To read the full version of this content please select one of the options below:

Audit fee discounting in the post-SOX environment

Benjamin W. Hoffman (Department of Accounting, Kent State University, Kent, Ohio, USA)
Albert L. Nagy (Department of Accountancy, John Carroll University, University Heights, Ohio, USA)

Managerial Auditing Journal

ISSN: 0268-6902

Article publication date: 1 September 2017

Issue publication date: 25 September 2017




This paper aims to investigate whether the expected implementation of Section 404(b) of the Sarbanes-Oxley Act (SOX 404(b)) (the integrated audit requirement) caused auditors to discount their audit fees for non-accelerated filers in anticipation of expected increased future economic rents (DeAngelo, 1981) from those clients.


This paper predicts that auditors charged their non-accelerated filer clients lower audit fees during the years 2005-2007 (in anticipation of increased expected future economic rents from the implementation of the SOX 404(b) requirement) compared with the years 2010-2012 (when it had been determined that non-accelerated filers were permanently exempt from complying with SOX 404(b)). The authors use ordinary least squares regression analysis to examine whether audit fees increased significantly for non-accelerated filers after the permanent exemption announcement.


The results show a significant positive association between the exemption announcement and audit fees, supporting the theory that auditors discounted their audit fees for non-accelerated filers in the pre-exemption announcement period. This finding is robust when sensitivity tests are used.

Practical implications

The findings of audit fee discounting literature related to the post-SOX period are mixed. This study adds to this stream of literature by supporting the notion that audit fee discounting is being practiced post-SOX and is a potential unintended consequence of SOX 404 and the exemption. Thus, investors will be interested in the results of this paper when making their investment decisions with regard to non-accelerated filers.

Social implications

The results of this paper show that, even in the post-SOX environment, auditors will employ the use of audit fee discounting if a change in regulation incentivizes it. This commentary on the present state of the audit pricing market should be of interest to audit pricing policymakers.


This paper is one of the first to study audit fee discounting outside the realm of initial audit engagements.



Hoffman, B.W. and Nagy, A.L. (2019), "Audit fee discounting in the post-SOX environment", Managerial Auditing Journal, Vol. 32 No. 7, pp. 715-730.



Emerald Publishing Limited

Copyright © 2017, Emerald Publishing Limited

Related articles