The impact of IFRS adoption and corporate governance mechanisms on audit report lag: evidence from an emerging country

Abstract

Purpose: The purpose of this paper is to investigate the impact of the International Financial Reporting Standards (IFRS) adoption and corporate governance mechanisms (e.g., Board characteristics and Audit Committee (AC) characteristics) on Audit Report Lag (ARL) in an emerging country, named Saudi Arabia. Methodology: We use a sample of 616 firm-year observations from the Tadawul Stock Exchange in Saudi Arabia for the period 2016-2019. Panel regressions were used. Findings: The results indicate that ARL has significantly increased after the IFRSs' adoption. This result may imply that IFRS adoption leads to a need of adaptation process. It may support the need for more training and IFRS education in Saudi Arabia. Additionally, both AC diligence and AC financial expertise significantly reduce ARL. It may support the Saudi regulatory requirement to equip audit committees with at least one member with accounting and financial expertise. However, the results show that AC size and Board characteristics (board size, board independence and board meetings) are not significantly associated with ARL. Contribution: Our study fills the gap in the existing literature by examining the impact of the IFRSs' adoption and the corporate governance characteristics on ARL, whose results remain mixed and rare in Saudi Arabia, an emerging and under-studied context.

Does Audit Committee Busyness Impact Audit Report Lag?

“…The results of the audit opinion, audit quality, board size, AC size, company size, profitability, and leverage are consistent with those obtained from Chan et al (2016), Hassan (2016), Mohamad-Nor et al (2010, Ng andTai (1994), Owusu-Ansah (2000), and Knechel and Sharma (2012). At the same time, the results of the board meetings and AC meetings agree with the previous research, including the studies by Gamra et al (2022) and Aldoseri et al (2021). However, the results of AC financial expertise are consistent with some studies in the literature, such as that by Nelson and Shukeri (2011), while they contradict the results obtained from other studies, such as those by Ovbiebo (2021) and Aldoseri et al (2021).…”

“…According to Aljaaidi et al (2019), audit committee independence and meetings have negative impacts on the ARL. These findings contradict the findings of Aldoseri et al (2021), Ezat et al (2021), andGamra et al (2022) who have discovered that the only characteristic that influences the ARL is financial expertise, while the AC size, independence, and meetings have no impact on the ARL. Moreover, Omer et al (2020) discovered that merging the risk management and audit committee functions into a single committee had a positive influence on the ARL.…”

“…Firstly, in recent years, Saudi Arabia has witnessed the development of non-financial sectors and an increase in both domestic and foreign investment rates (Elneel and AlMulhim 2022), which has increased the demand for timely audit reports. Secondly, non-financial information in emerging markets, such as Saudi Arabia, is frequently limited, and the analysts' forecasts are insufficiently developed, which places a premium on the financial information provided by companies and its timeliness (Aljaaidi et al 2019;Gamra et al 2022). Thirdly, the updated Saudi Corporate Governance Code, published in 2017, emphasized the importance of the AC members' roles and provided more guidance on the selection of these members and the committee's chair (Naif and Ali 2019).…”

Kualitas Laporan Keuangan: Apakah Keterlambatan Laporan Audit, Kesibukan Mitra Audit, Karakteristik Direksi Dapat Mempengaruhi?

“…Hasil ini tidak sejalan dengan hasil penelitian sebelumnya bahwa kesibukan mitra audit berpengaruh terhadap keterlambatan laporan audit (Raweh et al, 2021;Hussin et al, 2018;Singh et al, 2022;Wiedjaja & Eriandani, 2021). Hubungan signifikan negatif antara ukuran direksi dan keterlambatan laporan audit mendukung penelitian sebelumnya (Gamra et al, 2022;Candra dan Trisnawati, 2021;Bhuiyan dan D'Costa, 2020;Firnanti dan Karmudiandri, 2020;Raweh et al, 2019;Garkaz et al, 2016). Semakin banyaknya direksi maka dalam sebuah perusahaan akan lebih mudah untuk mengambil sebuah keputusan sehingga keterlambatan laporan audit didalam perusahaan tersebut akan semakin rendah.…”

“…Hasil penelitian ini tidak dapat membuktikan pengaruh signifikan keahlian direksi dan keterlambatan laporan audit, sebagaimana juga dinyatakan dalam studi Serly (2021), Ishaq dan Che-ahmad (2016) karena walaupun direksi memiliki latar belakang ekonomi juga tidak berpengaruh terhadap penyelesaian laporan keuangannya. Termasuk juga tidak adanya pengaruh signifikan antara pertemuan direksi terhadap keterlambatan laporan audit yang sejalan dengan studi Gamra et al (2022). Beberapa studi sebelumnya Nouraldeen et al (2021), Firnanti dan Karmudiandri (2020), dan Ishaq dan Che-ahmad (2016) menyampaikan bahwa pertemuan direksi dan keterlambatan laporan audit menghasilkan nilai signifikan negatif, meskipun ada juga yang menghasilkan nilai signifikan positif (Firnanti & Karmudiandri, 2020;Serly, 2021;Waris & Din, 2023).…”