Auditor Response to Negative Media Coverage of Client Environmental, Social, and Governance Practices

What is it about?

In this study, we examine external auditor response to negative media coverage of client environmental, social, and governance (ESG) practices. Across a large sample of U.S. public companies, we find that ESG-related negative media coverage of an audit client is associated with a higher likelihood of auditor resignation and increased audit fees. Based on theory and additional analyses, we explain this finding via the impact of negative media coverage on the client's risk of material misstatement.

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