The effect of the financial crisis on audit quality: European evidence
International Journal of Accounting & Information Management
ISSN: 1834-7649
Article publication date: 5 January 2022
Issue publication date: 1 February 2022
Abstract
Purpose
This paper aims to examine the impact of the recent financial crisis on audit quality by analysing discretionary accruals.
Design/methodology/approach
This study considers a sample of German, French, Italian and Spanish non-financial firms from 2005 to 2013 to investigate the auditor’s independence. It uses a cross-sectional and time-series ordinary least squares regression model to control for other predictors of the auditor’s independence when the financial crisis produces a decrease in audit quality.
Findings
The proportion of the non-financial firms having lower audit quality was higher during the financial crisis. In addition, during the crisis auditors were less likely to provide a higher audit quality for these non-financial firms. The level of audit quality returned to normal levels during the post-crisis years when the crisis had ceased.
Originality/value
These findings contribute to the literature on the impact of economic and financial changes on audit quality. In addition, this research finds that the Big Four accounting firms provide a higher audit quality in different circumstances from non-Big Four accounting firms, and that audit quality decreased during the crisis and returned to normal in the post-crisis period.
Keywords
Acknowledgements
The author would like to thank the editor and three anonymous referees for their valuable suggestions.
Citation
Kyriakou, M.I. (2022), "The effect of the financial crisis on audit quality: European evidence", International Journal of Accounting & Information Management, Vol. 30 No. 1, pp. 143-158. https://doi.org/10.1108/IJAIM-07-2021-0135
Publisher
:Emerald Publishing Limited
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