Analysts' earnings forecasts are important benchmarks for managers because investors and other stakeholders care about firms meeting-or-beating analysts' earnings forecasts (MBE). Prior studies show that firms that consistently MBE have a higher equity premium, lower cost of capital, and higher bond ratings. In this paper, we examine the association between repeated MBE and audit fees. Using data from 791 non-financial firms, we find that audit fees are lower for repeated MBE firms. Additional analyses indicate that the frequency of meeting-or-just-beating (just missing) analyst forecasts is negatively (positively) associated with audit fees. The findings are consistent with the suggestion of Kasznik and McNichols (2002) that repeated MBE firms may be viewed as less risky by investors and others, and the view that firms that repeatedly miss analyst forecasts are viewed as more risky by auditors.
