Audit materiality judgments during the COVID-19 pandemic: Evidence from the United Kingdom

Abstract

This study investigates how auditors’ materiality assessments changed during the sudden adverse economic conditions caused by the COVID-19 pandemic. Our evidence suggests that auditors primarily adjusted their benchmark choices in response to the pandemic’s negative impact, while maintaining quantitative materiality amounts similar to the pre-pandemic levels. Our further analysis reveals an asymmetric pattern in auditors’ materiality judgments: declining performance is associated with a higher likelihood of changing materiality benchmark types, but not with significant reductions in materiality values. Conversely, strong performance is associated with increased materiality values, but not with changes in benchmark types. Such practices raise concerns about whether auditors may have used benchmark changes to avoid reducing materiality levels. Our study provides valuable insights for practitioners, policymakers, and academics on auditors’ materiality assessments in the context of a global crisis.