Use of videoconferencing in audit committee–auditor communication during the COVID-19 pandemic: evidence from Korea

Purpose The purpose of this study is to examine whether the use of videoconferencing for communication between the audit committee (AC) and auditors affects the quality of client firms’ audits. Design/methodology/approach This paper analyzes the mandatory disclosure information on AC–auditors communication using 1,065 Korean listed firm-years for the fiscal years 2020 and 2021. The details of AC–auditor communication (i.e. the extent of firms’ use of videoconferencing) are manually collected from audit reports. Findings This study finds that videoconferencing has a negative impact on audit quality, suggesting that it is not an effective communication medium between AC and auditors. The results are robust to alternative research designs (e.g. entropy-balanced sample, propensity score matching analysis and change analysis) that address endogeneity concerns. This study also finds that while the negative effect of videoconferencing is mitigated by holding more frequent AC meetings, neither AC independence nor expertise mitigates this effect. Research limitations/implications This paper suggests that videoconferencing may affect audit quality by hurting the discussion between the AC and auditors. Practical implications The findings that videoconferencing impairs the effectiveness of ACs and thus lowers audit quality have practical implications as the COVID-19 pandemic has significantly changed how AC members and auditors interact. This study offers timely and valuable insights into the potential implications of these pandemic-induced changes on audit environments. Originality/value This study provides large-sample empirical evidence that directly examines the effect of videoconferencing on audit quality, enhancing the understanding of the communication dynamics between the AC and auditors. This study also contributes to the literature on the role of ACs in emerging markets by highlighting the information processing role of the AC.