Audit Structure and Other Determinants of Audit Report Lag: An Empirical Analysis.

This study investigates the determinants of the length of time auditors require to complete the audit--audit report lag (ARL). ARL can affect the timing of accounting disclosures, and evidence on determinants of ARL has the potential to provide insights into audit efficiency. The effect on ARL of competing audit technologies (structured versus unstructured) is also addressed. Prior studies have yielded mixed results, perhaps due to the non-comprehensive nature of their models. This study proposes a relatively comprehensive model of ARL based on (1) the amount of audit work required, (2) incentives to provide timely reports, and (3) the extent to which the auditor employs a structured audit approach. Data from 972 firms in seven industries for each of three consecutive years were related to ARL using a regression model. Results supported the importance of each of the above factors and indicated overall model explanatory power nearly three times greater than that of previously reported models. Regarding audit structure, the results showed that greater structure generally led to longer ARLs, but that accounting firms with greater structure also reacted more quickly to unanticipated events. These results provide a reconciliation of what appeared to be conflicting evidence on the relation between ARL and audit structure reported by Newton and Ashton (1989) and Williams and Dirsmith (1988).