Does Working from Home Impact Audit Quality? Evidence from Non-Pharmaceutical Interventions during COVID-19

54 Pages Posted: 8 Jul 2022

See all articles by Monika Causholli

Monika Causholli

University of Kentucky - Von Allmen School of Accountancy

Sung-Yuan (Mark) Cheng

University of Kentucky

Nargess Golshan

Indiana University - Kelley School of Business - Department of Accounting

Date Written: July 6, 2022

Abstract

Catalyzed by the COVID-19 pandemic, many audit firms have announced large-scale plans to adopt working from home (WFH) policies. It is unclear whether and how this emerging work arrangement would affect audit quality. Exploiting county-level non-pharmaceutical interventions (e.g., shelter-in-place orders and lockdowns) that exogenously increased local auditors’ WFH practices, this paper documents that WFH is associated with higher audit quality. Specifically, using a generalized difference-in-differences research design, we show that auditors’ adoption of WFH policies resulted in a lower likelihood of non-reliance restatements, lower discretionary accruals, and a higher likelihood of going-concern opinions. These results are stronger among Big 4 auditors and clients with less tangible assets. Further, audit fees are higher and audit report delay is longer among auditors impacted by WFH policies. Overall, the findings advance our understanding of the implications of WFH policies for audit quality and are informative to audit firms, audit committees, and regulators.

Keywords: Working from Home, Remote Audits, Audit Quality, COVID-19, Non-Pharmaceutical Interventions

Suggested Citation

Causholli, Monika and Cheng, Sung-Yuan (Mark) and Golshan, Nargess, Does Working from Home Impact Audit Quality? Evidence from Non-Pharmaceutical Interventions during COVID-19 (July 6, 2022). Available at SSRN: https://ssrn.com/abstract=4155625 or http://dx.doi.org/10.2139/ssrn.4155625

Monika Causholli (Contact Author)

University of Kentucky - Von Allmen School of Accountancy ( email )

Lexington, KY 40506
United States

Sung-Yuan (Mark) Cheng

University of Kentucky ( email )

Lexington, KY 40506
United States

Nargess Golshan

Indiana University - Kelley School of Business - Department of Accounting ( email )

1309 E. 10th Street
Bloomington, IN 47405
United States

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