Earnings volatility and audit report lag

David B. Bryan and Terry W. Mason

Advances in accounting, 2020, vol. 51, issue C

Abstract: This study investigates whether earnings volatility influences audit report lag. If auditors view earnings volatility as affecting risk, and adjust effort in response to risk, we expect earnings volatility to impact audit report lag. Using a sample of 13,075 firm-year observations over the period 2004–2015, we find a negative relation between earnings volatility and audit report lag, consistent with auditors responding to less volatile earnings with increased effort. We also find that the association between earnings volatility and audit report lag is driven by non-industry-specialist auditors, auditors with short tenure, and small and medium sized auditor offices. Furthermore, we examine whether earnings management conducted by way of earnings smoothing affects our results. We find that low earnings volatility has a stronger impact on increasing audit report lag when there is a high degree of earnings smoothing

Date: 2020
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:advacc:v:51:y:2020:i:c:s0882611020300663

DOI: 10.1016/j.adiac.2020.100496

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