Do covenant violations affect audit report timeliness?

Zane Swanson and Yinghong Zhang

International Journal of Accounting, Auditing and Performance Evaluation, 2018, vol. 14, issue 1, 1-23

Abstract: We investigate the impact of covenant violations on audit report timeliness. We argue that the existence of covenant violations might motivate clients or banks to seek waivers or renegotiations of current lending contracts. Otherwise, auditors might perform more audit tests before issuing audit opinions. Ultimately, auditors will increase the number of days to complete the audit. Our major findings are consistent with our prediction. In addition, we find that the presence of early covenant violations further increases audit delays. Our findings identify another factor affecting the audit report timeliness and one economic consequence of covenant violations.

Keywords: audit report timeliness; audit delay; audit report lag; covenant violation; technical default; private lending agreements. (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijaape:v:14:y:2018:i:1:p:1-23

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