| This dissertation examines whether a qualitative component of the common information set between auditors and their clients is used in audit pricing decisions. I specifically focus on information contents of managers' disclosure tone within the management discussion and analysis (MD&A) sections of annual reports. I find a significant negative association between audit fees and optimistic disclosure tone. This finding is consistent with prior research that auditors use client specific information in audit pricing decisions. Further analysis shows that in high litigation environment the tone fee relation is stronger. This paper contributes to the current audit fee literature by documenting the effect of qualitative information, such as the disclosure tone, on the pricing decision by auditors. |
