The COVID-19 US National Emergency Declaration and Auditing

Abstract

The COVID-19 US national emergency declaration on March 13, 2020, called for social distancing, triggered a national lockdown, made travel and in-office work impractical and accelerated the use of remote auditing. We use the emergency declaration as a marker event to compare audit fees, audit report lag and audit quality in the year before and after the declaration. Our findings suggest a decrease in audit fees and audit report lag and an increase in audit quality in four of our five audit quality proxies (with no change in the fifth proxy) in the post-declaration year. Collectively, our findings suggest that remote auditing enabled auditors to overcome the constraints imposed by the pandemic's social distancing and to ‘do more with less’ by potentially increasing the efficiency, timeliness and overall effectiveness of public company audits. Our findings are of potential interest to investors, regulators and audit firms in view of the current accountant shortage and the importance of maintaining the professional pipeline via work policies that meet the needs and preferences of an evolving work force.