When Corporate Social Responsibility Disappoints: The Hidden Cost of CSR Expectation Gaps in Audit Fees

This paper examines how auditors respond to the expectation gaps of a firm's corporate social responsibility (CSR). We find that auditors charge higher audit fees for firms with wider CSR expectation gaps, reflecting the hidden cost of failing to meet the CSR aspiration level. The mechanism analysis shows that CSR expectation gaps increase audit fees due to increased operating risks. Besides, we find that the COVID‐19 pandemic and intense industry competition positively moderate the relationship between CSR expectation gaps and audit fees. Overall, our findings underscore the latent perils associated with CSR performance when assessed from a comparative standpoint.