Asymmetric Audit Fee Adjustment under Uncertainty: Evidence from U.S. Listed Firms

Most audit fee studies treat the relationship between fees and client risk as symmetric. A unit increase and a unit decrease in client risk are assumed to produce equal but opposite fee responses. We examine whether that assumption holds in the U.S. audit market using 4,090 firm-year observations of U.S. listed companies from 2010 to 2022 and a first-difference specification with firm and year fixed effects. The data show that audit fees rise by about 1.06 percent for each one-unit increase in the Audit Analytics Risky Client Score (p < 0.001). The response of fees to risk decreases is not statistically different from zero (coefficient = 0.001, p = 0.708). The implied stickiness differential is 0.0093 (p = 0.058). The stickiness ratio is approximately 0.13. Fees adjust downward at about 13 percent of the rate at which they adjust upward following an equivalent risk movement in the opposite direction. The pattern is robust to a strict definition of risk decreases, holds in both early (2010–2016) and late (2017–2022) sub-samples, and is corroborated by an alternative risk proxy based on loss-status transitions, where fees rise 4.3 percent on entry to loss status and do not adjust on exit. The result has implications for audit pricing models, audit committee oversight, and the way fee dynamics are interpreted by users of audit fee data.