Impact of COVID-19 pandemic on auditors’ responsibility: evidence from European listed companies on key audit matters

Abstract

PurposeThis research seeks to assess the impact of the COVID-19 pandemic on the quality of financial reporting and the auditor's responsibility. This paper aims to investigate how the auditors identified the impact of COVID-19 on the companies' annual financial statements and considered this impact as a key audit matters (KAM) in the reports issued and the factors that influenced their reporting.Design/methodology/approachThe empirical research consists of a qualitative analysis of KAMs and a quantitative one based on a panel data econometric model using a random effects maximum likelihood regression. The sample includes companies listed on the primary market on European stock exchanges in 2019–2020.FindingsThe results suggest a direct positive correlation between numbers of KAMs and the auditor's size, frequency of the event and going concern uncertainty. Two of the variables were not validated: auditor rotation and audit fees.Research limitations/implicationsThe limitation of research can be the sample structure, and the model we proposed does not take into account all possible influencing factors.Practical implicationsThis study will help researchers, policymakers and business owners have a deeper understanding of auditors' responsibility in their work. As practical implications of the COVID-19 impact following the implementation of telework, audit firms have begun to invest in digital programs to assist them in their teamwork and communication with clients. One impact on regulators has been to relax reporting requirements by extending deadlines.Originality/valueThis research contributes to the academic literature by providing a synthesis and econometric model of the effects identified by auditors, following the COVID-19 pandemic, expressed by KAMs in their reports.