Audit committee ownership and audit report lag: evidence from Australia

Abstract

Purpose

This paper aims to examine whether audit committee ownership affects audit report lag. Independent audit committees are responsible for overseeing the financial reporting process, to ensure that financial statements are both credible and released to external stakeholders in a timely manner. To date, however, the extent to which audit committee ownership strengthens or compromises member independence, and hence, influences audit report lag, has remained unexplored.

Design/methodology/approach

This paper hypothesizes that audit committee ownership is associated with audit report lag. Further, the author hypothesize that both the financial reporting quality and the going concern opinions of a firm mediate the effect of audit committee ownership on audit report lag.

Findings

Using data from Australian listed companies, the author find that audit committee ownership increases audit report lag. The author further document that financial reporting quality and modified audit opinions rendered by external auditors mediate this positive relationship. The results are robust to endogeneity concerns emanating from firms’ deliberate decisions to grant shares to the audit committee members.

Originality/value

The study contributes to both the audit report timeliness and the corporate governance literatures, by documenting an adverse effect of audit committee ownership.

Citation

Bhuiyan, M.B.U. and D’Costa, M. (2020), "Audit committee ownership and audit report lag: evidence from Australia", International Journal of Accounting & Information Management, Vol. 28 No. 1, pp. 96-125. https://doi.org/10.1108/IJAIM-09-2018-0107