Developing a model of abnormal audit report lag: origins and consequences

The present study aims to develop a model of abnormal audit report lag, and then to diagnose and study the relationships between the origins and consequences of abnormal audit report lag. The present study uses data from 118 firms from 2012 to 2020 and deploys the data panel regression model to evaluate the hypotheses. Regarding the abnormal audit report lag, the findings of the present paper show that variables such as modified opinions, auditor size, auditor change, audit fee, firm size, loss, leverage, profitability, bankruptcy risk, and the ratio of fixed assets have a meaningful impact on elucidating the reasons of lag in the issuance of auditors’ report. Therefore, the model in the present paper offers a more comprehensive perspective toward abnormal audit lag by obviating the limits of the previous models. Moreover, the results regarding the origins and consequences show the meaningful positive impact of ownership dispersion and the ratio of independent directors on abnormal audit lag. Consequently, abnormal audit lag negatively affects earnings quality and has a meaningful positive impact on variation in monthly stock returns.