Does the implementation of the new lease standard affect firms’ audit fees?

To promote the convergence of Chinese Accounting Standards with international accounting standards, the Ministry of Finance promulgated the new lease standard in 2018. This paper finds that the implementation of the new lease standard significantly increases firms’ audit fees. Mechanism tests indicate that the new lease standard raises audit fees by expanding firms’ earnings management discretion and tightening financing constraints, prompting auditors to devote more audit work and charge higher risk premiums. Further analyses reveal that the positive effect of the new lease standard on audit fees is more pronounced in less market-oriented regions, industries more affected by the standard, and firms with poorer internal control quality. In addition, extended analyses show that the new lease standard reduces accounting information comparability. This paper enriches the literature on the economic consequences of the new lease standard and audit fees, and offers practical implications for listed firms, audit intermediaries, standard setters, and securities market regulators.