Have Regulatory and Standard Setting Changes Weakened the Connection between the Audit Report Date and the Substantial Completion of Audit Fieldwork?
55 Pages Posted: 8 Feb 2015 Last revised: 16 Mar 2019
Date Written: January 1, 2019
A large stream of research uses audit report lag to proxy for audit production, efficiency, and quality. We examine whether the timing of substantial completion of audit fieldwork as conveyed by the audit report date has become more noisy and weak as a result of regulatory and professional standard setting changes in the mid-2000s through June 2009, making audit report lag a less useful measure of audit efficiency and quality. Using three settings from prior research that use the audit report date to capture audit completion, we find a consistent pattern. The predicted associations from prior research are most pronounced in the period preceding the regulatory and standard setting changes, and the associations either weaken or disappear during and after the period of regulatory and standard-setting changes. We also find that the increased noisiness in audit report lag is most pronounced for companies that exhibited the greatest gap between the audit report date and the annual report filing date prior to these regulatory and standard setting changes (i.e., companies that consistently file the annual report close to the required filing deadline). These findings have important implications for researchers and should also be of interest to regulators.
Keywords: audit quality; audit report date; audit report lag; audit fieldwork completion
JEL Classification: M41
Suggested Citation: Suggested Citation