Unusual delay in Audit report on stock price crash due to internal control considerations

Timely release of audited financial statements will help investors in allocating resources in the best possible way. Any delay in submission of an audit report will increase the information asymmetry between management and shareholders and adversely affect the company financial reporting. A weak internal control environment also allows management to hide bad news for a long time, resulting in a sharp drop in stock prices when bad news is released. In this regard, the purpose of this study is to investigate the effect of abnormal audit report lag on stock price crash risk as well as the moderating role of internal control weakness on this relationship. for this purpose, 1015 firm-year (145 firms for seven years) observation gathered from the annual financial reports of listed companies in Tehran Stock Exchange from 2011 to 2017. The research findings show that abnormal audit report lag and internal control weakness have a positive impact on stock price crash risk. The results also show that in the occurrence of weakness in firm’s internal controls, the positive impact of abnormal audit report lag on stock price crash risk was be strengthened.