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Article
Publication date: 18 April 2020

The demand and supply timely financial reports

Mazen Al-Mulla and Michael E. Bradbury

This paper is motivated by the Financial Markets Authority’s (FMA) investigation into reporting delays of New Zealand issuers. The purpose of this paper is to provide…

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Abstract

Purpose

This paper is motivated by the Financial Markets Authority’s (FMA) investigation into reporting delays of New Zealand issuers. The purpose of this paper is to provide regulators with systematic evidence on firm specific characteristics associated with reporting delay. The paper examines the audit report lag (ARL), the financial report lag and the corresponding interim report lags for a large sample of New Zealand listed firms.

Design/methodology/approach

Because of the small sample we report bivariate correlations. Together with OLS regression, we examine the association between reporting delay and firm characteristics (e.g., size, complexity, governance) that capture the supply and demand for timely audited financial reports. We choose a period immediately prior to the FMA enforcement of reporting delays to capture the voluntary choice of reporting timeliness by managers.

Findings

The audit lag (i.e. balance date to preliminary announcement to the NZX) is longer than the report lag (i.e. preliminary announcement date to the issuance of the report to the NZX). We find that audit risk factors (leverage and finance firms) and busy reporting period are associated with longer audit lag. Whereas, having a Big 4 auditor and an interim review reduces annual audit lag. Investor demand factors are associated with a shorter report lag. Firms with a loss and more segments have a shorter report lag, while firms with high market to book ratio have a longer report lag. These are consistent with agency and proprietary cost explanations. The interim report lag is only seven days shorter than the annual lag. The determinants of annual report lag provide weak explanations for the interim report lags.

Research limitations/implications

Although all listed companies are sampled, the small sample size reduces the power of the analysis and may limit finding significant results at conventional levels.

Practical implications

The factors associated with reporting delays could be used by regulators as red flags to identify abnormal reporting delays. Interim reporting lags appear excessively relative to annual report lags. Therefore, regulators should investigate the reasons for the lack of timeliness of interim reports.

Social implications

Report timeliness is an important, but often overlooked, component of accounting quality. The major social implication is that timely reporting reduces information asymmetry between managers and shareholders and other stakeholders. Making better, timelier decisions ought to increase the wealth and welfare of investors and other stakeholders.

Originality/value

There are many studies on reporting delay. However, prior evidence on reporting delay in New Zealand is pre-IFRS and pre-recent regulatory reforms (such as the formation of the FMA). Hence, our contribution is to provide more contemporary-relevant evidence. We also distinguish between ARL and the financial report lag and found that different firm characteristics drive these lags. We also examine the interim reporting lag.

Details

Pacific Accounting Review, vol. 32 no. 3
Type: Research Article
DOI: https://doi.org/10.1108/PAR-10-2018-0076
ISSN: 0114-0582

Keywords

  • Audit report lag
  • Financial report lag
  • Interim report lag
  • Timeliness
  • Regulation

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Article
Publication date: 5 August 2019

The effect of company characteristics and auditor characteristics to audit report lag

Muhammad Rifqi Abdillah, Agus Widodo Mardijuwono and Habiburrochman Habiburrochman

The purpose of this paper is to examine and analyze the factors that affect an auditor’s efficiency in completing the audit process proxied by audit report lag. The…

Open Access
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Abstract

Purpose

The purpose of this paper is to examine and analyze the factors that affect an auditor’s efficiency in completing the audit process proxied by audit report lag. The factors used in this study are selected by looking at the characteristics of the company and the characteristics of an auditor.

Design/methodology/approach

Company characteristics were proxied by the audit committee effectiveness, financial condition, accounting complexity and profitability, whereas auditor characteristics were proxied with auditor reputation, audit tenure and auditors industry specialization. Populations of this study were all manufacturing companies listed in Indonesian Stock Exchange in 2014–2016. Based on the purposive sampling method, the number of samples obtained from 231 companies was 77. Multiple linear regression method was used to analyze this study. Hypothesis testing was done by statistical t-test (partial).

Findings

The results showed that partially variables of the audit committee effectiveness and profitability had a significant negative effect on audit report lag while the variable financial condition had a significant positive effect on audit report lag. Meanwhile, variables of the accounting complexity, auditor reputation, audit tenure and auditors’ industry specialization did not show significant influence on audit report lag.

Originality/value

This study tests both company’s and auditor’s characteristic on audit report lag that as far as authors know never been tested simultaneously.

Details

Asian Journal of Accounting Research, vol. 4 no. 1
Type: Research Article
DOI: https://doi.org/10.1108/AJAR-05-2019-0042
ISSN: 2443-4175

Keywords

  • Audit committee effectiveness
  • Accounting complexity
  • Auditors characteristics
  • Financial condition
  • Firms characteristics

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Article
Publication date: 6 March 2017

Accounting outsourcing and audit lag

Charles P. Cullinan and Xiaochuan Zheng

This paper examines the relationship between accounting outsourcing and audit lag. Accounting outsourcing may reduce misstatement risk, reducing the amount of audit effort…

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Abstract

Purpose

This paper examines the relationship between accounting outsourcing and audit lag. Accounting outsourcing may reduce misstatement risk, reducing the amount of audit effort necessary and thereby decrease audit lag. Alternatively, outsourcing may increase the amount of coordination necessary between the auditor, client management and the outside accounting service provider and thereby increase audit lag.

Design/methodology/approach

The accounting outsourcing/audit lag relationship is examined among closed-end mutual funds. These funds often outsource their accounting functions and disclose the names and services provided by any company providing services to the fund. These disclosures permit a consistent measurement of whether the fund outsources their accounting functions or performs them in-house.

Findings

This paper finds a positive relationship between accounting outsourcing and audit lag; outsourcing funds have audit lags that are two to three days longer than those not outsourcing their accounting. The results are robust to different specifications, controls for the distinctive characteristics of closed-end funds and consideration of endogeneity.

Practical implications

Closed-end funds could consider the increased time necessary to complete the audit when deciding whether to outsource their accounting functions.

Originality/value

By identifying a unique setting in which outsourcing data can be consistently obtained and analyzed (i.e. closed-end funds), this is the first study to empirically evaluate the relationship between accounting outsourcing and audit lag.

Details

Managerial Auditing Journal, vol. 32 no. 3
Type: Research Article
DOI: https://doi.org/10.1108/MAJ-03-2016-1349
ISSN: 0268-6902

Keywords

  • Outsourcing
  • Audit lag
  • Closed-end funds

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Article
Publication date: 13 January 2020

Audit committee ownership and audit report lag: evidence from Australia

Md. Borhan Uddin Bhuiyan and Mabel D’Costa

This paper aims to examine whether audit committee ownership affects audit report lag. Independent audit committees are responsible for overseeing the financial reporting…

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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.

Details

International Journal of Accounting & Information Management, vol. 28 no. 1
Type: Research Article
DOI: https://doi.org/10.1108/IJAIM-09-2018-0107
ISSN: 1834-7649

Keywords

  • Australia
  • Financial reporting quality
  • Audit report lag
  • Audit opinion
  • Audit committee ownership

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Article
Publication date: 2 May 2017

The impact of accelerated filing requirements on meeting audit report deadlines

Magdy Farag

The purpose of this study is to examine audit report lags and audit report deadline margins. It specifically examines whether audits of large accelerated filers are…

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Abstract

Purpose

The purpose of this study is to examine audit report lags and audit report deadline margins. It specifically examines whether audits of large accelerated filers are completed within a shorter period as compared with regular accelerated filers due to the introduction of new deadline filing requirements by the SEC. The paper also examines whether large accelerated filers have shorter audit report deadline margins.

Design/methodology/approach

Using a sample of 7,129 firm-year observations over the period 2007-2013, an OLS regression model is applied by regressing audit report lags and audit report deadline margins on an indicator variable for large accelerated filers and a set of control variables.

Findings

Results indicate that audits of large accelerated filers have shorter audit report lags as compared with regular accelerated filers. Also, large accelerated filers have shorter audit report deadline margins as compared with regular accelerated filers. These results suggest that even though large accelerated filers’ audits are more complex by nature, auditors of these firms are under more pressure to complete their audits and issue their clients’ audit reports on time.

Research limitations/implications

While the control variables included in the models are all based on established theories and validated in prior research, there may still be some control variables that were excluded from the study’s models. Also, these results cannot be generalized beyond firms that are categorized as large accelerated filers or accelerated filers.

Practical/implications

Public accounting firms should be prepared to devote more resources to large accelerated filers’ clients. Also, regulators might need to reconsider revising the filing deadline requirements for the new category of large accelerated filers by weighing the pros against the cons of these new deadlines, as it appears that auditors of large accelerated filers need more time to complete their audits.

Originality/value

This study uses a new measuring tool in addition to audit report lags, which is the ‘audit report deadline margin’.

Details

Accounting Research Journal, vol. 30 no. 01
Type: Research Article
DOI: https://doi.org/10.1108/ARJ-11-2013-0086
ISSN: 1030-9616

Keywords

  • Accelerated filer
  • Audit report deadline margin
  • Audit report lag

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Article
Publication date: 5 March 2018

Lead engagement partner workload, partner-client tenure and audit reporting lag: Evidence from Malaysia

Wan Nordin Wan Hussin, Hasan Mohamad Bamahros and Siti Norwahida Shukeri

Motivated by a recent call from DeFond and Zhang (2014) for auditing scholars to use “a richer set of audit firm, auditor office, and individual auditor characteristics to…

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Abstract

Purpose

Motivated by a recent call from DeFond and Zhang (2014) for auditing scholars to use “a richer set of audit firm, auditor office, and individual auditor characteristics to capture competency”, this study aims to extend the related line of research by examining the association between lead engagement partner workload, defined as the number of public listed clients the partner is in charge of, and audit lag. The moderating effects of partner tenure on the partner workload–audit lag relationship have also been examined.

Design/methodology/approach

The association between auditor workload and financial reporting timeliness on 651 non-financial firms listed on Bursa Malaysia is tested in this study. Data to compute the partner workload are based on 222 lead engagement partners who signed off the audit reports for all 892 public listed firms in 2013.

Findings

The busy auditors are observed to prolong audit lags, and the effect is more acute for non-Big 4 clients, busy season clients and a short partner tenure. The engagement partners with heavy workload can also mitigate the adverse effects of reduced audit report timeliness when they have a longer partner–client tenure.

Research limitations/implications

This study may understate the level of engagement partner workload when partners have private firms in their client portfolios. Notwithstanding that, this study reiterates the growing importance of examining accounting and auditing outcomes at the individual partner level.

Practical implications

The findings that over-burdened engagement partner takes a longer time to complete the audit add to the current debate, where audit regulators and various stakeholders are actively promoting discussions on potential indicators of audit efficiency and quality.

Originality/value

This study provides new evidence on the association between partner workload and audit reporting lag, which has hitherto been unexplored. This study also extends the research carried out by Gul et al. (2017) and Sharma et al. (2017) by providing additional evidence on the relationship between partner tenure and audit delay.

Details

Managerial Auditing Journal, vol. 33 no. 3
Type: Research Article
DOI: https://doi.org/10.1108/MAJ-07-2017-1601
ISSN: 0268-6902

Keywords

  • Malaysia
  • Audit delay
  • Busy auditor
  • Engagement partner workload
  • Partner tenure
  • Audit reporting lag
  • M4

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Article
Publication date: 2 May 2017

Audit quality and audit report lag: case of Indonesian listed companies

Rusmin Rusmin and John Evans

The purpose of this paper is to empirically examine the relation between two dimensions of auditor quality, namely, auditor industry specialization and auditor reputation…

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Abstract

Purpose

The purpose of this paper is to empirically examine the relation between two dimensions of auditor quality, namely, auditor industry specialization and auditor reputation and the audit report lag.

Design/methodology/approach

The data collection focuses on companies listed on the Indonesia Stock Exchange for the financial year of 2010 and 2011. To ensure data homogeneity and reduce industry bias, this study focuses solely on manufacturing companies identified by the Indonesian Capital Market Directory.

Findings

This study finds a negative and significant association between industry-specialist auditors and audit report timeliness. Companies audited by industry-specialist auditors have shorter audit delays. The authors also find evidence that Big 4 auditors perform significantly faster audit work than their non-Big 4 counterparts. In addition, this study reports a statistical and significant relationship between auditing complexity, companies’ profitability, auditors’ business risk, and industry classification and audit report lag. The results show that firms with a large number of subsidiaries and firms experiencing poorer financial performance are found to be associated with longer reporting delays. Moreover, audit report timeliness is found to be faster for companies in the low-profile industry sector and owned by family members.

Research limitations/implications

Similar to other empirical investigations, this study is not without certain caveats. First, the period of audit report lag in this study reflects the audit work from the year-end to the audit report date. The authors do not consider audit work conducted outside this period in the analysis. Second, there are numerous control variables and although the authors have attempted to capture those variables to maintain the integrity of the research there are likely other excluded variables that may be important in explaining audit report timeliness. Finally, there are other factors, for example, an administrative approval process with the audit firm home office, which can affect audit report lags but have not been included in the model analysis. Future studies can seek to focus on refinements to the proxy measures for dependent and experimental variables.

Practical implications

Insights drawn from this study may be of assistance to policy makers as they consider the costs and benefits associated with varying levels of audit market concentration as well as providing a snapshot of the level of non-compliance on audit timeliness in Indonesia.

Originality/value

This study provides further empirical evidence on the relation between auditor quality and audit report lag using data from a different domestic setting. This study also enriches the auditor quality literature by employing industry-specialist and Big 4 auditors as a predictor for the timeliness of audit reports.

Details

Asian Review of Accounting, vol. 25 no. 2
Type: Research Article
DOI: https://doi.org/10.1108/ARA-06-2015-0062
ISSN: 1321-7348

Keywords

  • Auditor reputation
  • Auditor industry specialization
  • Audit report lag
  • Indonesia manufacturing listed companies

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Article
Publication date: 7 January 2019

The determinants of audit report lag: a meta-analysis

Giselle Durand

The purpose of this paper is to further the understanding of the determinants of audit report lag, which is the number of days from a company’s fiscal year-end to the date…

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Abstract

Purpose

The purpose of this paper is to further the understanding of the determinants of audit report lag, which is the number of days from a company’s fiscal year-end to the date of its auditor’s report, by synthesizing extant literature. Audit report lag has been a variable of interest in many studies due to its use as a proxy for the occurrence of auditor-client management negotiations and audit efficiency and because long audit report lags delay the release of earnings information to the market.

Design/methodology/approach

The author uses meta-analysis to examine commonly identified predictors of audit report lag to determine if the prior research provides a consistent portrayal of audit report lag drivers.

Findings

The author finds that a number of variables relating to client profitability and financial condition, client complexity and audit opinion modifications increase audit report lag. In addition, audit report lag decreases with client size, when clients have positive earnings news to report and when the auditor has long tenure and provides non-audit services. Several variables, such as those relating to corporate governance and various auditor characteristics, have been little explored and would benefit from future research.

Originality/value

These results will be useful to researchers when selecting control variables for future audit report lag studies and provide insights into the key factors that contribute to the delay in audit reporting.

Details

Managerial Auditing Journal, vol. 34 no. 1
Type: Research Article
DOI: https://doi.org/10.1108/MAJ-06-2017-1572
ISSN: 0268-6902

Keywords

  • Meta-analysis
  • Audit report lag
  • Audit delay
  • M4

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Article
Publication date: 12 February 2018

The effect of CEO tenure and specialization on timely audit reports of Iranian listed companies

Mahdi Salehi, Mahmoud Lari Dasht Bayaz and Mohamadreza Naemi

The purpose of this paper is to examine whether the characteristics of a CEO, that is, tenure and financial expertise, could affect the timeliness of an audit report.

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Abstract

Purpose

The purpose of this paper is to examine whether the characteristics of a CEO, that is, tenure and financial expertise, could affect the timeliness of an audit report.

Design/methodology/approach

Research data gathered from listed companies on the Tehran Stock Exchange during the four-year period 2013-2016.

Findings

The results obtained from model fittings indicated that there is only a negative and significant relationship between CEO financial expertise and natural logarithm of audit report lag and no significant relationship observed between the former and two other indices of timely audit report. Moreover, no significant relationship was found between the CEO tenure and other three indices of timely audit report.

Originality/value

This paper is the first study, which developed the literature of timely audit report using CEO tenure effect and financial expertise tests for timely audit reports in Iran.

Details

Management Decision, vol. 56 no. 2
Type: Research Article
DOI: https://doi.org/10.1108/MD-10-2017-1018
ISSN: 0025-1747

Keywords

  • Audit committee
  • CEO tenure
  • CEO expertise
  • Timely audit report

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Article
Publication date: 5 August 2019

The effects of audit client tenure, audit lag, opinion shopping, liquidity ratio, and leverage to the going concern audit opinion

Rahmat Akbar Simamora and Hendarjatno Hendarjatno

The going concern audit opinion is an audit opinion issued by an auditor to evaluate the company’s ability in maintaining the business continuity. The purpose of this…

Open Access
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Abstract

Purpose

The going concern audit opinion is an audit opinion issued by an auditor to evaluate the company’s ability in maintaining the business continuity. The purpose of this paper is to discover the effects of audit client tenure, audit lag, opinion shopping, liquidity ratio and leverage on the going concern audit opinion.

Design/methodology/approach

The study used secondary data obtained from financial reports and independent audit reports published by Indonesian Stock Exchange (ISE) as well as Indonesian Capital Market Directory. Besides, the population of the study included manufacturing companies registered in ISE from 2009 to 2013. Further, the present study applied purposive sampling technique which resulted in 16 companies used as the sample of the study. Then the hypothesis was examined by applying logistic regression.

Findings

Results of the hypothesis examination indicated that the variables of opinion shopping and leverage affected the going concern audit opinion, whereas the variables of audit client tenure, audit lag and liquidity ratio did not affect the going concern audit opinion.

Originality/value

Results of the hypothesis examination indicated that the variables of opinion shopping and leverage affected the going concern audit opinion, whereas the variables of audit client tenure, audit lag and liquidity ratio did not affect the going concern audit opinion.

Details

Asian Journal of Accounting Research, vol. 4 no. 1
Type: Research Article
DOI: https://doi.org/10.1108/AJAR-05-2019-0038
ISSN: 2443-4175

Keywords

  • Audit client tenure
  • Audit lag
  • Going concern audit opinion
  • Opinion shopping
  • M41
  • M42

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