Title: The cost implications of ESG reporting: an examination of audit fees in the UK

Authors: Ahmed Saber Moussa

Addresses: Egyptian Customs Authority – Ministry of Finance, Cairo, Egypt

Abstract: This study examines how ESG-related information disclosure affects audit fees for UK non-financial firms and explores how internal governance moderates this effect over the period from 2010 to 2021 in the FTSE All Share. I find a robust positive link between ESG disclosure and audit fees. Larger and more profitable firms tend to pay higher audit fees, while variables like board size, independence, leverage, and audit committee non-executives show no significant impact on fees. Audit committee independence negatively affects audit fees consistently in various regression models. Internal governance moderates the ESG-audit cost relationship, with stronger governance reducing this link. This implies that firms with robust internal governance face lower audit costs related to ESG disclosure. Our findings have implications for sustainability professionals, auditors, regulators, investors, and management.

Keywords: ESG reporting; audit fees; internal governance; resource-based view; institutional theory; principal component analysis.

DOI: 10.1504/IJAAPE.2024.138478

International Journal of Accounting, Auditing and Performance Evaluation, 2024 Vol.20 No.3/4, pp.399 - 420

Received: 16 Jun 2023
Accepted: 12 Sep 2023
Published online: 07 May 2024 *

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