Are Lengthy Audit Report Lags a Warning Signal?

SUMMARY In this paper, we summarize our recent research into the association between abnormal audit report lags (the length of time between the fiscal year-end and the audit report date) and the likelihood of future restatements (Blankley, Hurtt, and MacGregor 2014). We find that as the audit report lag increases, the likelihood of a future restatement increases, and this dynamic appears to be associated with the effect of time pressure on the auditor. We will first summarize the motivation for the study, then discuss the empirical methods used, explain our results, and conclude with a discussion of the practical applications to practitioners.