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Article
Publication date: 15 July 2022

Maretno A. Harjoto and Indrarini Laksmana

The purpose of this study is to examine the impact of the 2020 COVID-19 lockdown on the audit fees and audit delay of audit client firms located in 52 countries and audit

Abstract

Purpose

The purpose of this study is to examine the impact of the 2020 COVID-19 lockdown on the audit fees and audit delay of audit client firms located in 52 countries and audit firm offices located in 40 countries.

Design/methodology/approach

Using archival audit data from Audit Analytics in the fiscal year 2020, this study examines the impact of the length of COVID-19 lockdown and other public health restrictions, measured by the stringency index (Hale et al., 2021), on audit fees and audit delay using a multivariate regression analysis.

Findings

Based on a sample of 2,726 US firms and 718 non-US firms from 51 different countries outside the USA and audit firm offices in 40 countries during the fiscal year 2020, the authors find that the COVID-19 lockdown and public health restrictions increase audit fees and audit delay. However, non-US firms experience longer audit delay because of the lockdown than their US counterparts. In addition, longer lockdown and greater restrictions increase the audit fees and audit delay of non-US firms with high audit risk at a greater rate than those of US firms with high audit risk.

Practical implications

The results of this study suggest that auditors increase audit fees and have longer audit delay when facing more COVID-19 restrictions. Increased audit fees and audit delay are likely to result from higher perceived audit risk and, consequently, additional audit effort to design new procedures, train staff to use the new procedures and implement them amid the pandemic restrictions. The impact of COVID lockdown and restrictions on audit fees and audit delay are more pronounced for non-US firms with greater audit risk. The results of this study suggest that audit firms should quickly adapt to the evolving audit, risk and financial landscape created by the pandemic.

Originality/value

Using archival audit data and large sample size, this study provides the first empirical evidence of the impact of lockdown and public health restrictions during the first wave of COVID-19 outbreak on audit processes as measured with audit fees and audit delay.

Details

International Journal of Accounting & Information Management, vol. 30 no. 4
Type: Research Article
ISSN: 1834-7649

Keywords

Article
Publication date: 10 January 2022

Chu Chen, Hongmei Jia, Yang Xu and David Ziebart

This study aims to examine the effects of audit firm attributes on audit delay associated with financial reporting complexity (FRC).

Abstract

Purpose

This study aims to examine the effects of audit firm attributes on audit delay associated with financial reporting complexity (FRC).

Design/methodology/approach

The authors use regression models with a sample of public firms with distinct monetary eXtensible Business Reporting Language tags to test the research hypotheses.

Findings

The authors find that two audit firm attributes (audit firm tenure and non-audit services performance) moderate the effect of FRC on audit delay.

Practical implications

The study provides insights to regulators, practitioners and investors into how firms may reduce audit delay from FRC by keeping their long-tenured auditors and allowing their auditors to gain more knowledge about the firms by providing non-audit services. The results, therefore, have implications for mandatory audit firm rotation.

Originality/value

To the best of the knowledge, this study conducts the first comprehensive analysis of this topic, exploring the impact of three audit firm attributes on audit delay caused by FRC. It attempts to illustrate the impact of external audit firms on reducing the adverse consequences of FRC.

Details

Managerial Auditing Journal, vol. 37 no. 2
Type: Research Article
ISSN: 0268-6902

Keywords

Article
Publication date: 30 October 2018

Nouha Khoufi and Walid Khoufi

This study aims to investigate the determinants of delay in publishing audited reports.

1547

Abstract

Purpose

This study aims to investigate the determinants of delay in publishing audited reports.

Design/methodology/approach

The research is conducted on a sample of French listed companies, covering the period of five years (from 2010 to 2014). The authors use pooled ordinary least squares regression analysis, modeling audit delay as a function of the following explanatory variables relating to the attributes of companies and their auditors.

Findings

A statistically significant association is found between audit delay and type of audit firm, audit opinion, firm size, the month of year-end and profitability. The results suggest that audit delay lag is reduced by appointing an international audit firm but is extended by aspects of qualified audit opinion.

Originality/value

The contribution of this paper is to investigate audit report in a developed capital market by taking advantage of access to proprietary data on audit timing and audit opinion. This allowed to overcome some of the problems of data quality that inhibit importing research methods from France to other advanced capital markets.

Details

Managerial Auditing Journal, vol. 33 no. 8/9
Type: Research Article
ISSN: 0268-6902

Keywords

Article
Publication date: 1 March 1996

Laurence E. Johnson

This paper presents a study of the audit delay experienced by 289 U.S. local governments. The study extends prior research by considering explanatory variables thought to…

Abstract

This paper presents a study of the audit delay experienced by 289 U.S. local governments. The study extends prior research by considering explanatory variables thought to be correlates of audit quality and by comparing city and county delay. Models of audit delay and audit fees are estimated using two-stage least squares regression. The study finds that audit delay is positively associated with correlates of audit quality and that cities experience less delay than do counties. The results indicate that, while audit fees have no explanatory power concerning audit delay, delay exerts a positive influence on fees.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 10 no. 3
Type: Research Article
ISSN: 1096-3367

Article
Publication date: 5 October 2015

Maretno Agus Harjoto, Indrarini Laksmana and Robert Lee

– The purpose of this study is to examine the impact of gender and ethnicity of CEO and audit committee members (directors) on audit fees and audit delay in the US firms.

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Abstract

Purpose

The purpose of this study is to examine the impact of gender and ethnicity of CEO and audit committee members (directors) on audit fees and audit delay in the US firms.

Design/methodology/approach

Audit-related corporate governance literature has extensively examined the determinants of audit fees and audit delay by focusing on board characteristics, specifically board independence, diligence and expertise. The authors provide empirical evidence that gender and ethnicity diversity in corporate leadership and boardrooms influence a firm’s audit fees and audit delay.

Findings

This study finds that firms with female and ethnic minority CEOs pay significantly higher audit fees than those with male Caucasian CEOs. The authors also find that firms with a higher percentage of ethnic minority directors on their audit committee pay significantly higher audit fees. Further, the authors find that firms with female CEOs have shorter audit delay than firms with male CEOs and firms with a higher percentage of female and ethnic minority directors on their audit committee are associated with shorter audit delay. Results indicate that female CEOs and both female and ethnic minority directors are sensitive to the market pressure to avoid audit delay.

Research limitations/implications

The results suggest that gender and ethnic diversity could improve audit quality and the firms’ overall financial reporting quality.

Practical implications

This study provides insights to regulators and policy-makers interested in increasing diversity within a firm’s board and top executives. Recently, the US Securities and Exchange Commission (SEC) and the European Commission have been pressing publicly traded companies to improve diversity among their directors. This study provides evidence and perspective on how diversity can enhance financial reporting quality measured by audit fees and audit delay.

Originality/value

Previous studies have not given much attention on the impact of racial ethnicity in addition to gender characteristics of top executives and audit committee directors on audit fees and audit delay.

Details

Managerial Auditing Journal, vol. 30 no. 8/9
Type: Research Article
ISSN: 0268-6902

Keywords

Article
Publication date: 1 July 2014

Sharad Asthana

This paper aims to address three questions: Does the abnormal delay in the audit process signal poor earnings quality? Is this information about earnings quality…

2649

Abstract

Purpose

This paper aims to address three questions: Does the abnormal delay in the audit process signal poor earnings quality? Is this information about earnings quality incremental to that contained in earnings report delay? Does the market use this information about earnings quality in valuing the firm?

Design/methodology/approach

Data are obtained from four databases: Compustat, Audit Analytics, Compact-Disclosure and I/B/E/S. Complete data are available for 5,298 firms for 22,492 firm-years. The paper uses a two-stage model. In the first stage, a detailed model using determinants from extant research tries to explain the audit delay. In the second stage, the unexplained delay from the first stage is used in the association tests with earnings quality.

Findings

The paper presents evidence that abnormal delays in the audit process are inversely associated with earnings quality. When the market values a dollar of reported earnings, it appears to discount the valuation by the extent of abnormal audit delay.

Originality/value

The current paper contributes to existing research in several ways. First, it establishes a comprehensive model to explain audit delays and provides a tool to measure abnormal audit delays. Second, it provides evidence of inverse association between abnormal audit delay and seven proxies of earnings quality. Finally, the paper shows that abnormal audit delay creates skepticism among investors about earnings quality and they value the disclosed earnings after discounting for such delay.

Details

Journal of Financial Reporting and Accounting, vol. 12 no. 1
Type: Research Article
ISSN: 1985-2517

Keywords

Article
Publication date: 1 May 2019

Saeed Rabea Baatwah, Zalailah Salleh and Jenny Stewart

The purpose of this paper is to investigate whether the characteristics of the audit committee (AC) chair affect audit report timeliness. In particular, the direct…

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Abstract

Purpose

The purpose of this paper is to investigate whether the characteristics of the audit committee (AC) chair affect audit report timeliness. In particular, the direct association between AC chair accounting expertise and audit report delay, and the moderating effect of other characteristics of AC chair on this association are examined.

Design/methodology/approach

To achieve the purpose of this study, the characteristics examined by this study are AC chair expertise, shareholding, tenure and multiple directorships. Furthermore, a sample of Malaysian companies during the period 2005–2011 and the fixed effects panel data method are utilized.

Findings

The results suggest that an AC chair with accounting expertise is associated with a reduction in audit delay. The reduction is more obvious when the chair holds shares in the company, but is weakened by longer tenure and multiple directorships. These results are robust after conducting several robust tests. Using mediating analysis, the authors also document that an AC chair with accounting expertise can enhance the timeliness of audit reports even when the quality of financial reporting is lower. The reported result is supported by additional analysis that finds that AC chairs with accounting expertise and AC chairs with accounting expertise and shareholding are significantly associated with shorter abnormal audit delay.

Originality/value

This study provides comprehensive analysis concerning the association between AC chair and audit report timeliness using a unique setting. It is among the limited evidence that reports the moderating effect of AC chair characteristics on the role of such chair on audit report timeliness.

Details

Asian Review of Accounting, vol. 27 no. 2
Type: Research Article
ISSN: 1321-7348

Keywords

Article
Publication date: 4 January 2011

Vivek Mande and Myungsoo Son

The purpose of this study is to examine whether lengthy audit delays lead to auditor changes in the subsequent year. The paper hypothesizes that a lengthy interaction…

3910

Abstract

Purpose

The purpose of this study is to examine whether lengthy audit delays lead to auditor changes in the subsequent year. The paper hypothesizes that a lengthy interaction between clients and their auditors reflects high audit risk factors relating to management integrity, internal controls, and the financial reporting process. It argues that auditors are more likely to drop clients with long audit delays because they would like to avoid these types of audit risks.

Design/methodology/approach

Using logistic regressions, the paper first tests whether a lengthy audit delay leads to an auditor change. It then examines whether as audit delays increase, auditor changes are more likely to be downward than lateral.

Findings

The results support the hypothesis that Big N auditor‐client realignments occur following long audit delays. Further, as the length of the delay increases, the paper finds that there are more downward changes.

Research limitations/implications

An implication of our study is that a long audit delay represents a publicly observed proxy for the presence of audit risk factors that lead to an auditor change.

Practical implications

This study suggests that all else constant, investors should consider a lengthy audit delay as indicating that there has been deterioration in the quality of the client‐auditor interaction. An audit delay also presents an observable proxy for successor auditors to consider while evaluating risks associated with a new client.

Originality/value

The results of our study increase our understanding of how Big N auditors manage their client portfolios to mitigate their exposure to risk factors.

Details

Managerial Auditing Journal, vol. 26 no. 1
Type: Research Article
ISSN: 0268-6902

Keywords

Article
Publication date: 11 July 2016

Mishari M. Alfraih

This paper aims to examine the influence of corporate governance mechanisms on audit delay in companies listed on the Kuwait Stock Exchange (KSE) in 2013. Kuwait has the…

2309

Abstract

Purpose

This paper aims to examine the influence of corporate governance mechanisms on audit delay in companies listed on the Kuwait Stock Exchange (KSE) in 2013. Kuwait has the unusual audit regulation that listed companies must be jointly audited by two independent auditors who both sign the report.

Design/methodology/approach

Audit delay is measured as the number of days that elapse between the end of the company’s financial year and the date of the audit report. A multivariate regression model analyzes the association between audit delay and six corporate governance mechanisms, namely, joint auditor combination, board size, board independence, role duality, institutional ownership and government ownership.

Findings

There is a wide range in audit delay among KSE companies, ranging from 7 to 159 days. After controlling for various company characteristics, there is a significant difference in the timeliness of audit reports depending on the combination of auditors: audit delay is significantly reduced when the audit is performed by Big-4 companies. Moreover, companies with larger boards, a greater number of independent directors and separate CEO–chairman roles are more likely to produce timely financial statements. Higher government ownership levels were associated with greater audit delay, while no significant association was found for institutional ownership. These results are robust to a variety of sensitivity checks.

Practical implications

The findings highlight the effectiveness of corporate governance mechanisms in shaping the timeliness of audit reports; thus, these mechanisms should be taken into account in any regulatory action to reduce audit delay. In addition, the findings of this study provide empirical evidence that can be used by regulators and enforcement bodies in their continued campaigns promoting the role and importance of corporate governance mechanisms in improving the quality and timeliness of financial reporting.

Originality/value

The study extends the audit delay literature by investigating the issue in a joint audit setting. The empirical evidence shows a wide range of audit delay in KSE-listed companies, which raises questions about the costs and benefits of the joint audit regulation for the length of this period.

Details

Journal of Financial Regulation and Compliance, vol. 24 no. 3
Type: Research Article
ISSN: 1358-1988

Keywords

Article
Publication date: 1 March 1996

Janice Lawrence and Barry Bryan

Federal agencies rely heavily on the annual audit report to monitor the stewardship of public funds. This study examines the impact of audit delay on the monitoring of…

105

Abstract

Federal agencies rely heavily on the annual audit report to monitor the stewardship of public funds. This study examines the impact of audit delay on the monitoring of low-income housing projects. Specifically, project characteristics correlated with delayed audit reports are determined. Significant differences between projects filing audit reports on time and those filing late are also analyzed. Importantly, samples of both Farmers’ Home Administration (FmHA) and Housing and Urban Development (HUD) projects are examined, with private and public/municipal housing projects included in each sample. The results of this study have monitoring applications for users of the audit report and implications for federal regulators.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 10 no. 2
Type: Research Article
ISSN: 1096-3367

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