Corporate governance and audit report timeliness: Evidence from Kuwait

Abstract

The purpose of this study is to empirically investigate the impact of corporate governance mechanisms, among other variables, on audit report lag (ARL) for a sample of 97 companies listed on the Kuwait Stock Market (KSE) in 2020. Audit report lag is measured as the number of days between the date of the financial year end and the date of the audit report. The descriptive statistics indicate that there is considerable variation in the ARL between the sample companies, ranging from 13 to 121 days, with an average of 69 days. A multivariate regression model was employed to examine the association between ARL and corporate governance proxies, namely: board size, board meetings, board financial expertise, non-executive directors, and institutional ownership. The results indicate that companies whose boards have considerable financial expertise are associated with lower audit delay. For other (control) variables, the results indicate that profitability, company size, type of audit opinion, and industry type are found to have a significant impact on the timeliness of financial reporting. More profitable and larger companies were found to issue their audited financial reports faster. Moreover, financial institutions show a shorter lag in releasing their annual report than other sectors, and companies which seek qualified opinions have longer ARLs. Finally, in order to improve the timeliness of annual reports of companies listed on the market, the study suggests the adoption of eXtensible Business Reporting Language (XBRL). There is convincing evidence to suggest that the use of XBRL results in timelier stock market filing and shorter ARL.