The Role of Auditing in the Outbreak of COVID-19: Evidence from Private Firms Internationally

• In Event: 2.02. Audit in International Contexts

Abstract

We provide the first large-scale study to investigate the role of auditing in the outbreak of the global pandemic. Using World Bank Enterprise Survey and COVID Follow-up Survey that covers 17 countries and 12 industry sectors, we find that private firms that have their financial statements audited are less likely to experience cash flow shortages since the outbreak of the global pandemic and that, when cash flow shortages occur, these firms are more likely to use loans as the primary source to deal with cash flow shortages. We further find that the effect of auditing is more pronounced when firms operate in countries that implement less stringent country-level policies to deal with the pandemic. Taken together, our findings suggest that auditing provides benefits especially under the presence of unforeseeable disruptions in the firm’s external environment.

Authors

• Xi Ai, University of Louisville

• Man Wang, Dongbei University of Finance and Economics