This paper shows with the help of a meta-analysis the existence of the determinants of an audit report lag. Moreover this article calculates the relevance of these determinants with the help of Z-scores. The justification of this paper is to get a greater extent of knowledge through a meta-analytic literature review of the determinants of audit report lags. An audit report lag is the number of days from a company’s fiscal year-end to the date of its auditor’s report.
Due to the great development of the globalization and economy, this world has more economical data and is more complicated in an economical context than before. Proof for this statement is the subprime crisis 2007, where Asset-Backed Commercial Papers had a complicated transformation. In addition to this the accounting has issues with too much information and complicated financial products. At first accounting has problems with disclosure of information in the financial statement. Secondly Big Data challenges accounting and finally audit report lags are larger after a new standard is set by the standard-setter or a company has a poor performance in this particular fiscal year. In addition to this last problem, there are a lot of more determinants for an audit report lag than these two. Accordingly this audit report lag is a problem for accounting.
Table of Contents
1. Introduction
1.1 Problems and delimitations
1.2 Objective and structure of the paper
2. Rudiments
2.1 Background
2.2 Audit report lag
3. Hypotheses development
3.1 Audit commitment characteristics
3.2 Unique-business complexity
4. Meta-analysis
4.1 Methodology of the meta-analysis
4.2 Results
5. Discussion and Conlcusion
Objectives and Research Focus
The primary objective of this paper is to synthesize current accounting literature regarding the determinants of audit report lag. The study analyzes which specific determinants exist, evaluates their relevance through a meta-analytic approach, and discusses their implications for audit efficiency, the timing of corporate financial reporting, and audit client management.
- Identification of key determinants influencing audit report lags.
- Calculation of determinant relevance using the Stouffer-method.
- Evaluation of the relationship between audit report lag and audit efficiency.
- Examination of audit client management and market impact of reporting delays.
- Comparison of accounting approaches (stewardship vs. decision usefulness) regarding report lag.
Excerpt from the Book
2.2 Audit report lag
The Audit report lag is the number of days from a company’s fiscal year-end to the date of its auditor’s report (Ashton, Willingham, and Elliott 1987, p. 275, Knechel and Payne 2001, p. 137). The research of an audit report lag evolved in the middle 1970s (Dyer and McHugh 1975). The scientific field determinants of an audit report lag develops in the 1980s (Givoly and Palmon 1982, Ashton, Willingham, and Elliott 1987). This part of research increased in the 2010s arguably through the overload of information’s (Abernathy et al. 2017, p. 102-112).
This could be one reason why the audit report lag is the most important and used variable for audit efficiency (Mitra, Song, and Yang, J. Sun 2015, p. 507). In addition to this audit efficiency is not an easy measuring variable. Moreover the driver audit report lag is one of a few variables who are externally measurable for the science of accounting in relation to audit efficiency (Ashton and Newton 1989, p. 22-25, Bamber, E. Michael, Bamber, L. Smith, and Schoderbek 1993, p. 2). There are two more variables who have a high similarity with audit efficiency. Furthermore these two variables use audit report lag as an driver too. The first variable is audit timeliness. A paper calls audit timeliness just an “alternative measure” to audit efficiency (Abbott, Parker, and Peters 2012, p. 509). The second variable is audit effort. Researchers try to build a similarity between effort and efficiency, where they calculate with audit effort and at the end or start they state it as audit efficiency (Mitra, Song, and Yang, J. Sun 2015, p. 507-510, Knechel and Payne 2001, p. 137-145).
Summary of Chapters
1. Introduction: This chapter introduces the audit report lag as a critical metric in accounting, justifying its relevance due to the increasing complexity of financial data and the need for timely corporate reporting.
2. Rudiments: This chapter establishes the theoretical foundation, defining audit report lag and discussing its significance within the stewardship and decision usefulness approaches to accounting.
3. Hypotheses development: This chapter categorizes determinants into audit commitment, corporate governance, and business complexity, formulating specific hypotheses regarding their influence on audit delays.
4. Meta-analysis: This chapter details the methodology of the study, employing the Stouffer-method to synthesize quantitative results from 21 selected scientific articles to determine the impact of various variables.
5. Discussion and Conlcusion: This chapter connects the meta-analytic findings to the research questions, discussing the practical implications for stakeholders and suggesting future research directions in accounting science.
Keywords
Audit report lag, Audit delay, Meta-analysis, Accounting science, Audit efficiency, Decision usefulness, Stewardship, Audit fees, Financial statement audit, Corporate governance, Audit tenure, Auditor change, Earnings announcements, Information asymmetry, Stouffer-method
Frequently Asked Questions
What is the core focus of this research paper?
The paper focuses on identifying and quantifying the determinants of "audit report lag," defined as the time between a company's fiscal year-end and the date of the audit report.
What are the central thematic areas covered?
The research covers audit commitment characteristics (e.g., Big 4 firms, audit fees), unique-business complexity (e.g., firm size, segments, leverage), and the role of audit reporting in financial markets.
What is the primary goal of the study?
The primary goal is to synthesize the fragmented existing literature into a meta-analysis to determine the relevance of various factors that drive audit report delays.
Which scientific method is utilized?
The author uses a meta-analysis approach, specifically applying the "Stouffer-method" to aggregate t-values and p-values from 21 selected high-quality accounting studies.
What is addressed in the main body of the paper?
The main body moves from theoretical background to hypothesis development, followed by a detailed methodology and the results of the meta-analytic calculations.
Which keywords best characterize this work?
Key terms include audit report lag, audit delay, meta-analysis, audit efficiency, and decision usefulness.
How does corporate culture affect audit reporting in the US versus Germany?
The paper highlights that Germany relies more on stewardship and bank-focused financing, whereas the US emphasizes decision usefulness and public capital markets, leading to different reporting norms and lag durations.
Why is audit report lag considered a double-edged sword for audit quality?
While long delays can indicate complex issues or potential problems, the author notes that artificially shortening the audit timeline to meet market demands can inadvertently decrease audit quality and the auditor's ability to detect accruals.
- Quote paper
- Philipp Wierzchowski (Author), 2020, Determinants of an audit report lag. A meta-analysis, Munich, GRIN Verlag, https://www.grin.com/document/1135110
