HEC-Ecole de gestion de l'Université de Liège
HEC-Ecole de gestion de l'Université de Liège

The effect of audit firm size and the Covid-19 pandemic on audit quality: evidence from Belgium

Tribolet, Simon ULiège
Promotor(s) : Torsin, Wouter ULiège
Date of defense : 21-Jun-2023/28-Jun-2023 • Permalink :
Title : The effect of audit firm size and the Covid-19 pandemic on audit quality: evidence from Belgium
Author : Tribolet, Simon ULiège
Date of defense  : 21-Jun-2023/28-Jun-2023
Advisor(s) : Torsin, Wouter ULiège
Committee's member(s) : Riffon, Véronique ULiège
Language : English
Number of pages : 112
Keywords : [en] Audit quality
[en] Earnings management
[en] COVID-19 pandemic
[en] Discretionary accruals
Discipline(s) : Business & economic sciences > Accounting & auditing
Target public : Researchers
Professionals of domain
General public
Institution(s) : Université de Liège, Liège, Belgique
Degree: Master en sciences de gestion, à finalité spécialisée en Financial Analysis and Audit
Faculty: Master thesis of the HEC-Ecole de gestion de l'Université de Liège


[en] This paper examines the effect of audit firm size (Big 4 versus non-Big 4) and the COVID-19
pandemic on audit quality in Belgium. To assess audit quality in this country, a multiple linear
regression analysis is conducted on a sample of 3,343 large and very large Belgian entities spanning from 2016 to 2020. Audit quality is proxied by discretionary accruals determined thanks to the performance-adjusted Jones model (Kothari et al., 2005). The findings present compelling evidence of a statistically significant disparity in discretionary accruals between enterprises audited by a Big 4 and those overseen by alternative auditors in Belgium. Additionally, the study identifies a statistically significant positive correlation between the magnitude of discretionary accruals and the COVID-19 outbreak, suggesting diminished audit quality during this period of disruption. These findings remain robust across various model specifications and empirical designs. Nevertheless, there is no statistically significant correlation between audit quality and the performance of an audit assignment by a Big 4 firm in Belgium during the pandemic. Only a supplementary analysis reveals that negative discretionary accruals were statistically significantly more positive for Big 4 clients throughout the health crisis period. Further tests indicate that corporations with higher returns on assets and sales growth rates exhibit lower audit quality from auditors. The study also uncoversthat as Belgian firms expand in terms of total assets, there is a corresponding reduction in their employment of discretionary accruals in absolute value, thereby resulting in an improved level of audit quality. Moreover, our study provides evidence that Belgian companies with progressively elevated long-term debt-to-total-assets ratios and favourable liquidity positions, as assessed by high current ratios, are associated with better audit quality. Conversely, when firms experience losses, they tend to engage in greater manipulation of their
financial results through higher levels of discretionary accruals in absolute terms, which leads to a decline in audit quality.



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  • Tribolet, Simon ULiège Université de Liège > Master sc. gest., à fin.


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