The impact of COVID-19 on the relationship between auditor industry specialization and audit fees: empirical evidence from Jordan
Journal of Financial Reporting and Accounting
ISSN: 1985-2517
Article publication date: 22 June 2023
Abstract
Purpose
Motivated by the disastrous impact of COVID-19 on the world’s economies, the purpose of this study is to examine its effect on the association between auditor industry specialization and external audit fees, referring to two time periods: before and during COVID-19.
Design/methodology/approach
A quantitative analysis based on the ordinary least squares regression is performed, using 3,200 company-year observations from 2005 to 2020 in Jordan to test the hypotheses. The qualitative component is a textual analysis of firms’ annual reports that support the quantitative analysis findings.
Findings
The analysis confirms there is a direct positive relationship between COVID-19 and external audit fees, confirming the tough consequences of the crisis on audit complexity and risks. While the results show evidence that the relationship between auditor specialist and audit fees is weakened because of COVID-19, the content analysis explained that COVID-19 led to fewer requests for high-quality audit, given the urgent need to report on firms’ financial circumstances. Jordan’s capital market is controlled by family businesses, and the insolvency of several large firms during COVID-19 led auditors to offer their services at low cost.
Research limitations/implications
The findings of this study have serious implications for policymakers, legislators, regulators and the audit profession, as they examine the arising difficulties during a period of economic uncertainty. The findings can help to improve laws that control the auditing industry in Jordan following the damage caused by COVID-19. As well, the outcomes can be extrapolated to other Middle East nations.
Originality/value
To the best of the authors’ knowledge, the authors believe that this research presents the first evidence on the influence of COVID-19 on the auditing industry.
Keywords
Acknowledgements
The authors would like to thank the editor and anonymous reviewers of the JFRA for taking the necessary time and effort to review the manuscript. Author sincerely appreciate all your valuable comments and suggestions, which helped them in improving the quality of this manuscript.
Conflict of interest: No potential conflict of interest is reported by the authors.
Citation
Alharasis, E.E., Alhadab, M., Alidarous, M., Jamaani, F. and Alkhwaldi, A.F. (2023), "The impact of COVID-19 on the relationship between auditor industry specialization and audit fees: empirical evidence from Jordan", Journal of Financial Reporting and Accounting, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JFRA-01-2023-0052
Publisher
:Emerald Publishing Limited
Copyright © 2023, Emerald Publishing Limited