Variable Type

Variable Measure

Variable Sign

Variable Interpretation

Dependent variable

Audit fees

LAF

Natural logarithm of audit fee

Independent variable

City-level

City L

City L = 1 if audit firm and company in a same city

Economic scale

Scale

Total income Percentile Ranking based on regional -level

Cross terms

City L × Scale

Control variable

Company size

Size

Natural logarithm of total asset

Short-term Liquidity

Cata

Current assets/current liabilities

Liquidity solvency

Quick

Quick assets/current liabilities

Operational capability

LEV

Total liabilities/total assets

Profitability capability

ROI

Pre-tax income/total assets

Growth capacity

Growth

Growth rate of operating income

Lasting capacity

Loss

Loss = 1 if Net profit less than0,or loss = 0

Audit opinion

Op

Op = 1 if give Standard without reservation, or op = 0

Regression year

Year

Fixed variable

Regression industry

Industry

Fixed variable