The implementation of the Shanghai-Hong Kong Stock Connect policy, through its selection mechanism and continuous supervision, may influence the corporate governance of target companies, enhance the quality of accounting information, and subsequently affect the audit risks and audit fees of these companies. Although the impact of the opening of China’s capital markets on audit fees has attracted the attention and research of many scholars, the existing literature shows that there is still no consensus on the direction, mechanism of action, and ultimate effects of this impact. Therefore, studying the effects of the Shanghai-Hong Kong Stock Connect policy on audit fees for target companies holds significant theoretical value and practical significance. Based on the theoretical analysis of the Simunic audit pricing model, this paper uses the difference-in-differences method to empirically test the audit fees of the target enterprises of A-share Shanghai-Hong Kong Stock Connect in the Shanghai Stock Exchange from 2011 to 2017. The empirical results show that the implementation of the Shanghai-Hong Kong Stock Connect policy significantly reduces the audit fees of the target enterprises. At the same time, this paper also explores the transmission path of the impact of the policy implementation on audit fees by testing the mechanism of the investment and governance of the target enterprises by domestic securities investment funds and the change of the earnings quality of the target enterprises after the implementation of the Shanghai-Hong Kong Stock Connect policy. In addition, through heterogeneity analysis, it is found that the implementation of the Shanghai-Hong Kong Stock Connect policy effectively alleviates the impact of the target enterprises on the audit fees due to the different marketization levels and property rights of the target enterprises in the region. The contributions of this paper are as follows: firstly, by comprehensively using the audit pricing theory and audit risk theory, it analyzes the potential negative moderating effect of the Shanghai-Hong Kong Stock Connect policy on audit fees for target companies from multiple perspectives, including selection criteria for target companies, changes in the regulatory environment, and optimization of corporate governance. It also empirically validates these inferences using big data. Secondly, the paper explores and identifies the transmission paths and mechanisms through which the policy implementation reduces audit fees from the perspectives of enhanced investment and governance by domestic investment funds and improvements in the earnings quality of target companies. The heterogeneous analysis confirms that the implementation of the Shanghai-Hong Kong Stock Connect policy helps to generally lower audit fees across various types of target companies, thereby indirectly demonstrating its effectiveness in reducing transaction costs for target companies. Overall, this research enriches the literature on the consequences of the opening of China’s capital market and provides empirical evidence for further orderly opening of the capital market. The policy implications of this study are as follows: firstly, China’s capital market should further increase the strength of opening to the outside world in an orderly manner, actively learn from the advantages of overseas capital market supervision system, and further improve the supervision system of China’s mainland capital market. Secondly, China’s capital market should vigorously cultivate domestic institutional investors, introduce qualified foreign institutional investors, guide them to actively participate in corporate governance, and improve the governance level of listed companies. Thirdly, domestic regulatory authorities should keep pace with the times, absorb mature regulatory experiences from overseas capital markets, further establish and improve the regulatory mechanism, strictly supervise and punish various illegal and irregular activities in the capital market, and lay a legal and institutional foundation for the construction of a clean and positive capital market environment.