The impact of information technology capability on audit report lag and audit fees: empirical evidence from the COVID-19 pandemic

Abstract

Purpose This study aims to examine the impact of client information technology (IT) capabilities on audit report lag and audit fees in Jordanian companies listed on the Amman Stock Exchange (ASE) during the COVID-19 pandemic. Design/methodology/approach This study analysed financial and non-financial data from 72 Jordanian public shareholding companies listed on the ASE between 2014 and 2021. Using fixed- and random-effects models, the authors examined the impact of client IT capabilities on audit report lag and audit fees. The authors also examined how the COVID-19 pandemic might affect audit report lag and audit fees. The analysis incorporated various control variables specific to the Jordanian context to ensure accuracy. Findings Empirical evidence indicates that client IT capabilities do not significantly impact audit report lag and audit fees. In contrast, the COVID-19 pandemic has positively impacted audit report lag and audit fees, leading to an increase in audit report lag of 60 to 67 days and an increase in audit fees of approximately 15%. It is worth noting that these effects are more pronounced when influenced by factors including return on assets, company losses and audits conducted by the Big 4 firms. Research limitations/implications The scope of this study, which focuses on Jordanian firms, may limit the generalisability of the findings to other contexts. Reliance on aggregate IT infrastructure and software assets as proxies for IT capabilities might not fully capture their multifaceted nature, overlooking the qualitative aspects crucial for audit outcomes. Furthermore, excluding external factors such as governmental regulations underscores the need for future research to explore the nuanced interplay between IT capabilities, internal control systems and regulatory environments, enriching our understanding of audit practices. Originality/value This study contributes to auditing literature by examining the interplay between IT capabilities and audit processes during the COVID-19 pandemic in Jordan. This study highlights the unexpected finding that IT capabilities have minimal impact on audit report lags and fees, opening new avenues for research on how pandemics and similar crises can reshape auditing practices and influence regulatory policies in an evolving economic environment.