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Investment Opportunities and Audit Report Lags: Initial Evidence

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Listed:
  • Trung Pham
  • Mai Dao
  • Veena L. Brown

Abstract

We examine the association between audit report lag (ARL) and the level of investment opportunity. High investment opportunities have been perceived to increase audit risk. External auditors, therefore, have to increase the required scope of audit work, which is expected to lead to longer audit report delays. The paper is motivated from (1) the effect of audit report lag on the timeliness of financial reporting and thus the market reactions to late earnings releases; and (2) the limited research on investment opportunities. We find that firms with high investment opportunities are more likely to have longer audit report lags. Our results extend the contemporary research on ARL and investment opportunities. The paper also provides useful information for firms’ management and external auditors.

Suggested Citation

  • Trung Pham & Mai Dao & Veena L. Brown, 2014. "Investment Opportunities and Audit Report Lags: Initial Evidence," Accounting and Finance Research, Sciedu Press, vol. 3(4), pages 1-45, August.
    • Handle: RePEc:jfr:afr111:v:3:y:2014:i:4:p:45
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    References listed on IDEAS

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    2. Ashton, Rh & Willingham, Jj & Elliott, Rk, 1987. "An Empirical-Analysis Of Audit Delay," Journal of Accounting Research, Wiley Blackwell, vol. 25(2), pages 275-292.
    3. Zmijewski, Me, 1984. "Methodological Issues Related To The Estimation Of Financial Distress Prediction Models," Journal of Accounting Research, Wiley Blackwell, vol. 22, pages 59-82.
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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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