Additional evidence on audit report lag

The process for providing accounting information to the public has not chan ged much in the last century even though the extent of disclosure has incre ased significantly. Sundem et al. (1996) suggest that the primary benefit o f audited financial statements may not be decision usefulness but the disci pline imposed by timely confirmation of previously available information. I n general, the Value of information from the audited financial statement wi ll decline as the audit report lag (the time period between a company's fis cal year end and the date of the audit report) increases since competitivel y oriented users may obtain substitute sources of information. Furthermore, the literature on earnings quality and earnings management suggests that u nexpected reporting delays may be associated with lower quality information . The purpose of this paper is to extend our understanding about the determin ants of audit report lag using a proprietary database containing 226 audit engagements from an international public accounting firm. We examine three previously uninvestigated audit firm factors that potentially influence aud it report lag and are controllable by the auditor: (1) incremental audit ef fort (e.g., hours), (2) the resource allocation of audit team effort measur ed by rank (partner, manager, or staff), and (3) the provision of nonaudit services (MAS and tax). The results indicate that incremental audit effort, the presence of contentious tax issues, and the use of less experienced au dit staff are positively correlated with audit report lag. Further, audit r eport lag is decreased by the potential synergistic relationship between MA S and audit services.