Audit Report Lag. Differential Analysis between Spanish SMEs and Non-SMEs

Susana Escaloni,Mercedes Mareque

doi:10.3390/su132212830

Abstract

Audit report lag is considered to be an indicator of audit punctuality and efficiency, while the existence of factors that may determine this lag has been signalled in previous studies. The objective of this study is to identify the determinants of audit report lag in Spanish SMEs, and to analyse the potential singularities of these factors with regards to non-SMEs. With this aim in mind, a set of factors has been analysed; in the previous literature, a relationship has been observed between these factors and the characteristics of the audited company, the auditor and the audit exercise. Additionally, the possible influence of financial crisis and recovery periods is analysed. The sample analysed is made up of 3217 unlisted Spanish firms for the years 2008–2015. Multiple linear regression analysis is used, modelling the audit report lag based on the independent variables related to the characteristics of the audited company, the auditor and the audit exercise. Based on the results obtained, we can support the existence of differences among the independent variables responsible for the audit report lag based on company type (SME/non-SME), with a larger number of factors impacting the audit report lag in SMEs. It is worth noting the significant relationship between audit report lag and opinion and crisis variables, both for the SME and non-SME models. In the case of SMEs, links between audit report lag and the likelihood of bankruptcy, auditor type, number of economic activities carried out by the audited company, the industry to which the audited company pertains, and audit fees were also observed. Furthermore, we can conclude that audit report lag is greater in SMEs and that the independent variables explaining report lag differ according to whether the company is an SME or not.

Highlights

For the users of accounting data to be able to access the information contained in financial statements, this needs to meet the “opportunity” requirement, that is, it should be available as soon as possible; if not, the data presented may no longer be of use [1]
A possible explanation for the greater speed in issuing the audit report during the crisis might be the increased pressure from the audited company and its creditors to avail of the audit reports as swiftly as possible, given that many debt contracts are signed on the basis of prior knowledge of the information contained in the audited financial statements [8]
The aim of this study is to identify the determiners of audit report lag (ARL) in audit report issuance for Spanish sized companies (SMEs), and the singularity or differentiation of these factors depending on the company type (SMEs or non-SMEs)

Summary

Introduction

For the users of accounting data to be able to access the information contained in financial statements, this needs to meet the “opportunity” requirement, that is, it should be available as soon as possible; if not, the data presented may no longer be of use [1]. The previous literature has stated that the punctual availability of audit financial statements is singularly important. Afify [5] states that issuing an audit opinion “opportunely” can contribute towards improving investor decision making, reducing data skewness, and it can dictate the timing of the announcement of earnings by the audited company. Companies may experience negative market reactions and greater data skewness if there is a considerable delay in the publication of the audited financial statements [4,6]. Greater ARL may result in the interested parties having to make investment decisions without availing of adequately verified accounting data [7], or access to financing may be compromised [8].

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Discussion

Conclusion