Just being mentioned in the news—even for something good—triggers a 'spotlight tax' where auditors start charging you way more.
We usually assume companies only pay higher fees when they are in financial trouble, but this study reveals that auditors treat any media attention as a business risk. Because they fear the public eye, auditors raise their prices for firms that are in the news, effectively taxing them for being visible regardless of what the news actually says.
Diverse Effects of Different Types of Media Coverage on Audit Fees: Evidence Based on Media Tones
SSRN · 6310598
This paper investigates the relationship between different types of media coverage and audit fees. We theoretically and empirically distinguish between the media's information and monitoring role resulting from impartial, neutral coverage, which is associated with lower audit risk, and the media's attention-grabbing role resulting from sensational or biased reporting, which is associated with higher auditor business risk. Using data from US public firms between 2003 and 2021, we find that client