The Impact of ESG Disclosure ESG Performance and ESG Risk on Audit Fees and Non Audit Fees in the South African Quasi Mandatory Regime

Abstract This study examines impact of ESG disclosure, ESG performance, and ESG risk affect audit fees and non-audit fees in South Africa quasi-mandatory environment. Using panel data of Johannesburg Stock Exchange listed firms from 2006 to 2024, we employ OLS, fixed effects, and random effects estimation to analyse the relationships. We find that higher ESG disclosure is associated with higher audit fees, suggesting expanded audit scope, greater verification effort, and increased engagement complexity tied to more comprehensive ESG information. Conversely, ESG disclosure is negatively associated with non-audit fees, indicating that transparent reporting reduces reliance on external advisory and assurance services. Similarly, stronger ESG performance is associated with higher audit fees, consistent with auditors perceiving sustainability activities and disclosures as more complex to assess, but is negatively associated with non-audit fees. In addition, higher Sustainalytics ESG risk is associated with lower audit fees, implying that ESG-exposed firms strengthen internal controls and governance oversight. Conversely, ESG risk is positively associated with non-audit fees, as weak governance compliance increases demand for external advisory services. Firms should consider ESG factors when pricing advisory services fees, and academics should consider the regulatory environment when assessing ESG factors and auditing pricing.