The effect of audit firm attributes on audit delay in the presence of financial reporting complexity

Abstract

PurposeThis study aims to examine the effects of audit firm attributes on audit delay associated with financial reporting complexity (FRC).Design/methodology/approachThe authors use regression models with a sample of public firms with distinct monetary eXtensible Business Reporting Language tags to test the research hypotheses.FindingsThe authors find that two audit firm attributes (audit firm tenure and non-audit services performance) moderate the effect of FRC on audit delay.Practical implicationsThe study provides insights to regulators, practitioners and investors into how firms may reduce audit delay from FRC by keeping their long-tenured auditors and allowing their auditors to gain more knowledge about the firms by providing non-audit services. The results, therefore, have implications for mandatory audit firm rotation.Originality/valueTo the best of the knowledge, this study conducts the first comprehensive analysis of this topic, exploring the impact of three audit firm attributes on audit delay caused by FRC. It attempts to illustrate the impact of external audit firms on reducing the adverse consequences of FRC.