The effect of the Covid-19 epidemic on auditing quality and the reaction of family vs non-family businesses to Covid-19: the case of Jordan

Abstract

Purpose The purpose of this paper is to provide new scientific knowledge concerning the impact of the Covid-19 pandemic on auditing quality as determined by audit fees for both family- and non-family-owned firms in Jordan. Design/methodology/approach The authors use an ordinary least squares (OLS) regression firm-clustered standard error employing data from 200 Jordanian enterprises between 2005 and 2020 to validate this study's hypotheses. Findings The regression findings suggest that enterprises run by families are better able to handle crises and spend less on audits. Companies that are not family-owned have to spend the most on monitoring tasks since they need to take extra steps to prevent the agency problem and make their financial statements stand out from their peers in order to attract more investors. Additional analysis that stretched out throughout 2005–2022 came to the same findings. Practical implications The findings can be beneficial for authorities to better regulate and supervise the auditing sector. Political leaders, legislators, regulators and the auditing industry can all learn important lessons from the findings as they assess the growing concerns in a turbulent economic situation. The results of this research can, therefore, be utilised to reassure investors and assist policymakers in crafting workable responses to Covid-19's creation of financial problems. After the devastation caused by the coronavirus, these findings may be used to strengthen the laws that oversee Jordan's auditing sector. Originality/value In emerging nations like Jordan, where there is a clear concentration of ownership and a predominance of high levels of family ownership, and to the best of the authors' knowledge, this is the first empirical study to compare the auditing quality of family-owned versus non-family-owned enterprises. Preliminary insights into the crisis management tactics of family and non-family organisations are provided by this first empirical investigation of the consequences of the Covid-19 crisis on family-owned firms.