Purpose

The purpose of this paper is to investigate how audit fees change in responding to the financial crisis of 2008. It also examines auditors’ perceived risk and how they priced the risk in the financial crisis.

Design/methodology/approach

Using a sample of 20,930 firm-year observations, this paper examines the change of audit fees before, during and after the financial crisis, as well as the relationship between audit fees and restatements. Furthermore, this study investigates whether this relationship between audit fees and restatements strengthened during the financial crisis.

Findings

The paper finds that audit fees increase as a result of the macro-systemic risks from the crisis. It also finds that there is a significantly positive relationship between audit fees and restatements, which is a proxy of risk factors related to poor financial reporting quality and poor audit quality. However, the results show that there is no significant change of the fees–restatements relationship in the financial crisis period.

Research limitations/implications

The main limitation of this study is that no definite answer can be provided for the question that whether auditors believe that poor audit quality and audit failures are leading up to the financial crisis. The test rejects the alternative hypothesis. However, it does not necessarily prove the null hypothesis is true.

Originality/value

This paper contributes to the current literature by analyzing not only the impact of the financial crisis on audit fees, but also how the accounting profession views its own role in the financial crisis.