ESG performance and audit pricing: A European perspective

This study examines the relationship between ESG performance and audit pricing. Using an unbalanced panel of Eurozone firms from 2015 to 2023, we analyze how ESG scores, audit opinions, and their interactions influence audit fees. The results show that firms with superior ESG performance consistently incur lower audit fees, highlighting sustainability as a significant factor in auditors’ risk assessments. In contrast, firms receiving modified audit opinions face significantly higher fees, reflecting auditors’ responses to increased reporting risk and complexity. Notably, the beneficial effect of ESG performance on audit costs is moderated when audit qualifications are present, indicating that sustainability engagement cannot fully offset deficiencies in financial reporting quality. These findings are particularly relevant, as the analysis draws on data from diverse regulatory environments in the Eurozone. As regulatory frameworks in Europe continue to evolve, this study offers timely evidence. The findings highlight the value of integrated governance approaches that help optimize audit costs, improve market efficiency, and strengthen corporate accountability.