Workload, Audit Quality and the Moderating Role of Audit Committee Characteristics

Abstract

As a result of the financial scandals of many companies globally, interest has increased in the audit quality that ensures the accuracy and reliability of financial statements and in governance mechanisms that prevent managers from using their power to serve their own interests as assumed by agency theory. The impact of workload in busy seasons on audit quality is of interest as more than half of companies choose December as the end of their fiscal year, which may affect the performance of auditors and thus audit quality. The aim of this study is to examine the impact of workload on audit quality and whether audit committee independence and expertise play a role in mitigating workload. For this purpose, discretionary accruals calculated as a proxy of audit quality and busy season (December) were considered as a proxy of workload, using data from FTSE All Shares from the UK for the period from 2011 to 2021. The findings show that there is a decrease in audit quality for the firms that end their fiscal year is December; however, this result is not statistically significant. Moreover, audit committee independence plays a significant role in mitigating the negative impact of workload on audit quality. In addition, the results reveal that audit committee expertise does not influence the relationship between auditor workload and audit quality. This study differs from most studies in the audit field in that it examines the role of an audit committee in mitigating the negative impact of auditors’ workload on audit quality.