International Journal of Finance & Managerial Accounting

International Journal of Finance & Managerial Accounting

Presenting a Model for the Effect of Corporate Governance Measures on Audit Report Lag by a Structural Equation Approach

Document Type : Original Article

Authors
mohammad reza ebrati 1
saeed Jabbarzadeh Kangarloui 2
jamal bahrisales 2
ali ashtab 3
1 Ph.D Student of Accounting , Department of Accounting, Urmia Branch, Islamic Azad University, Urmia, Iran
2 Associate Professor of Accounting, Department of Accounting, Urmia Branch, Islamic Azad University, Urmia, Iran
3 Assistant Professor of Accounting, Department of Accounting, Urmia University, Urmia, Iran
Abstract
The efficiency of financial reporting is considered as one of important characteristics of annual reporting quality. It is usually hidden in the timeliness of accounting information, which is one of qualitative characteristics of accounting information. The usefulness of information disclosed by companies reduces as lag increases. Corporate governance as the most important controlling and monitoring mechanism has a significant impact on the efficiency of financial reporting, and affects firm value. The objective of this research is to present a model for the effect of corporate governance measures on audit report lag by a structural equation approach in companies listed on the Tehran Stock Exchange. In the research, the independent variables are corporate governance measures, and the dependent variable is audit report lag. The research method is applied-correlational. Data is collected from 148 companies listed on the Tehran Stock Exchange in the time period of 2011 to 2019, and analyzed by Stata 12, SPSS and Smart-PLS. The method used for collecting data is from the Rahavardnovin software. The hypotheses are tested by the multivariate linear regression test and structural equations. According to the results from hypothesis testing, the corporate governance measures of audit committee experience, audit committee size, audit committee independence, ownership concentration (first measure), ownership concentration (second measure) and board independence have a significant effect on audit report lag; however, the variables of audit committee financial expertise, audit committee gender, ownership structure, board size and CEO duality don’t have any significant effect on audit report lag.
Keywords
Corporate governance measures
Audit report lag
Structural equations
  • Abdelsalam, O., & El-Masry, A. (2008), The Impact of Board Independence and Ownership Structure on the Timeliness Of Corporate Internet Reporting of Irish-listed Companies. Managerial Finance, 34(12), 907-918.
  • Abidin, S,. & Ahmad-Zaluki, N.A. (2012). Auditor Industry Specialism and Reporting Timeliness. Procedia-Social and Behavioral Sciences, 65 (2012), 873-878
  • Afify, H.A.E. (2009), Determinants of Audit Report Lag: Does Implementing Corporate Governance Have any Impact? Empirical Evidence from Egypt. Journal of Applied Accounting Research, 10(1), 56-86.
  • Aghaei, M., & Chalaki, P. (2009). A Study of the Relationship between Corporate Governance Characteristics and Earnings Management in Companies Listed on the Tehran Stock Exchange, Accounting Research, 1(4), 54-77.
  • Ahmad, R., & Kamarudin, K. (2003). Audit Delay and the Timeliness of Corporate Reporting: Malaysian Evidence, In: Communication Hawaii International Conference on Business, Hawaii, USA 18-21 June 2003.
  • Al-Ajmi, J. (2008), Audit and Reporting Delays: Evidence from an Emerging Market, Advances in Accounting, 24(2), 217-226.
  • Apadore, A., & Noor, M. (2013). Determinants of Audit Report Lag and Corporate Governance in Malaysia. International Journal of Business and Management, 8(15), 151-163.
  • Arens, A., et al. (2013). Auditing and Assurance Services: an Integrated Approach. 15th edition. Bostone: Pearson.
  • Ashton, R.H., et al. ( 1987). An Empirical Analysis of Audit Delay. Journal of Accounting Research, 25(2), 275-292.
  • Astami, E., & Tower, G. (2006). Accounting Policy Choice and Firm Characteristics in the Asia Pacific Region: An International Empirical Test of Costly Contracting Theory, International Journal  of Accounting, 41(2), 1-21.
  • Bamber, E.M., et al. (1993). Audit Structure and Other Determinants of Audit Report Lag: An Empirical Analysis. Auditing: A Journal of Practice & Theory, 12(1), 1–23.
  • Basuony, M.A.K., et al. (2016). Board Characteristics, Ownership Structure and Audit Report Lag in the Middle East. Int. J. Corporate Governance, 7(2), 180-205.
  • Beaver, W.H., et al. (1980). The Information Content of Security Prices. Journal of Accounting and Economics, 2(1), 3-28.
  • Bemby, B., et al. (2013). Good Corporate Governance (GCG) Mechanism and Audit Delay: An Empirical Study on Companies Listed in Indonesia Stock Exchange (IDX) in the Period of 2009-2011. Journal of Modern Accounting and Auditing, 9(11), 1454-1468.
  • Bozorg-Asl, et al. ( 2018). A Study of Factors Affecting on Timely Release of Audit Report. Accounting Knowledge, 9(1), 115-146.
  • Carslaw, C.A., & Kaplan, S.E. (1991). An Examination of Audit Delay: Further Evidence from New Zealand. Accounting and Business Research, 22(85), 21-32.
  • Chan, A.M.Y., et al. (2013). Independent Audit Committee Members’ Board Tenure and Audit Fees. Accounting and Finance, 53(4), 29-47.
  • Cohen et al. (2002). Corporate Governance and the Audit Process (2002). Contemporary Accounting Research, 19(4), 573-594.
  • Dabor, A., & Uyagu, B. (2018). Abnormal Audit Delay and Earnings Quality in Nigerian Banking. Sriwijaya International Journal of Dynamic Economics and Business,2(2), 2581-2912.
  • Dastgir, M., et al. (2020). The Effect of Ownership Concentration on Conditional and Unconditional Conservatism. Journal of New Research Approaches in Management and Accounting, 4(45), 59-89.
  • Fujianti, L., & Satria, I. (2020). Firm Size, Profitability, Leverage as Determinants of Audit Report Lag: Evidence From Indonesia. International Journal of Financial Research, 11(2), 61.
  • Hasas-Yeganeh, Y., et al. (2008). The Relationship of Corporate Governance Mechanisms, Debt Ratios, Company Size with Earnings Management. Accounting Studies, 24, 79-115.
  • Hassani, M., & Barkhordari, H. (2020). Investigating the Impact of Institutional Ownership Concentration on Relationship between Board Independence and Audit Services Fees: Contraposition Supply & Demand Based Perspectives. Accounting and Auditing Review, 27(1), 32-59.
  • Hashim, U.J.B., & Abdul Rahman, R.B. (2012). Corporate Board: Role, Duties and Composition, 8(3), 48-63.
  • Hazeri-Nayeri, H., et al. (2019). A Study of the Effect of Audit Report Lag on Stock Price Volatilities in Companies Listed on the Tehran Stock Exchange. Accounting and Auditing Research, 9(2), 81-98.
  • Henseler, J., et al. (2009). The Use of Partial Least Squares Path Modeling in International Marketing. Advances in international marketing,20, 277-319.
  • Ilaboya, O.J., & Christian, I. (2014). Corporate Governance and Audit Report Lag in Nigeria. International Journal of Humanities and Social Science, 4(13), 172-180.
  • Jaggi, B., & Tsui, J. (1999). Determinants of Audit Lag: Further Evidence from Hong Kong, Accounting and Business Research, 30(1), 17-28.
  • Jensen, H.L. & Tang, R.Y.W. (1993), Audits of Collective Bargaining, The Internal Auditor, 50(2), 37–42.
  • Jensen, M.C., and Meckling, W.H. (1976). Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure, Journal of Financial Economics, 3(4), 305-360.
  • Lary, A.M, & Taylor, D.W. (2012). Governance Characteristics and Role Effectiveness of Audit Committees. Managerial Auditing Journal, 27(4), 336-354.
  • Lawal, B. (2012). Board Dynamics and Corporate Performance: Review of Literature, and Empirical Challenges. International Journal of Economics and Finance, 4(1), 22-35.
  • Mahdavi, A., & Maydari, A. (2005). Ownership structure and the Efficiency of Companies Operating in the Tehran Stock Exchange. Journal of Economic Research, 40(4), 103-132.
  • Mahdavi, G., & Hosseininia, S. (2014). A Study of the Relationship between Corporate Governance Mechanisms and Reduced Audit Report Lag, Applied Research in Financial Reporting, 3(5), 75-98.
  • Mahdavi, G., & Jamalianpour, M. (2010). An Examination of Factors contributing to the Speed of Financial Reporting in Companies Listed on the Tehran Stock Exchange. Financial Accounting Research, 2(4), 89-108.
  • Moghadam, A., & Momeni-Bansari, A. (2012). A Study of the Impact of some Characteristics of the Corporate Governance System on the Capital Structure Decisions of Companies Listed on the Tehran Stock Exchange. Accounting and Auditing Reviews, 19(2), 123-136.
  • Moradi, M., & Pourhosseini, S.M. (2009). A Study of the Relationship between Some Financial and Non-Financial Characteristics and Execution and Completion Time of the Audit work in Companies Listed on the Tehran Stock Exchange. Journal of Accounting Research, 1(1), 168-185.
  • Mouna, A., & Anis, J. (2013). Financial Reporting Delay and Investors Behavior: Evidence from Tunisia. International Journal of Management and Business Research, 3(1), 57-67.
  • Nor, M., et al. (2010). Corporate Governance and Audit Report Lag in Malaysia. Asian Academy of Management Journal of Accounting and Finance. 6(2), 57-84.Ogoun, S., et al. (2020). Audit Committee Attributes and Audit Report Lag of Quoted Industrial Companies in Nigeria. IORS Journal of Business and Management, 22(5), 1-9.
  • Ogoun, S., et al. (2020). Audit Committee Attributes and Audit Report Lag of Quoted Industrial Companies in Nigeria. IORS Journal of Business and Management, 22(5), 1-9.
  • Owusu-Ansah, S. (2000). Timeliness of Corporate Financial Reporting in Emerging Capital Markets: Empirical Evidence from the Zimbabwe Stock Exchange. Accounting and Business Researches, 30(3), 241-254.
  • Powell, M., & Ansic, D. (1997). Gender Differences in Risk Behavior in Financial Decision-making: An Experimental Analysis. Journal of Economic Psychology, 18(6), 605–628.
  • Rajabi-Damavandi, R., et al. (2020). A Study of the Effect of the Establishment of an Audit Committee and CEO Duality on Fraudulent Financial Reporting. Journal of New Research Approaches in Management and Accounting, 4(43), 180-193.
  • Rasouli-Ghahroudy, M., & Fakhraei, H. (2017), The Impact of Capital Structure and Ownership Structure on the Survival of Companies Listed on the Tehran Stock Exchange, Quarterly Journal of Planning and Budget, 22(1), 73-101.
  • Raweh, N.A.M., et al. (2019). Audit Committee Characteristics and Audit Report Lag: Evidence from Oman. International Journal of Accounting and Financial Reporting, 9(1), 152-169.
  • Rusmanto, T., & Helina, M. (2020). The Relationship between Corporate Governance and Audit Report Lag: Evidence from Indonesia. Palarch’s Journal of Archeology of Egypt/Egyptology, 17(7), 3003-3013.
  • Sadeghi-Hassanabadi, H. (2009). Factors Contributing to the Time of Issuance of an Audit Report, M.A. Thesis, Allameh Tabatabai University.
  • Salehi, M., et al. (2016), The Effect of Audit Committee Existence and its Characteristics on Audit Report Lag, Journal of Accounting Knowledge, 7(26), 59-83.
  • Samaha, K., & Khlif, H. (2017). Audit-related Attributes, Regulatory Reforms and Timely Disclosure. Journal of Financial Reporting and Accounting, 15(2), 158-179.
  • Sarraf, F., et al. (2015). Investment Opportunity in Companies and Audit Report Lags: Evidence from Iran. European Online Journal of Natural and Social Sciences, 4(1),1515-1526.
  • Satyawan, M.D., & Aisyahturahmmi (2020). Impact of Company Size, Political Connections, Audit Opinion and Fees on Audit Report Lag in Indonesia. SSRG International Journal of Economics and Management Studies, 7(6), 133.
  • Siti, R.I., et al. (2011). Audit Committee Effectiveness and Timeliness of Reporting: Indonesian Evidence. Managerial Auditing Journal, 27(4), 403-424.
  • Sultana, N., et al. (2015). Audit Committee Characteristics and Accounting Conservatism. International Journal of Auditing, 19(2),72-87.
  • Sultana, N. (2015). Audit Committee Characteristics and Audit Report Lag. Intarnational Journal of Auditing, 19(2), 88-102.
  • Vaez, S., et al. (2016). A Study of the Relationship of Some Audit Quality Indicators and Corporate Characteristics with Audit Report Lag. Accounting Knowledge, 16(62), 101-120.
  • Wu, C.H., et al. (2008). The Release Timing of Annual Reports and Board Characteristics. The International Journal of Business and Finance Research, 2(1), 103-118.