COVID-19 and Auditor Response

Abstract

[Purpose] The purpose of this study is to investigate auditors response to Coronavirus Disease(COVID-19). The outbreak of COVID-19 paralyses health, social, and economic parts and eventually it had considerable economic and financial impacts worldwide. To prevent the spread of the COVID-19, the government have urged people to stay at home. The COVID-19 led to negative impact on firms’ liquidity, profits and going-concern assumptions. Therefore, auditors might encounter some challenges during COVID-19 such as new audit procedures, a lack of verifying financial information and exceptional situation of manipulating accounting numbers. We investigate whether auditors input more audit hours during COVID-19.
 [Methodology] This study uses 3,800 listed firm-years samples during prior year(2019) and the initial year of the COVID-19 outbreak(2020). We use audit hours of managers, registered certified public accountants, staff auditors, and all auditors for auditors response. To control industry effects during COVID-19, we apply fixed effects on our regression model.
 [Findings] We find auditors input more working hours on year-end audits during COVID-19. It indicates that all types of auditors might put more efforts to mitigate audit risk. Also, we find that year-end audit hour ratio is increased during COVID- 19.
 [Implications] As COVID-19 increases audit risk and also have auditors adopt a new audit procedures, COVID-19 could be a challenge to auditors. This study empirically shows how auditors respond to COVID-19. The auditors spend more audit hours during COVID-19 to mitigate audit risk and apply new procedures.