Does working from home impact audit quality? evidence from non-pharmaceutical interventions during COVID-19

Catalyzed by the COVID-19 pandemic, many audit firms announced large-scale plans to adopt work-from-home (WFH) policies. It is unclear how this arrangement would affect audit quality. We exploit county-level non-pharmaceutical interventions, such as shelter-in-place orders and lockdowns, that exogenously increased local auditors’ WFH practices. We use a difference-in-differences research design to compare audit engagements that were affected by these policies to those that were not, including those within the same office. We find that WFH is associated with higher audit quality measured by discretionary accruals and going-concern opinions. We also find some evidence that these results are stronger for clients of Big-Six auditors and clients with lower tangible assets. Furthermore, audit fees are higher among auditors impacted by WFH policies. Overall, these findings improve our understanding of the implications of WFH policies for audit quality during COVID-19 and provide useful information for audit firms, audit committees, and regulators.