5. Conclusion
Auditors play a significant role in enhancing investors’ confidence on financial markets. The recent global financial crisis shocked investors’ confidence on financial markets and drove many, including members of Investor Advisory Group of PCAOB, to put a question mark on quality of auditor’s performance around the GFC. In the absence of wake up calls from the auditors to warn market of the financial distress faced by several firms (Woods et al., 2009) (PCAOB 2011), many commentators believe that market’s trust on unqualified financial statements declined as a results of the GFC (Sikka, 2009). Most of the existing literature on audit quality focuses on whether auditors increased their efforts and whether their propensity to issue qualified reports increased during the GFC or whether firms were motivated to increase the audit quality. Complementary to such studies, we focus on the investors’ perspective and examine whether investors’ perception of audit quality changed during the GFC.
In general and contrary to the criticism heaved by financial median and regulator we find that investors perceived audit quality to have increased during the GFC. Our results also show that the increase in the investors’ perceived quality of audit was not dependent on the auditors’ size or their apparent fee dependence on clients. We also find that the increase in the investors’ perception of audit quality is not driven by a decrease in the richness of information stemming from other sources during the GFC. These findings corroborate the findings of Xu et al. (2011), Xu et al. (2013) and Geiger et al. (2014) who do not find evidence of auditors being lax in issuing qualified reports during the GFC.
