The impact of information technology capability on audit report lag and audit fees: empirical evidence from the COVID-19 pandemic
Journal of Financial Reporting and Accounting
ISSN: 1985-2517
Article publication date: 8 August 2024
Abstract
Purpose
This study aims to examine the impact of client information technology (IT) capabilities on audit report lag and audit fees in Jordanian companies listed on the Amman Stock Exchange (ASE) during the COVID-19 pandemic.
Design/methodology/approach
This study analysed financial and non-financial data from 72 Jordanian public shareholding companies listed on the ASE between 2014 and 2021. Using fixed- and random-effects models, the authors examined the impact of client IT capabilities on audit report lag and audit fees. The authors also examined how the COVID-19 pandemic might affect audit report lag and audit fees. The analysis incorporated various control variables specific to the Jordanian context to ensure accuracy.
Findings
Empirical evidence indicates that client IT capabilities do not significantly impact audit report lag and audit fees. In contrast, the COVID-19 pandemic has positively impacted audit report lag and audit fees, leading to an increase in audit report lag of 60 to 67 days and an increase in audit fees of approximately 15%. It is worth noting that these effects are more pronounced when influenced by factors including return on assets, company losses and audits conducted by the Big 4 firms.
Research limitations/implications
The scope of this study, which focuses on Jordanian firms, may limit the generalisability of the findings to other contexts. Reliance on aggregate IT infrastructure and software assets as proxies for IT capabilities might not fully capture their multifaceted nature, overlooking the qualitative aspects crucial for audit outcomes. Furthermore, excluding external factors such as governmental regulations underscores the need for future research to explore the nuanced interplay between IT capabilities, internal control systems and regulatory environments, enriching our understanding of audit practices.
Originality/value
This study contributes to auditing literature by examining the interplay between IT capabilities and audit processes during the COVID-19 pandemic in Jordan. This study highlights the unexpected finding that IT capabilities have minimal impact on audit report lags and fees, opening new avenues for research on how pandemics and similar crises can reshape auditing practices and influence regulatory policies in an evolving economic environment.
Keywords
Acknowledgements
The authors express heartfelt gratitude to the University of Aveiro for generously providing indispensable resources and support for this research. Special thanks to the esteemed faculty and staff at the Department of Economics, Management, and Industrial Engineering for their expert guidance and invaluable feedback. We also extend our appreciation to the diligent editor and reviewers of the Journal of Financial Reporting and Accounting for their insightful suggestions, which significantly enriched our manuscript. Lastly, we acknowledge the camaraderie of our fellow researchers, whose unwavering commitment to sustainable finance has continuously fuelled our inspiration and motivation.
Funding: The authors received no financial support for the research, authorship and/or publication of this article.
Declaration of Conflicting Interests: The authors declared no potential conflict of interest with respect to the research and/or publication of this article.
Citation
Bani-Khaled, S. and Pinho, C. (2024), "The impact of information technology capability on audit report lag and audit fees: empirical evidence from the COVID-19 pandemic", Journal of Financial Reporting and Accounting, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JFRA-08-2023-0493
Publisher
:Emerald Publishing Limited
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