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Audit report lag and client industry homogeneity

Errol G. Stewart (School of Accountancy, Parker College of Business, Georgia Southern University, Statesboro, Georgia, USA)
Timothy D. Cairney (School of Accountancy, Parker College of Business, Georgia Southern University, Statesboro, Georgia, USA)

Managerial Auditing Journal

ISSN: 0268-6902

Article publication date: 28 June 2019

Issue publication date: 7 October 2019

Abstract

Purpose

This study aims to examine the association between audit report lag (ARL), the length of time between the fiscal year end and the date the auditors’ report is signed, and client industry homogeneity, a measure of the similarity of operations of members of an industry.

Design/methodology/approach

Regression models are used to test the significance of industry homogeneity on the ARL, of specialists in homogenous industries on the ARL, and the completion of the audits of homogenous industry clients in the year of tightening Securities and Exchange Commission (SEC) filing deadlines.

Findings

The evidence suggests that auditors complete audits of clients more quickly in more homogenous industries. The association between ARL and homogeneity is negative, which indicates that auditors are more efficient in audits in homogenous industries. The association between ARL and specialist audits in homogenous industries is also negative. Finally, homogenous industry audits are better able to be completed by the compressed filing dates imposed by the SEC on accelerated and large accelerated filers in 2003 and 2006.

Originality/value

This study extends recent research on industry homogeneity’s influence on the audit market. By reporting an association between the homogeneity of a company’s industry and the ARL, investors and regulators have additional information to better evaluate the timing and monitor trends in the timing of the audit report dates.

Keywords

Citation

Stewart, E.G. and Cairney, T.D. (2019), "Audit report lag and client industry homogeneity", Managerial Auditing Journal, Vol. 34 No. 8, pp. 1008-1028. https://doi.org/10.1108/MAJ-07-2018-1931

Publisher

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Emerald Publishing Limited

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