The Relationship between Audit Report Lags and Future Restatements

2014 ◽  
Vol 33 (2) ◽  
pp. 27-57 ◽  
Author(s):  
Alan I. Blankley ◽  
David N. Hurtt ◽  
Jason E. MacGregor
Keyword(s):  
Time Pressure ◽  
Financial Statements ◽  
Financial Statement ◽  
Fiscal Year ◽  
Audit Report ◽  
Two Stage ◽  
Number Of Factors ◽  
Financial Restatements ◽  
Ex Ante ◽  
The Relationship

SUMMARY: We investigate the relationship between future financial statement restatements and audit report lags. Audit report lags are defined as the number of days between the fiscal year-end and the date of the audit report. Ex ante, it is not clear whether there should be a relationship and, if there is, whether that relationship would be negative or positive. We first discuss the underlying conceptual rationale for both negative and positive associations, then we use a two-stage approach to empirically examine the relationship. We find that compared to non-restating firms, firms that eventually restate their financial statements have longer abnormal audit report lags. In subsequent testing, we consider a number of factors that may undermine additional audit effort and, thus, influence the association between audit report lag and subsequent restatements. Of the factors examined, we find that time pressure appears to be associated with increased probability of financial restatements.

Additional Evidence on Audit Report Lag

2001 ◽  
Vol 20 (1) ◽  
pp. 137-146 ◽  
Author(s):  
W. Robert Knechel ◽  
Jeff L. Payne
Keyword(s):  
Earnings Quality ◽  
Financial Statements ◽  
Financial Statement ◽  
Fiscal Year ◽  
Sources Of Information ◽  
Audit Report ◽  
The Public ◽  
Time Period ◽  
Audit Team ◽  
Available Information

The process for providing accounting information to the public has not changed much in the last century even though the extent of disclosure has increased signifi-cantly. Sundem et al. (1996) suggest that the primary benefit of audited financial statements may not be decision usefulness but the discipline imposed by timely confirmation of previously available information. In general, the value of information from the audited financial statement will decline as the audit report lag (the time period between a company's fiscal year end and the date of the audit report) increases since competitively oriented users may obtain substitute sources of information. Furthermore, the literature on earnings quality and earnings management suggests that unexpected reporting delays may be associated with lower quality information. The purpose of this paper is to extend our understanding about the determinants of audit report lag using a proprietary database containing 226 audit engagements from an international public accounting firm. We examine three previously uninvestigated audit firm factors that potentially influence audit report lag and are controllable by the auditor: (1) incremental audit effort (e.g., hours), (2) the resource allocation of audit team effort measured by rank (partner, manager, or staff), and (3) the provision of nonaudit services (MAS and tax). The results indicate that incremental audit effort, the presence of contentious tax issues, and the use of less experienced audit staff are positively correlated with audit report lag. Further, audit report lag is decreased by the potential synergistic relationship between MAS and audit services.

Corporate Social Responsibility and Financial Reporting Quality:Evidence from Restatements

2020 ◽  
Author(s):  
Yi-Hung Lin ◽  
Hua-Wei (Solomon) Huang ◽  
Mark E. Riley ◽  
Chih-Chen Lee
Keyword(s):  
Financial Reporting ◽  
Negative Relationship ◽  
Reporting Quality ◽  
Financial Statements ◽  
Financial Statement ◽  
Financial Reporting Quality ◽  
Csr Reporting ◽  
Corporate Social ◽  
Reporting Environment ◽  
The Relationship

We find a negative relationship between aggregate CSR scores and the probability that firms restated financial statements over the period 1991-2012. We then break that period into three sub-periods in order to determine whether the relationship holds for all three sub-periods. During the sub-periods of 1991-2001 and 2002-2005, the negative CSR score - restatement probability relationship holds. The negative relationship disappears in the 2006-2012 sub-period. Additional analyses indicate CSR scores are significantly higher in the 2006-2012 sub-period, suggesting the disappearance of the relationship between aggregate CSR scores and financial statement quality may relate to changes in CSR assessments and the CSR reporting environment. Our findings update the literature linking CSR scores and financial reporting quality and identify the need for further research as to the reasons the link between these constructs disappeared.

Scoring to estimate the financial statement fraud risk during the audit

2021 ◽  
Vol 22 (11) ◽  
pp. 1262-1275
Author(s):  
Sergei V. ARZHENOVSKII ◽  
Tat'yana G. SINYAVSKAYA ◽  
Andrei V. BAKHTEEV
Keyword(s):  
Discriminant Analysis ◽  
Statistical Method ◽  
Empirical Data ◽  
Financial Statements ◽  
Financial Statement ◽  
Financial Statement Fraud ◽  
Two Stage ◽  
Preparation Methods ◽  
Behavioral Traits ◽  
Fraud Risk

Subject. This article assesses the propensity for material misstatement risk due to unfair actions of persons charged with the financial statements preparation, based on their behavioral traits. Objectives. The article aims to develop a scoring type methodology for identifying the propensity for material misstatement risk due to unfair actions of persons charged with the financial statements preparation. Methods. For the study, we used a multidimensional statistical method of discriminant analysis based on empirical data from an author-conducted survey of 515 employees charged with the financial statements preparation in companies. Results. The article presents a two-stage methodology that helps estimate whether a person has traits associated with a hyperpropensity for financial statements fraud risk. Conclusions and Relevance. The developed methodology for detecting the fraud risk is easy to use. It gives the result in binary form and does not violate the principles of audit ethics. The estimated material misstatement risk due to unfair actions makes it possible to justify the need for appropriate audit procedures when developing a strategy and audit plan.

Auditors’ response to readability of financial statement notes

2020 ◽  
Vol 28 (3) ◽  
pp. 463-480
Author(s):  
Mahdi Salehi ◽  
Mahmoud Lari Dasht Bayaz ◽  
Shaban Mohammadi ◽  
Mohammad Seddigh Adibian ◽  
Seyed Hamed Fahimifard
Keyword(s):  
Stock Exchange ◽  
Financial Statements ◽  
Audit Fees ◽  
Financial Statement ◽  
Audit Report ◽  
Financial Reports ◽  
Statistical Population ◽  
Content Type ◽  
Listed Firms ◽  
Going Concern Opinion

PurposeThe main objective of the present study is to assess the potential impact of readability of financial statement notes on the auditor's report lag, audit fees and going concern opinion (GCO).Design/methodology/approachThe statistical population of this study includes all listed firms on the Tehran Stock Exchange (TSE) for the period of 2012–2017. The systematic elimination method is used for sampling and multiple regression and EViews software are used for testing the hypothesis models.FindingsThe obtained results show that there is a significant and positive relationship between audit report lags and readability of financial statements. Moreover, it is also revealed that readability of financial statements is positively associated with audit fees. Furthermore, the findings suggest a negative correlation between readability indexes and issuing GCOs, denoting hard-to-read statements is considered as a risk factor by auditors. Finally, the observations of our robustness tests suggest that the association between audit report lag and readability of financial statements is robust.Originality/valueThis is the first conducted investigation concerning auditor's response to the readability of financial statement notes in TSE. The outcome of current paper may pave the way for revising and developing Iranian accounting standards in order to give a fairer and clearer picture of financial reports.

Amtek Auto debacle: financial statement analysis

2020 ◽  
Vol 10 (2) ◽  
pp. 1-24
Author(s):  
Asheesh Pandey
Keyword(s):  
Learning Outcomes ◽  
Financial Statements ◽  
Financial Statement ◽  
Financial Statement Analysis ◽  
Content Type ◽  
Academic Level ◽  
Reserve Bank ◽  
Financial Decision ◽  
The Relationship ◽  
A Company

Learning outcomes The learning outcomes are as follows: developing an understanding of financial statement analysis among students; students would be able to calculate various ratios, understand their meaning and interpret them to take a financial decision; and exploring the relationship between financial leverage and risk. Case overview/synopsis Amtek Auto is a leading auto-components manufacturer established in 1988 which entered into bankruptcy in through the order of Reserve Bank of India in 2017. The company started with a humble beginning and later on the promoter decided to expand exponentially both through organic as well as inorganic growth in past 15 years. To grow a company kept on taking debt which made it riskier and deteriorated its financial position over a period. The case covers a 10-year timeline from 2008 to 2017. It gives an opportunity to analyze its financial statements to understand how its decisions shaped its performance Complexity academic level The case aims for students to take a comprehensive view of the financial statement analysis of Amtek Auto including the following: vertical and horizontal analysis; comprehensive ratio analysis including liquidity, profitability, leverage and turnover ratios with special emphasis on debt as a double-edged sword; analysis of Armtek Auto’s financial performance over a period of 10 years. Supplementary materials Teaching Notes are available for educators only. Subject code CSS 1: Accounting and Finance.

scholarly journals Determinants of Audit Report Lag of Financial Statements in Banking Sector

2019 ◽  
pp. 142
Author(s):  
Sigit Handoyo ◽  
Erza Diandra Maulana
Keyword(s):  
Sampling Method ◽  
Banking Sector ◽  
Stock Exchange ◽  
Financial Statements ◽  
Fiscal Year ◽  
Audit Report ◽  
Financial Service Authority ◽  
Firm Reputation ◽  
Financial Reports ◽  
Auditor Switching

Audit Report Lag (ARL) is the time length of the auditor completing their activities on the client is measured from the end of the fiscal year until the date of audit report was signed. Research related to ARL has been widely carried out in some countries, considering the importance of this issue. This study analyzed the factors that affect ARL on the Conventional Bank Companies listed in the Indonesia Stock Exchange. The sample consisted of 84 companies listed in Indonesia Stock Exchange (IDX) which submitted financial reports to OJK (the Financial Service Authority) in the period of 2013-2015. The data used in this research was selected by using purposive sampling method and analysis used multiple linear regression. Based on the analytical results, Profitability, Auditor Opinion, and Firm Reputation had negative significant effect toward ARL. Then Auditor Switching, Complexity, and Board of Size of Director had positive significant effect toward ARL.

Can Auditors Mitigate Information Asymmetry in M&As? An Empirical Analysis of the Method of Payment in Belgian Transactions

2013 ◽  
Vol 33 (1) ◽  
pp. 57-91 ◽  
Author(s):  
Mathieu Luypaert ◽  
Tom Van Caneghem
Keyword(s):  
Information Asymmetry ◽  
Private Information ◽  
Regression Models ◽  
Financial Statements ◽  
Financial Statement ◽  
Firm Characteristics ◽  
Target Level ◽  
Financial Statement Audit ◽  
Method Of Payment ◽  
The Relationship

SUMMARY In this paper, we empirically examine the relationship between the external financial statement audit and the method of payment across a sample of Belgian mergers and acquisitions between listed and private firms over the period 1997–2009. We investigate whether a Big N audit (at the target level) reduces the need for a contingent payment resulting from information asymmetry about the target's value. In addition, we analyze whether a Big N audit (at the bidder level) limits incentives for bidders to exploit private information about their own value. Using multivariate ordered probit and binary regression models, we determine that contingent payments are less common when the target is audited by a Big N auditor after controlling for several other deal and firm characteristics. Furthermore, we find that the incentive to use stock payments in periods of stock market overvaluation is lower for acquirers with a Big N auditor. Finally, target shareholders are more likely to accept a contingent offer if the acquirer's financial statements are certified by a Big N auditor. JEL Classifications: G34; M4.

Response of a Subgroup of the PCAOB's Investor Advisory Group to the PCAOB's Concept Release Concerning Reports on Audited Financial Statements and Related Amendments to PCAOB Standards

2011 ◽  
Vol 5 (2) ◽  
pp. C21-C50 ◽  
Author(s):  
Kelvin Blake ◽  
Joseph V. Carcello ◽  
Norman J. Harrison ◽  
Michael J. Head ◽  
Barbara E. Roper ◽  
...  
Keyword(s):  
Financial Statements ◽  
Capital Allocation ◽  
Financial Statement ◽  
Advisory Group ◽  
Audit Report ◽  
Audit Risk ◽  
The Public ◽  
Public Company ◽  
Risk Areas

SUMMARY Recently, the Public Company Accounting Oversight Board (PCAOB) released a concept release concerning possible revisions to PCAOB standards related to reports on audited financial statements and related amendments to PCAOB standards. The comment letter below, written by a subgroup of the PCAOB's Investor Advisory Group, was recently submitted to the PCAOB in response to the Board's concept release. The subgroup believes that the four most important changes to the audit report would require the auditor to: (1) discuss the auditor's assessment of the estimates and judgments made by management in preparing the financial statements and how the auditor arrived at that assessment, (2) disclose areas of high financial statement and audit risk and how the auditor addressed these risk areas, (3) discuss unusual transactions, restatements, and other significant changes in the financial statements (including the notes), and (4) discuss the quality, not just the acceptability, of the issuer's accounting practices and policies. They further assert that the disclosure of this information will improve investors' ability to make informed buy/sell decisions, which should result in higher returns to investors and improved capital allocation within society.

scholarly journals KINERJA KEUANGAN DALAM KERANGKA MAQASHID SYARIAH: PENGARUHNYA TERHADAP NILAI PERUSAHAAN DENGAN ISLAMIC SOCIAL REPORTING SEBAGAI VARIABEL MODERATING

2017 ◽  
Vol 15 (2) ◽  
pp. 72
Author(s):  
Nur Fitriyah ◽  
Alamsyah M Tahir ◽  
Herlina Pusparini
Keyword(s):  
Financial Performance ◽  
Financial Statements ◽  
Social Reporting ◽  
Annual Reports ◽  
Fiscal Year ◽  
Islamic Banks ◽  
Legitimacy Theory ◽  
Significance Level ◽  
Company Value ◽  
The Relationship

The objective of this study is to provide empirical evidence on the influence of financial performance based on the framework of Maqashid Sharia toward the company value moderated by the Islamic Social Reporting (ISR) of Islamic banking in Indonesia. This study applied Agency Theory, Signaling Theory and Legitimacy Theory to justify the relationship between the variables studied. The sample of this study consisted of 11 Islamic Banks in Indonesia. Data were collected from financial statements and annual reports published by Bank Indonesia (BI) and Islamic Banks for the fiscal year of 2011-2015. Data were analyzed based on Moderating Regression Analysis (MRA). The results showed that financial performance, ISR and the interaction between the financial performances and the ISR does not simultaneously affect the company value at a significance level of 5%. However, it showed a significance level at 10% level of confidence. Partially, the results do not show that financial performance nor the ISR has influence on the company value. The result also indicated that ISR does not moderate the relationship between the financial performance and the company value. Keywords: financial performance, Islamic social reporting, company value.

scholarly journals Determinan Audit Delay dan Timeliness

2015 ◽  
Vol 1 (2) ◽  
pp. 100
Author(s):  
Oyong Lisa
Keyword(s):  
Stock Exchange ◽  
Financial Statements ◽  
Decision Makers ◽  
Financial Statement ◽  
Prediction Tool ◽  
Manufacturing Companies ◽  
Audit Report ◽  
Timely Manner ◽  
Analysis Technique ◽  
Independent Audit

<em>Timeliness of drafting or reporting an audit report on the company's financial statements could affect the value of such financial statements. If financial statement information is not delivered in a timely manner, thus it is not relevant which could reduce or eliminate the ability of the financial statements as a prediction tool for users or decision makers. Audit delay is the length of time the audit completion is measured from the date of closing of the financial year until the date of completion of the independent audit report. This study aims to analyze the effect of the companysize, solvency and profitability towards audit delay and timeliness. The populatin of this research was manufacturing companies listed in Indonesian Stock Exchange at 2011-2013, based on purposive sampling 25 companies used as sample. The analysis technique used is multiple regression analysis. The results show that the size of the company, solvency, and profitability simultaneously and partially affect audit delay and timeliness. The most contributed variable towards audit delay is profitability, while most contributed variable towasds the time-liness is the company size.</em>

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