Audit fees under the COVID-19 pandemic: evidence from Oman

Adel Ali Al‐Qadasi · Saeed Rabea Baatwah · Waddah Kamal Hassan Omer

48 citations0/0 files storedJournal of Accounting in Emerging Economies

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Auditing, Earnings Management, Governance COVID-19 Pandemic Impacts Corporate Governance and Financial Management

Abstract

Purpose The worldwide spread of the coronavirus disease 2019 (COVID-19) has significant effects on financial markets and companies, causing an unprecedented level of uncertainty in reporting and auditing companies' financial statements. This study explores whether and how COVID-19 affects audit fees. Design/methodology/approach Using a sample of 268 firm-year observations from the Omani capital market between 2017 and 2020, the ordinary least squares (OLS) regression with a robust standard error is applied to answer the research question of this study. Findings The authors find that the pandemic has a significant and positive association with audit fees and abnormal audit fees. This finding suggests that the threat of risk, complexity and legal liability circumstances resulting from the pandemic can be compensated by charging higher audit fees. In addition, the authors provide evidence that Big4 audit firms are those most responding to COVID-19 by charging higher audit fees. Finally, the authors conclude that large companies are less sensitive to the pandemic. Practical implications Users of financial reports and audit firms should anticipate changes in the audit efforts resulting in increased audit fees during COVID-19. Thus, this paper may guide practitioners and businesses in determining the audit fees and associated costs of any potential pandemic. Originality/value The study results are among the earliest empirical insights into the effect of COVID-19 on audit fees in Oman.

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References

2014A review of archival auditing research 1980The Pricing of Audit Services: Theory and Evidence 2020Financial markets under the global pandemic of COVID-19 2006Audit Fees: A Meta‐analysis of the Effect of Supply and Demand Attributes*2020COVID-19 pandemic, oil prices, stock market, geopolitical risk and policy uncertainty nexus in the US economy: Fresh evidence from the wavelet-based approach 2020Death and contagious infectious diseases: Impact of the COVID-19 virus on stock market returns 2004What do we know about audit quality?2020Stock markets’ reaction to COVID-19: Cases or fatalities?

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