Paper Title
Qualitative Disclosure, Firm Life Cycle and Audit Fees

The objective of this study is to examine whether and to what extent qualitative disclosure features, such as complexity, and ambiguity of annual reports are associated with audit fees. Using 47,582 observations for the years 2000 to 2014, we observe that these narrative disclosure traits have positive audit pricing consequences. We infer from these findings that these narrative disclosure characteristics play important roles in auditors’ client risk estimation and therefore audit fee determination process. We further posit that the audit fee consequences of these disclosure traits would vary across different phases of a client firm’s corporate life cycle. While, the positive association of the narrative disclosure traits with audit fees do not seem to considerably vary between introduction and growth phases, this association is moderated when firms enter the maturity phase. Finally, these lexical features seem to play more important role in audit fee determination process when firms advance from maturity to decline phase. We argue, based on these findings, that to examine the audit fee consequence of management disclosure strategy, one needs to treat a client firm as a dynamic evolving entity.