Determinants of audit report lag: further evidence from Hong Kong

This study examines whether the audit report lag (ARL) of Hong Kong companies is associated with auditor business risk and audit firm technology. The study is based on a sample of 393 Hong Kong companies for the 1991–1993 period. Financial condition and family ownership/control of a company are used as proxies for auditor business risk, and the structured/unstructured audit approach is used as a proxy for audit firm technology. Other variables, such as the number of subsidiaries, nature of client's business, company size, unexpected positive earnings news and nature of audit opinion, are included as control variables. Regression results show that there is a positive association between the audit report lag and the financial risk index for Hong Kong companies, suggesting that companies with a weak financial condition are associated with longer audit delays. The results also show that companies audited by audit firms using the structured audit approach have longer audit delays. The findings on the association between ARL and the company's family ownership and control suggest that family-owned/controlled companies may have shorter audit delays, though the results are statistically not significant. Larger companies appear to provide motivation for shorter audit delays.