Do Auditors Adjust Labour Allocation in Response to Client Media Coverage and Tone?

In this paper, we explore how auditors adjust their audit efforts based on the extent and sentiment of client media coverage. While existing literature indicates that firms subject to greater media coverage, particularly of a negative tone, tend to incur higher audit fees, the underlying mechanisms driving this association remain unclear. Leveraging data on audit hours from Korea, we show that media attention prompts auditors to devote more time to audits, particularly by deploying higher‐ranked personnel such as partners and senior‐level staff. This increase in labour input leads to a rise in total audit fees. Notably, our findings indicate that auditors do not modify the fee rate per hour (i.e., fee premiums) based on media coverage or tone. In addition, the results of the path analysis indicate that extensive or negative media coverage leads auditors to increase their audit efforts, which subsequently raises overall audit fees. Further analyses show that quality reviewers and specialists engaged by the auditor allocate more effort to clients when their clients receive substantial and negatively framed media attention. Additionally, Big 4 audit firms appear especially responsive to media attention, particularly in the case of large clients. These results remain consistent across multiple empirical tests addressing potential endogeneity concerns. Taken together, our evidence suggests that auditors interpret media coverage and negative tone as a signal of heightened audit risk and respond accordingly by intensifying effort and assigning more experienced personnel.