EU audit reform and audit quality: did European regulators hit the mark?

Yosra Mnif and Marwa Bouassida

Managerial Auditing Journal, 2025, vol. 41, issue 1, 191-227

Abstract: PurposeThe purpose of this study is to assess the empirical effects of the compliance with the key provisions of the 2014 EU audit reform on the statutory audit quality based on a sample of listed European firms.Design/methodology/approachThe sample consists of 412 observations, split into two subsamples: 206 observations for the prereform period (2014–2015) and 206 observations for the postreform period (2017–2018) across the four largest EU Member States. OLS regressions have been used.FindingsThe results show a significant decline in the extent of accrual-based earnings management after the reform’s implementation compared to the prereform period. Specifically, the empirical findings reveal that the NAS fee cap, audit tenure, audit committee accounting/auditing expertise and audit committee industry expertise are more effective in constraining the level of discretionary accruals following the reform adoption. By contrast, the prohibition of NAS appears to exert a positive and significant effect.Originality/valueTo the best of the authors’ knowledge, the present study is the first to empirically assess the impact of the EU audit reform on audit quality immediately after the regulatory change, compared to the preregulation period. The relevance of this study lies in estimating the extent to which the new regulatory requirements have achieved their intended objective of improving statutory audit quality, using a comparative perspective.

Keywords: EU audit reform; Audit quality; Earnings management; European firms (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:majpps:maj-09-2024-4465

DOI: 10.1108/MAJ-09-2024-4465

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