Study on the Impact of Carbon Trading Mechanisms on Audit Fees

Abstract

On March 11, 2021, the Fourth Session of the 13th National People's Congress adopted the Resolution on the Outline of the 14th
Five-Year Plan for National Economic and Social Development and the Long-Range Objectives Through the Year 2035. This resolution explicitly incorporates carbon peaking and carbon neutrality into development goals, fundamentally aiming to pursue a sustainable development
path for the Chinese nation and better build a community with a shared future. Against the backdrop of carbon peaking and carbon neutrality,
China has gradually established the world's largest carbon market. With the rapid development of the low-carbon economy, China's carbon
emissions trading market is also rapidly emerging and maturing. Under the carbon trading mechanism, carbon information disclosure, as the
foundation for carbon accounting and trading, plays a pivotal role in the market. It enables the communication of corporate emissions reduction information both internally and externally. Enhancing the quality of carbon information disclosure can provide enterprises with competitive advantages, establish corporate image, attract investment, and increase enterprise value. High-quality disclosure reduces information
asymmetry. This reduction, in turn, lowers potential litigation and liability risks for auditing entities, thereby decreasing the risk premiums
they charge and ultimately reducing audit fees. This paper explores the logical chain: improved disclosure quality under the carbon trading
mechanism reduces information asymmetry, which lowers audit fees.