How Do Remote Audits Impact Auditor Liability Exposure? Exploring Jurors’ Perceptions of Interview Evidence Collected during the COVID-19 Pandemic

Abstract

The COVID-19 Pandemic has arguably accelerated auditors’ shifts to 100% remote audits, with unknown consequences on auditor liability exposure. In this experimental study, a moderated-mediation model is proposed and tested to explore the joint effects of the modality of auditors’ interview evidence collection and the COVID-19 Pandemic on jurors’ perceptions of auditors’ intentions to collect high quality evidence and auditor liability. 158 jury eligible participants read a case that manipulated the client interview modality (face-to-face vs. remote/virtual) and the timing of the audit (before vs. during the COVID-19 Pandemic) in a 2x2 between-subjects experiment examining jurors’ perceptions of auditors who failed to detect collusion. After reading the case, participants provided their perceptions of auditors’ intent to collect high quality evidence and auditor liability for shareholder losses. Results indicate that, while the risks are likely to be lessened during the COVID-19 Pandemic time period, auditors may be exposed to increased risk of liability for collecting interview evidence virtually outside of the COVID-19 Pandemic time period.