关键词: 环境规制, 审计费用, 环保投入, 异质性

Abstract:

With the improvement of environmental protection requirements and ecological civilization constructions, local governments have enacted large numbers of environmental regulations. Enterprises in heavy pollution industries, as the main object of environmental governance, are facing higher environmental violation risks. Under the modern risk-oriented audit mode, environmental violation risks affect audit fees. Meanwhile, the previous environmental investment can help enterprises to improve their reputation, innovation, competitiveness, and ability to resist risks, which may have an insurance-like effect to alleviate the effect of environmental regulations on audit fees. Although some studies have examined the effect of environmental regulations on audit fees, there is still a lack of attention on whether the previous environmental investment and heterogeneous environmental investment strategies can alleviate this effect.
Based on the modern risk-oriented audit mode and the insurance-like effect of the previous environmental investment, taking Chinese A-share listed companies in heavy pollution industries from 2012 to 2017 as the sample, this study empirically tests the effect of environmental regulations on audit fees and the moderating effects of heterogeneous environmental investment strategies. This study further explores the mechanism of the environmental investment in alleviating the effect of environmental regulations on audit fees under different corporate natures, information transparency, and auditor tenures. The empirical results show that local environmental regulations are significantly positively associated with audit fees. The previous environmental capital expenditures negatively moderate the positive correlation, indicating that the environmental capital expenditures can alleviate the effect of environmental regulations on audit fees. Yet the environmental revenue expenditures do not have the same moderating effect. The results are confirmed to be robust after endogenous tests and alternative variables tests. Further mechanism analysis suggests that in local state-owned enterprises, non-state-owned enterprises, and enterprises with low information transparency and shorter auditor tenure, the moderating effect of environmental capital expenditures is more significant.
The theoretical contribution and practical value are as follows: Firstly, unlike previous studies that only test the effect of environmental regulations on audit fees, this study further verifies the moderating effect of enterprises’ previous environmental investment; Secondly, this study divides the environmental investment into capital expenditures and revenue expenditures, and then tests the different moderating effects of heterogeneous environmental investment strategies. Therefore, this study reveals the effect of environmental regulations on audit fees and suggests that enterprises’ environmental investment can serve as a risk management tool. The conclusion has reference value for the adjustment of audit behaviors and the optimization of enterprises’ environmental investment strategies under strict environmental regulations.
The conclusion shows that enterprises’ environmental investment can not only promote the environmental governance but also enhance the ability to resist risks. Therefore, this study puts forward the following suggestions: First, local governments should strengthen the implementation of environmental regulations when improving the economic development. Second, enterprises should increase their environmental investment, optimize their environmental investment strategies, and increase the environmental capital expenditures instead of environmental revenue expenditures. In addition, auditors should pay more attention to the effect of environmental regulations on enterprises, and understand the different roles of heterogeneous environmental investment strategies in dealing with environmental violation risks.

Key words: Environmental Regulation, Audit Fees, Environmental Investment, Heterogeneity