Prior research on the link between lowballing (LB) of audit fees and audit quality is inconclusive. Using more recent data and an innovative design, we define LB engagements as those where the audit fee discount is at least 30 percent. We consider three research questions to understand the possible link between LB and audit quality. First, we investigate whether the two variables that are often associated with auditor independence in the literature—non-audit fees and client importance—are related to LB. Second, we test whether lowballing auditors recoup initial audit fee discounts in the future period. Lastly, we investigate the relation between recovery of audit fees and future audit quality. We find that non-audit fees in the first year of engagement are negatively related to the propensity to LB. LB is significantly positively related to client importance for client firms switching from a non-Big N to another non-Big N auditor while the relation is insignificant for client firms switching from a Big N to another Big N auditor. The results of non-audit fees and client importance indicate that economic dependence does not motivate audit firms to lowball. Further, lowballing auditors tend to recoup their initial fee discounts in subsequent periods via increases in audit fees. Using multiple measures of audit quality, we do not find a significant relation between recovery of audit fees and future audit quality. Overall, contrary to regulators’ concerns, our results suggest that LB does not impair audit quality.

先前关于审计费用的低价 (LB) 与审计质量之间联系的研究尚无定论。使用更新的数据和创新设计，我们将 LB 业务定义为审计费折扣至少为 30% 的业务。我们考虑三个研究问题以了解 LB 与审计质量之间可能存在的联系。首先，我们调查文献中经常与审计师独立性相关的两个变量——非审计费用和客户重要性——是否与 LB 相关。其次，我们测试低价审计师是否会在未来期间收回初始审计费折扣。最后，我们调查了审计费用的回收与未来审计质量之间的关系。我们发现第一年的非审计费用与 LB 的倾向呈负相关。对于从非大 N 审计师转向另一非大 N 审计师的客户公司，LB 与客户重要性显着正相关，而对于从大 N 审计师转向另一大 N 审计师的客户公司，这种关系不显着。非审计费用和客户重要性的结果表明，经济依赖不会促使审计公司低头。此外，低调的审计师倾向于通过增加审计费用来收回其在随后期间的初始费用折扣。使用多种审计质量衡量标准，我们没有发现审计费用的回收与未来审计质量之间存在显着关系。总体而言，与监管机构的担忧相反，我们的结果表明 LB 不会损害审计质量。