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This paper aims to examine the impact of the recent financial crisis on audit quality by analysing discretionary accruals.Design/methodology/approachThis study considers a sample of German, French, Italian and Spanish non-financial firms from 2005 to 2013 to investigate the auditor’s independence. It uses a cross-sectional and time-series ordinary least squares regression model to control for other predictors of the auditor’s independence when the financial crisis produces a decrease in audit quality.FindingsThe proportion of the non-financial firms having lower audit quality was higher during the financial crisis. In addition, during the crisis auditors were less likely to provide a higher audit quality for these non-financial firms. The level of audit quality returned to normal levels during the post-crisis years when the crisis had ceased.Originality/valueThese findings contribute to the literature on the impact of economic and financial changes on audit quality. In addition, this research finds that the Big Four accounting firms provide a higher audit quality in different circumstances from non-Big Four accounting firms, and that audit quality decreased during the crisis and returned to normal in the post-crisis period.
International Journal of Accounting and Information Management – Emerald Publishing
Published: Feb 1, 2022
Keywords: Financial crisis; Discretionary accruals; Audit quality; Non-audit fees; M41; M42
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