The determinants of audit report lag: Evidence from Indonesia
-
DOIhttp://dx.doi.org/10.21511/imfi.21(1).2024.01
-
Article InfoVolume 21 2024, Issue #1, pp. 1-12
- 1116 Views
-
414 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
The determining factors that cause delays in audit reports are essential for shareholders to pay attention to when making quick decisions. Delays in audit reports receive significant attention in the capital markets where audited financial statements in annual reports are the only reliable source of information available to investors. This study aims to identify factors that cause delays in audit reports in the form of company and industry specifics consisting of profitability, company size, audit committee, audit opinion, and size of a public accounting firm. The research method uses a panel data regression model to test five hypotheses based on data collected from annual reports from 2011 to 2021. The research sample selected were 46 companies in the construction and property services sector listed on the Indonesian Sharia Stock Index. Empirical findings show that a public accounting firm’s profitability, audit opinion, and size hurt audit report lag, while the audit committee has a positive impact. Company size is the only factor that does not have an impact on audit reporting delays. The research results provide recommendations for company management and shareholders that delays in audit reports can be reduced by increasing company profits. Apart from that, audit delay lag can also be reduced by appointing a reputable or international public accounting firm and providing a quality audit opinion.
- Keywords
-
JEL Classification (Paper profile tab)M40, M41, M42, H54, N25
-
References65
-
Tables5
-
Figures0
-
- Table 1. Variables and their measurement
- Table 2. Descriptive statistic data
- Table 3. Chow’s study result of ARL
- Table 4. Hausman’s study results of ARL
- Table 5. Hypothesis
-
- Abdillah, M. R., Mardijuwono, A. W., & Habiburrochman, H. (2019). The effect of company characteristics and auditor characteristics to audit report lag. Asian Journal of Accounting Research, 4(1), 129-144.
- Abernathy, J. L., Barnes, M., Stefaniak, C., & Weisbarth, A. (2017). An international perspective on audit report lag: A synthesis of the literature and opportunities for future research. International Journal of Auditing, 21(1), 100-127.
- Afify, H. A. E. (2009). Determinants of audit report lag: Does implementing corporate governance have any impact? Empirical evidence from Egypt. Journal of Applied Accounting Research, 10(1), 56-86.
- Agre, R. A., & Febrianto, R. (2023). Determinants of Audit Report Lags of Public Companies in Indonesia. International Journal of Economics and Business Issues, 2(2), 55-64.
- Al-Ajmi, J. (2008). Audit and reporting delays: Evidence from an emerging market. Advances in Accounting, 24(2), 217-226.
- Aljaaidi, K., Bagulaidah, G., Ismail, N., & Fadzil, F. (2015). An empirical investigation of determinants associated with audit report lag in Jordan. Jordan Journal of Business Administration, 11(4), 963-980.
- Amin, A., Mauludin, H., & Suwitawayansari, E. (2021). The Impact of Firm Size on the Effect of Industry Specialization, Audit Opinion and the Size of a Public Accounting Firm (KAP) on Audit Delay in Mining Companies. Asian Journal of Economics, Business and Accounting, 21(18), 65-74.
- Asthana, S. (2014). Abnormal audit delays, earnings quality and firm value in the USA. Journal of Financial Reporting and Accounting, 12(1), 21-44.
- Ashton, R. H., Willingham, J. J., & Elliott, R. K. (1987). An Empirical Analysis of Audit Delay. Journal of Accounting Research, 25(2), 275-292.
- Alkhatib, K., & Marji, Q. (2012). Audit reports timeliness: Empirical evidence from Jordan. Procedia-Social and Behavioral Sciences, 62, 1342-1349.
- Al Mutawa, A., & Suwaidan, M. (2022). Corporate governance and audit report timeliness: Evidence from Kuwait. International Journal of Innovation, Creativity and Change, 16(1).
- Apadore, K., & Noor, M. M. (2013). Determinants of audit report lag and corporate governance in Malaysia. International Journal of Business and Management, 8(15), 151.
- Arifuddin, K. H., & Usman, A. (2017). Company size, profitability, and auditor opinion influence to audit report lag on registered manufacturing company in Indonesia Stock Exchange. International Journal of Applied Business and Economic Research, 15(19), 353-367.
- Ashton, R. H., Graul, P. R., & Newton, J. D. (1989). Audit delay and the timeliness of corporate reporting. Contemporary Accounting Research, 5(2), 657-673.
- Baldacchino, P.J., Grech, L., Farrugia, K., & Tabone, N. (2016). An Analysis of Audit Report Lags in Maltese Companies. Contemporary Issues in Finance: Current Challenges from Across Europe (Contemporary Studies in Economic and Financial Analysis, Vol. 98) (pp. 161-182). Bingley: Emerald Group Publishing Limited.
- Basuony, M. A. K., Mohamed, E. K. A., Hussain, M. M., & Marie, O. K. (2016). Board characteristics, ownership structure, and audit report lag in the Middle East. International Journal of Corporate Governance, 7(2), 180-205.
- Blankley, A. I., Hurtt, D. N., & MacGregor, J. E. (2014). The relationship between audit report lags and future restatements. Auditing: A Journal of Practice & Theory, 33(2), 27-57.
- Carslaw, C. A., & Kaplan, S. E. (1991). An examination of audit delay: Further evidence from New Zealand. Accounting and Business Research, 22(85), 21-32.
- Çelik, B., Özer, G., & Merter, A. K. (2023). The Effect of Ownership Structure on Financial Reporting Timeliness: An Implementation on Borsa Istanbul. SAGE Open, 13(4), 21582440231207458.
- Chan, K. H., Luo, V. W., & Mo, P. L. (2016). Determinants and implications of long audit reporting lags: evidence from China. Accounting and Business Research, 46(2), 145-166.
- Che-Ahmad, A., & Abidin, S. (2008). Audit delay of listed companies: A case of Malaysia. International Business Research, 1(4), 32-39.
- Daoud, K. A. A., Ku Ismail, K. N. I., & Lode, N. A. (2014). The timeliness of financial reporting among Jordanian companies: Do company and board characteristics and audit opinion matter? Asian Social Science, 10(13), 191-201.
- Durand, G. (2019). The determinants of audit report lag: a meta-analysis. Managerial Auditing Journal, 34(1), 44-75.
- Endri, E., Sari, A.K., Budiasih, Y., Yuliantini, Y., & Kasmir, K. (2020). Determinants of Profit Growth in Food and Beverage Companies in Indonesia. Journal of Asian Finance, Economics, and Business, 7(12), 739-748.
- Ettredge, M., Johnstone, K., Stone, M., & Wang, Q. (2011). The effects of firm size, corporate governance quality, and bad news on disclosure compliance. Review of Accounting Studies, 16, 866-889.
- Fanny, D. R., Septiyanti, R., & Syaippudin, U. (2019). Analysis of factors affecting the audit delay in manufacturing companies listed in Indonesia stock exchange in 2013-2015. International Journal for Innovation Education and Research, 7(12), 289-297.
- Fathony, M., Khaq, A., & Endri, E. (2020). The Effect of Corporate Social Responsibility and Financial Performance on Stock Returns. International Journal of Innovation, Creativity and Change, 13(1), 240-252.
- Fauzi, F. & Locke, S. (2012). Board structure, ownership structure and firm performance: A study of New Zealand listed-firms. Asian Academy of Management Journal of Accounting of Finance, 8(2), 43-67.
- Fitri, H., Haryani, D., Putra, R. B., & Annisa, S. (2021). Influence Financial Distress, Firm Size, and Leverage on Audit Delay with Auditor Reputation as Moderating Variable. UPI YPTK Journal of Business and Economics, 6(3), 78-84.
- Fujianti, L., & Satria, I. (2020). Firm size, profitability, leverage as determinants of audit report lag: Evidence from Indonesia. International Journal of Financial Research, 11(2), 61-67.
- Gajevszky, A. (2013). The Timelines of Financial Reporting in the Context of European Union’s Emerging Economies. Network Intelligence Studies, 1(02), 73-82.
- Habib, A., Bhuiyan, M. B. U., Huang, H. J., & Miah, M. S. (2019). Determinants of audit report lag: A meta-analysis. International Journal of Auditing, 23(1), 20-44.
- Habib, A. (2015). The New Chinese Accounting Standards and Audit Report Lag. International Journal of Auditing, 19(1), 1-14.
- Habib, A., & Bhuiyan, M. B. U. (2011). Audit firm industry specialization and the audit report lag. Journal of International Accounting, Auditing and Taxation, 20(1), 32-44.
- Hapsari, A. N., Putri, N. K., & Arofah, T. (2016). The influence of profitability, solvency, and auditor’s opinion to audit report lag at coal mining companies. Binus Business Review, 7(2), 197-201.
- Harahap, I. M., Septiania, I., & Endri, E. (2020). Effect of financial performance on firms’ value of cable companies in Indonesia. Accounting, 6(6), 1103-1110.
- Hassan, Y. M. (2016). Determinants of audit report lag: evidence from Palestine. Journal of Accounting in Emerging Economies, 6(1), 13-32.
- Henderson, B. C., & Kaplan, S. E. (2000). An examination of audit report lag for banks: A panel data approach. Auditing: A Journal of Practice & Theory, 19(2), 159-174.
- Ilaboya, O. J., & Christian, I. (2014). Corporate governance and audit report lag in Nigeria. International Journal of Humanities and Social Science, 4(13), 172-180.
- Inneh, E., Fakunle, I. O., Busari, R. R., & Olatunji, I. G. (2022). Audit Characteristics and Financial Reporting Timeliness of Nigerian Listed Non-Financial Institution. Journal of Economics and Behavioral Studies, 14(2 (J)), 13-25.
- Khoufi, N., & Khoufi, W. (2018). An empirical examination of the determinants of audit report delay in France. Managerial Auditing Journal, 33(8/9), 700-714.
- Lai, T., Tran, M., Hoang, V., & Nguyen, T. (2020). Determinants influencing audit delay: The case of Vietnam. Accounting, 6(5), 851-858.
- Lee, H.-Y., & Jahng, G.-J. (2008). Determinants of Audit Report Lag: Evidence from Korea - an Examination of Auditor-Related Factors. Journal of Applied Business Research (JABR), 24(2), 27-44.
- Leventis, S., Weetman, P., & Caramanis, C. (2005). Determinants of audit report lag: Some evidence from the Athens Stock Exchange. International Journal of Auditing, 9(1), 45-58.
- Mazkiyani, N., & Handoyo, S. (2017). Audit report lag of listed companies in the Indonesia stock exchange. Jurnal Aplikasi Bisnis, 77-95.
- McMullen, D. A. (1996). Audit committee performance: An investigation of the consequences associated with audit committees. Auditing, 15(1), 87-103.
- Mukhtaruddin, M., Oktarina, R., Relasari, R., & Abukosim, A. (2015). Firm and auditor characteristics, and audit report lag in manufacturing companies listed on Indonesia Stock Exchange during 2008-2012. Expert Journal of Business and Management, 3(1), 13-26.
- Mutiara, Y. T., Zakaria, A., & Anggraini, R. (2018). The influence of company size, company profit, solvency and CPA firm size on audit report lag. Journal of Economics Finance and Accounting, 5(1), 1-10.
- Nelson, S.P., & Shukeri, S.N. (2011). Corporate Governance and Audit Report Timeliness: Evidence from Malaysia. In Susela Devi, S. and Hooper, K. (Eds), Accounting in Asia (Research in Accounting in Emerging Economies, Vol. 11) (pp. 109-127). Bingley: Emerald Group Publishing Limited.
- Nerantzidis, M., Drogalas, G., Lazarides, T. G., Chytis, E., & Mitskinis, D. (2023). Audit committee characteristics and the audit report lag in Greece. Journal of Operational Risk, 18(1), 59-89.
- Ng, P. P., & Tai, B. Y. (1994). An empirical examination of the determinants of audit delay in Hong Kong. The British Accounting Review, 26(1), 43-59.
- Ojeka, S. A., Iyoha, F. O., & Asaolu, T. (2015). Audit committee financial expertise: antidote for financial reporting quality in Nigeria? Mediterranean Journal of Social Sciences, 6(1), 136-146.
- Oussii, A. A., & Taktak, N. B. (2018). Audit committee Effectiveness and Financial Reporting Timeliness: The Case of Tunisian Listed Companies. African Journal of Economic and Management Studies, 9(1), 34-55.
- Owusu-Ansah, S., & Leventis, S. (2006). Timeliness of corporate annual financial reporting in Greece. European Accounting Review, 15(2), 273-287.
- Raimo, N., Vitolla, F., Marrone, A., & Rubino, M. (2021). Do audit committee attributes influence integrated reporting quality? An agency theory viewpoint. Business Strategy and the Environment, 30(1), 522-534.
- Raweh, N. A., Kamardin, H., & Malik, M. (2019). Audit committee characteristics and audit report lag: Evidence from Oman. International Journal of Accounting and Financial Reporting, 9(1), 152-169.
- Rusmin, R., & Evans, J. (2017). Audit quality and audit report lag: case of Indonesian listed companies. Asian Review of Accounting, 25(2), 191-210.
- Sari, W. O. I., Subroto, B., & Ghofar, A. (2019). Corporate governance mechanisms and audit report lag moderated by audit complexity. International Journal of Research in Business and Social Science (2147-4478), 8(6), 256-261.
- Soltani, B. (2002). Timeliness of corporate and audit reports: Some empirical evidence in the French context. The International Journal of Accounting, 37(2), 215-246.
- Sultana, N., Singh, H., & Van der Zahn, J. L. M. (2015). Audit committee characteristics and audit report lag. International Journal of Auditing, 19(2), 72-87.
- Shleifer, A., & Vishny, R. W. (1997). A survey of corporate governance. The Journal of Finance, 52(2), 737-783.
- Sudradjat., Ishak, J. F., Sukmawati, M., & Syifa, M. N. (2020). The Effect of Profitability, Leverage, Firm Size, Firm Reputation and Institutional Ownership on Audit Report Lag. The Journal of Accounting and Finance, 1(1), 36-40.
- Su’un, M., Hajering, H., & Sartika, D. (2020). The effect of profitability, solvency, and audit opinion on audit delay. Point of View Research Accounting and Auditing, 1(4), 197-203.
- Vuko, T., & Čular, M. (2014). Finding determinants of audit delay by pooled OLS regression analysis. Croatian Operational Research Review, 81-91.
- Wijayanti, Y. P., Machmuddah, Z., & Utomo, S. D. (2019). Audit delay: Case studies at conventional banking in Indonesia. Journal of Innovation in Business and Economics, 3(01), 33-40.