Abstract: More and more scholars have discussed the influence of common ownership, a link between enterprises in the same industry, on corporate behavior, but less attention has been paid to the research of common ownership in the field of auditing. This paper examines the impact of common ownership on abnormal audit fees by selecting a sample of listed companies in China from 2009 to 2020. It is found that common ownership reduces companies’ abnormal audit fees both by improving the quality of internal controls and by restricting management’s tendency to audit conspiracy. This conclusion is still robust after testing with distinguishing the changes of common ownership, entropy balancing, instrumental variable method and other methods. Further analysis shows that the negative effect of common ownership on abnormal audit fees is more pronounced in firms whose management has greater power and whose marketization level is lower. In addition, common ownership improves the quality of the audit while reducing the abnormal audit fee. This study provides a reference for the regulatory authorities to strengthen the supervision of abnormal audit fees and audit quality, and also for the improvement of audit bargaining rules.

Key words: common ownership, abnormal audit fees, internal control, audit conspiracy, quality of audit