This study examines the association between corporate carbon emissions and audit fees and investigates whether audit market concentration and local environmental exposure moderate this relationship.
Using a panel of French listed firms from the SBF 120 index Using a panel of French listed firms from the SBF 120 index over the period 2018–2024, carbon exposure is measured using total CO2 emissions and carbon intensity. Moderating effects are captured through interactions with audit market concentration and local environmental carbon exposure. The analysis relies on robust OLS regressions and is complemented by several robustness tests, including alternative emission measures, feasible generalized least squares (FGLS) and system GMM estimation to address potential endogeneity concerns.
The results demonstrate that firms with higher carbon emissions incur higher audit fees, suggesting that carbon exposure is systematically priced as an audit risk. This effect is particularly pronounced in more concentrated audit markets, indicating that auditors operating in such environments incorporate carbon-related complexity and reputational concerns more strongly into their pricing decisions. Furthermore, local environmental carbon exposure strengthens the positive association between firm-level emissions and audit fees, highlighting the importance of the broader environmental context in shaping auditors' risk assessments.
This study contributes to the audit pricing literature by documenting that carbon emissions constitute a material non-financial determinant of audit fees in a French code-law setting. By jointly examining audit market concentration and regional environmental carbon exposure, it provides new evidence on how audit market structure and environmental context shape auditors' pricing of carbon-related risks.
