Effect of Corporate Characteristics on the Audit Report Lag (ARL) An Empirical Investigation

Abstract

Audit report lag (ARL) is the time period required to complete the audit and to issue the audit report. This timing is very important as it was found that it has an effect on the stock market and stock prices. With this purpose in mind, this study identified a matrix of company characteristics and audit-firm characteristics. The company characteristics include company size, number of subsidiaries, type of business sector, ownership concentration, CEO duality, profitability (ROA and EPS), leverage and liquidity, and the audit-related factors include type of audit firm and audit opinion. The study adopts quantitative methodology, as the researcher developed a regression model for 114 firm-year observations for companies listed in EGX 50 from 2016 to 2018. The findings highlight that the mean ARL in the Egyptian stock market is 77 days ranging from minimum 10 days to maximum 153 days. The regression analysis results showed that type of audit firm, type of audit opinion, company size, CEO duality, ownership concentration and liquidity significantly affect ARL. But on the other hand, number of subsidiaries, type of business sector, leverage, profitability and EPS have insignificant effect on ARL. The adjusted R-squared indicate that 25 per cent of the variation in the dependent variable in the regression model is explained by variations in the independent variables.