3 mars 2026
First price ICCI-IBR 2024:
Simon Tribolet, Master in Financial Analysis and Audit, HEC Liège – Liège Université (2023)
Promoteur : prof. Wouter Torsin, HEC Liège
"Reliable and truthful financial reporting and independent auditing are now highly needed by investors and other stakeholders and have a large role to play in managing outcomes of, and exit from, the sudden calamity"
(Dr. Stavros Thomadakis, former President of the IESBA, 2020, p. 1)
The health measures implemented by the Belgian government during coronavirus crisis, such as the closure of universities and the imposition of lockdowns, have affected us all. Moreover, we have borne witness to the distressing repercussions of this pandemic on our beloved acquaintances. As a cohesive entity, we collectively espouse the common goal of ensuring that our society never again experiences such tumultuous circumstances in the future. As pointed out by Goodell (2020), the current state of affairs has resulted in extensive economic and financial ramifications on a worldwide level, impacting numerous industries and sectors, including governments, financial markets, banking and insurance, and domestic demands. The COVID-19 outbreak has induced substantial stock market volatility and necessitated the enforcement of restrictions on trade and consumption, thereby creating a significant impact on the prospects for future economic growth (Gormsen & Koijen, 2020). The probability of business failures can have noteworthy economic and social consequences for shareholders, who could suffer losses on their investments, and for management and employees, who might face the possibility of losing their jobs (Charitou et al., 2007). The trust of stakeholders in the financial outcomes of firms can be eroded, potentially resulting in financial hardship (KPMG, 2020).
The primary role of auditors is to increase confidence that the financial statements fairly represent the financial position of a company (PwC, 2017). The auditing function, which stems from the agency theory of corporate governance, mitigates the information asymmetry between the managers and shareholders of a company by thwarting the managers' attempts to manipulate the reported earnings (Alves, 2013; Chan et al., 1993; Jensen & Meckling, 1976). Amidst the coronavirus crisis, companies across the globe were urged to augment their communication and transparency by offering detailed and accurate disclosures, especially to guarantee that the financial statements accurately reflect the financial reality of the company in these economically precarious times (Clayton & Hinman, 2020). This fair presentation may be distorted by earnings management, which poses a significant challenge for auditors (Barghathi et al., 2018). Indeed, companies may be more urged to report aggressively during a financial crisis (Herrmann et al., 2008).
Financial reporting will play a role in restoring trust in uncertain times by providing reliable and accurate information as well as transparency (EY, 2020). As an example, investors may apply pressure on managers to manipulate the results and present a more favourable depiction (Iatridis & Kadorinis, 2009; Kothari et al., 2016). In general, earnings management denotes a range of business management techniques that are employed by management to distort the perception of the company's financial situation (Healy & Wahlen, 1999; Bernstein & Siegel, 1979). Given the increased pressure and incentives for managers to engage in earnings management during periods of turmoil, the quality and reliability of financial statement information becomes a critical area of concern (Tsipouridou & Spathis, 2014). Audit quality is crucial to ensure that there is no manipulation of the results by managers, either upwards or downwards. Besides, the focus on audit quality and audit practices becomes even more critical during times of financial crisis (Francis, 2004; Fargher & Jiang, 2008).
Through an empirical analysis based on financial data of large and very large Belgian audited companies, this paper studies the audit quality of Big 4 and non-Big 4 auditors in Belgium before and during the COVID-19 pandemic, spanning from 2016 to 2019 and 2020.