Are abnormal audit fees informative about audit quality? The moderating role of office resource availability

We contribute to the literature on the relation between client-level abnormal (excess) audit fees and audit quality by offering a novel perspective. We posit that audit office-level resource availability moderates the relation between client-level audit fees and audit quality. This is because office-level resources (audit partners, staff, technology and administrative support) are generally shared across engagements and can augment those engagements that are resource constrained. We first provide evidence that office-level resource availability is informative about audit quality incremental to client-level abnormal fees and several other client and auditor characteristics, including office size. More importantly, we find that client-level abnormal fees are informative about audit quality only for audit offices that are resource-constrained but not for offices that are not resource-constrained.