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. This study examines whether this assumption holds in the U.S. audit market using a first-difference specification on 4090 firm-year observations of U.S. listed companies from 2010 to 2022. The evidence is consistent with asymmetric adjustment. Audit fees rise meaningfully with increases in the Audit Analytics Risky Client Score but show no statistically detectable response to equivalent decreases. The differential is marginally significant in the preferred specification (p = 0.058). The implied stickiness ratio suggests that fees adjust downward at approximately 13 percent of the rate at which they adjust upward. The pattern is robust across sub-periods and to an alternative risk proxy based on loss-status transitions. A period split around the 2019 Critical Audit Matter mandate shows that the documented asymmetry concentrates in the post-CAM era, consistent with the mandate strengthening incentives to price judgment-intensive risk asymmetrically. The findings have implications for audit pricing models, audit committee oversight, and how fee dynamics are interpreted by users of audit fee data.