Work or Life? Evidence of the Impact of Air Quality on Audit Delay and Audit Quality

We investigate the impact of air quality on audit process and audit outcomes using samples from the Chinese capital market between 2013 and 2018. We find that client firms located in cities with worse air quality have shorter audit delay and lower audit quality, represented by a lower probability of and fewer audit adjustments. Further analyses show that auditors from Big 4 audit firms can mitigate the effect of air quality on audit delay and audit quality. Our study contributes to the emerging literature on behavioral finance by extending the research into ambient air pollution to the auditing context, and provides new insights into the determinants of audit delay and audit quality.