The Impact of Regulation on Auditor Fees: Evidence from the Sarbanes-Oxley Act

45 Pages Posted: 27 Nov 2007 Last revised: 17 Mar 2015

See all articles by Al (Aloke) Ghosh

Al (Aloke) Ghosh

UNC Charlotte

Robert J. Pawlewicz

University of Richmond - Accounting

Date Written: February 1, 2008


We examine changes in fees paid to auditors around the Sarbanes-Oxley Act (SOX, 2002). Audit fees are expected to increase after SOX due to both increased audit effort and potentially increased auditors' legal liability. Our results indicate an economically large increase in audit fees following the enactment of SOX. Controlling for size of the auditor, auditor's opinion, and client characteristics, we find that audit fee levels went up approximately 74 percent in the post-SOX period. In contrast, non-audit fees declined significantly over the same period. Total fees went up during this period because the increase in audit fees offset the decline in non-audit fees. Our conclusions remain unchanged when we use audit fee change regressions. Additionally, we find that the Big 4 audit firms increased audit fees by 42 percent more than their smaller counterparts. Further, we find that while small and large audit firms discount fees on initial engagements to attract new clients for the pre-SOX period, only small audit firms continue of offer fee discounts for the post-SOX years. Our results remain robust even after a battery of sensitivity analyses.

Keywords: Audit Fees, Non-audit Fees, The Sarbanes-Oxley Act, Fee Discounting, Low-balling

JEL Classification: L84, M41, M49, G38

Suggested Citation

Ghosh, Al (Aloke) and Pawlewicz, Robert J., The Impact of Regulation on Auditor Fees: Evidence from the Sarbanes-Oxley Act (February 1, 2008). Auditing: A Journal of Practice & Theory, Vol. 28, No. 2, 2009, Available at SSRN: or

Al (Aloke) Ghosh (Contact Author)

UNC Charlotte ( email )

9201 University City Blvd
Charlotte, NC 28223
United States


Robert J. Pawlewicz

University of Richmond - Accounting ( email )

102 UR Drive
Richmond, VA 23173
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics