The focus on risk under the risk-oriented audit approach is likely to lead to interactions between corporate
growth and internal governance in listed companies. Companies experiencing overly fast or negative growth
are characterized by greater risk (Lang et al., 1996) and their internal corporate governance may suffer an
adverse change in stability, thus providing management with the motivation to manage reported earnings.
Companies that grow steadily and moderately, in contrast, are often in the maturity stage.2 They thus experience
a lower degree of risk and their internal corporate governance is relatively stable. Cui et al. (2007) examine
the relationship between corporate growth and financial risk and find the probability that a company
experiences financial crisis increases dramatically when its growth rate exceeds what the authors call a reasonable
growth rate. They also report a significant positive relationship between the probability of financial crisis
and excessive growth rates and an insignificant relationship between the probability of financial crisis and the
real growth rate of non-excessively growing companies (Cui et al., 2007). In reality, many companies appear to
collapse suddenly. Enron and WorldCom in the United States and the Giant Group and Qinchi Alcohol in
China are representative examples. In line with the foregoing discussion, this study examines subsamples
grouped by corporate growth in addition to the full sample. The full sample reveals a significant negative relationship
between corporate governance and audit fees, and the subsample results also show that corporate
governance’s influence on audit fees is affected by corporate growth. The negative relationship between corporate
governance and audit fees is economically and statistically significant in sample companies that grew
moderately during the sample period, whereas the relationship is mixed or insignificant for companies that
experienced overly fast or negative growth.