Audit Committee Characteristics and Audit Report Lag

Abstract

This study seeks to determine whether audit committee compositional features are associated with the timeliness of financial reporting by Australian firms. Timeliness of financial reporting by firms, of which the length of an audit is a fundamental component, adds information content and impacts firm value, making an examination of audit report lag determinants important. Results indicate that audit committee members with financial expertise, prior audit committee experience and those who are independent are associated with shorter audit report lag. Results suggest that legislation mandating audit committee financial expertise and independence are effective also in improving the timeliness of financial reporting. More importantly, our results suggest that there may be benefits in constituting audit committees with other compositional features such as prior committee experience in overall efforts to improve the timeliness, and therefore quality, of financial reporting by firms.

An International Perspective on Audit Report Lag: A Synthesis of the Literature and Opportunities for Future Research

“…They also found that this relation held for audit committee chairs. Sultana, Singh and Van der Zahn (2015) presented very similar findings for a sample of Australian companies. They suggested that regulatory requirements of audit committee independence and expertise could potentially improve financial reporting timeliness.…”

Audit Committee Financial Expertise and Audit Report Lag: Malaysia Further Insight

“…Supporting this argument, Abernathy et al (2014) found that the presence and high proportion of accounting expertise on audit committees is associated with timelier audit reports for US companies. Baatwah et al (2015b) and Sultana et al (2015) also found that audit committees with financial expertise resulted in reduced audit report lag.…”

“…The motivation for this study stems from recent research that investigates the effect of corporate governance mechanisms on the timeliness of audit reports (e.g. Abdullah 2006;Afify 2009;Puasa, Salleh & Ahmad 2014;Abernathy, Beyer, Masli, & Stefaniak 2014;Baatwah, Salleh & Ahmad 2015b;Sultana, Singh & Van der Zahn 2015). In addition to investigating various corporate governance mechanisms, such as the board of directors and audit committee characteristics, previous research had also provided emphasis on the audit committee financial expertise since discharging audit committee responsibilities require directors with extensive financial knowledge and experience (Bédard, Chtourou & Courteau 2004).…”

The Influence of Profitability, Solvency, and Auditor’s Opinion to Audit Report Lag at Coal Mining Companies

“…The framework of this research can be described in following Figure Meanwhile, Sultana et al (2015) try to exam whether audit committee compositional features are associated with the timeliness of financial reporting by Australian firms. They find that audit committee members with financial expertise, prior audit committee experience and those who are independent are associated with shorter audit report lag.…”