The Auditors' Role in the US Paycheck Protection Program (PPP)

We examine whether auditors helped public clients obtain U.S. Paycheck Protection Program (PPP) loans to overcome the COVID-19-related economic crisis. Larger auditors had better access to resources to help their auditees with PPP applications. However, the Big 4 auditors were primarily focused on helping large banks process PPP loans, which constrained their ability to help their auditees. We predict and find that auditees of Second-Tier auditors are more likely than auditees of Big 4 auditors to obtain a PPP loan. In contrast to the Big 4 and Second-Tier auditors, many Small auditors faced significant financial challenges during the pandemic and had to avail of PPP loans. We find that auditees of Small auditors who availed (did not avail) of PPP loans were less (as) likely to obtain PPP loans than (as) auditees of Second-Tier auditors. Our findings demonstrate the value that non-Big 4 auditors can provide through nonaudit services.