Investigation the Relationshio between Audit Report Lag and Future Stock Price Crash Risk and the Effect of Internal Audit Performance on It

Document Type : Original Article

Authors

1 Assistant Professor of Accounting, Faculty of Management and Accounting, Shahid Beheshti University, Mehran, Ira

2 MSc. of Auditing, Faculty of Management and Accounting, Shahid Beheshti University, Mehran, Ira

3 PhD Student in Accounting, Islamic Azad University, North Tehran Branch, Tehran, Iran

Abstract

This study aimed to investigate the relationship between audit report delay and future stock price crash risk. It also aimed to investigate the effect of internal audit performance on the relationship between audit report delay and future stock price crash risk. In order to measure the Internal Auditor Performance, the number of employees of the internal audit unit and the age of the internal audit unit was used. In this regard, data of 167 companies listed on the Tehran Stock Exchange between 2015 to 2020 were collected from Rahavard Novin, their financial statements, and the official website of the Tehran Stock Exchange and then analyzed using the multivariate regression.The results showed that the audit report delay had a significant positive effect on the future stock price crash risk. A significant negative relationship was also observed between the effect of the size of the internal audit unit and the age of the internal audit unit on the relationship between the audit report delay and the future stock price crash risk. An internal auditor can have a decisive role in adjusting the type, nature, and scheduling of the audit procedures and reducing the limitations of the independent audit procedures, and also improving reporting timeliness and reducing the stock crash risk.

Keywords


انصاری، عبد المهدی. حسین، شفیعی. (1388). بررسی تأثیر متغیر‌های داخلی بر برنامه حسابرسی. بررسی‌های حسابدارس و حسابرسی. 16(4)، 21-34.
حاجیها، زهره. رفیعی، آزاده. (1393). تأثیر کیفیت عملکرد حسابرسی داخلی بر به هنگام بودن گزارش حسابرسی مستقل. پژوهش‌های حسابداری مالی وحسابرسی، 6(24)، 121-137.
حاجیها، زهره. اورادی، جواد و صالح آبادی، مهری. (1396). ضعف در کنترل‌های داخلی و تأخیر گزارش. حسابرسی. فصلنامه حسابداری مالی. 9 (33)، 78-96.
رازقی، سیده غزاله و امیرحسینی، زهرا. (1395). بررسی رابطه بین بهبود نگهداشت وجه‌نقد و ارزیابی عملکرد ارزش افزوده اقتصادی. راهبرد مدیریت مالی، 4(1)، 123-139.
فندرسکی، علی و گرایلی، مهدی. (1397). اثربخشی کنترل‌های داخلی و ریسک سقوط قیمت سهام. پژوهش‌های حسابداری مالی و حسابرسی. 10(2)، 169-186.
کوکبی، صدریه. کردلویی، حمید رضا و میرابی، وحیدرضا. (1394). تأثیر کارایی عملکرد حسابرسی داخلی و کمیته حسابرسی بر تجدید ارائه صورت‌های مالی. دانش حسابداری و حسابرسی مدیریت. 4(16)، 27-34.
مشایخی، بیتا. حسن زاده، شادی. امینی، یاسین و منتی، وحید. (1395). تأثیر کیفیت حسابرسی داخلی بر حق‌الزحمه حسابرسی مستقل. پژوهش‌های حسابداری مالی وحسابرسی، 8(31)، 41-56.
 
Abernathy, J. L., Barnes, M., Stefaniak, C., and Weisbarth, A. (2017). An international perspective on audit report lag: A synthesis of the literature and opportunities for future research. International Journal of Auditing, 21(1), 100-127.
Akingunola, R. O., Soyemi, K. A., & Okunuga, R. (2018). Client Attributes and the Audit Report Lag in Nigeria. Market Forces, 13(1).
Aljifri, K., Khasharmeh, H. (2010). The timeliness of annual reports in Bahrain and the United Arab Emirates: An empirical comparative study. The International Journal of Business and Finance Research, 4(1), 51-71.
Ansari, A. & Shafiei, H. (2009). Investigating the effect of internal variables on the audit program. Journal of Accounting and Auditing Reviews, 16(4): 21-34. (In Persian)
Ansari, A., Shafiei, H. (2010). An Examination on the Effect of Certain Internal Audit Variables on the Planning of External Audit. Accounting and Auditing Review, 16(4), 21-34 [In Persian].
Barber, B. M., & Odean, T. (2013). The behavior of individual investors. In Handbook of the Economics of Finance. (2). 1533-1570..
Beattie, V., Fearnley, S., and Brandt, R. (2001). Behind closed doors. New York, NY: Palgrave.
Beattie, V.A., Hines, T. and Fearnley, S. (2011), Reaching Key Financial Reporting Decisions – How Directors and Auditors Interact, John Wiley & Sons, Chichester.
Blankley, A. I., Hurtt, D. N., & MacGregor, J. E. (2014). The relationship between audit report lags and future restatements. Auditing: A Journal of Practice & Theory, 33(2), 27-57.
Bryant-Kutcher, L., Peng, E. Y., and Weber, D. P. (2013). Regulating the timing of disclosure: Insights from the acceleration of 10-K filing deadlines. Journal of Accounting and Public Policy, 32(6), 475-494.
Carslaw, C. A., & Kaplan, S. E. (1991). An examination of audit delay: Further evidence from New Zealand. Accounting and business research, 22(85), 21-32.
Chan, K. H., Luo, V. W., & Mo, P. L. (2016). Determinants and implications of long audit reporting lags: Evidence from China. Accounting and Business Research, 46(2), 145-166.
Chen, J., Chan, K. C., Dong, W., & Zhang, F. (2017). Internal control and stock price crash risk: Evidence from China. European Accounting Review, 26(1), 125-152.
De Angelo, L. (1981). Auditor Size and Audit Quality, Journal of Accounting and Economics.
Fagbemi, T. O., & Uadiale, O. M. (2011). An appraisal of the determinants of timeliness of audit report in Nigeria: Evidence from selected quoted companies. In The New Orleans International Academic Conference New Orleans, Louisiana USA.
 Felix, Jr, W. L., Gramling, A. A., and Maletta, M. J. (2001). The contribution of internal audit as a determinant of external audit fees and factors influencing this contribution. Journal of Accounting Research, 39(3), 513-534.
Fendereski, A., Safari Grailei, M. (2018). The effectiveness of internal controls and Stock Price Crash Risk. Quarterly financial accounting journal 10(38), 169-186 [In Persian].
Fenderski, A. & Garayli, M. (2018). The effectiveness of internal controls and the risk of stock price crash. Journal of Financial Accounting and Auditing Research, 10 (2): 169-186. (In Persian)
Habib, A., & Huang, H. J. (2019). Abnormally long audit report lags and future stock price crash risk: evidence from China. International Journal of Managerial Finance.
Hajiha Z, Oradi J, Saleh Abadi M.(2017). Internal control weaknesses and Audit report lag. Quarterly financial accounting journal. 9 (33) :78-96 [In persian].
Hajiha, Z. & Rafiei, A. (2014). The effect of internal audit performance quality on the timeliness of the independent audit report. Journal of Financial Accounting and Auditing Research, 6(24): 121-137. (In Persian)
Hajiha, Z., Oradi, J. & Salehabadi, M. (2017). Weaknesses in Internal Controls and Audit Report Delays. Financial Accounting Quarterly, 9 (33): 78-96. (In Persian)
Hajiha, Z., Rafiei, A. (2014). The impact on the timeliness of performance quality of internal audit Independent audit reports. Quarterly financial accounting journal. 6(24), 121-137 [In Persian].
Hutton, A. P., Marcus, A. J., & Tehranian, H. (2009). Opaque financial reports, R2, and crash risk. Journal of financial Economics, 94(1), 67-86.
Kokabi, S., Kordloui, H. R. & Mirabi, V. R. (2015). The Impact of the Efficiency of Internal Audit Performance and the Audit Committee on the Restatement of Financial Statements. Journal of Knowledge of Management Accounting and Auditing, 4(16): 27-34. (In Persian)
Kokabi, S., Kordlouie, H., Mirabi, V. (2015). The impact of function efficiency of internal audit and the audit committee on financial restatements of firms. Journal of Management Accounting and Auditing Knowledge. 4(16). 27-34 [In persian].
Lambert, T. A., Jones, K. L., & Brazel, J. F. (2011). Unintended consequences of accelerated filings: Are mandatory reductions in audit delay associated with reductions in earnings quality. Unpublished Paper.
Leventis, S., Weetman, P., & Caramanis, C. (2005). Determinants of audit report lag: Some evidence from the Athens Stock Exchange. International Journal of Auditing, 9(1), 45-58.
Lu, S., Xuan, Y., & Zhang, L. (2020). Do Abnormal Audit Report Lags Signal Impending Stock Price Crash?. China Accounting and Finance Research, 22(4).
Mashayekhi, B,. Hasanzadeh, SH,. Amini, Y,. Menati, V. (2016). The Impact of Internal Audit Quality on Independent Audit Fee. Quarterly financial accounting journal. 8(31), 41-56 [In Persian].
Mashayekhi, B., Hassanzadeh, S., Amini, Y. & Mennati, V. (2016). The Impact of Internal Audit Quality on Independent Audit Fees. Journal of Financial Accounting and Auditing Research, 8 (31): 41-56. (In Persian)
Pizzini, M., Shu, L., & Vargus, M. (2010). The Impact of Internal Audit Function Quality on Audit Delays. University College of Business and Public Administration: pp, 1-41.
Razeqi, G. & Amir Hosseini, Z. (2016). Investigating the Relationship between Improving Cash Holding and Evaluating Economic Added Value Performance. Journal of Financial Management Strategy, 4 (1): 321-931. (In Persian)
Rusmin, R., Astami, E. W., & Hartadi, B. (2014). The impact of surplus free cash flow and audit quality on earnings management. Asian review of accounting.
Talebnia, G., Rajabdorri, H. (2018). Effect of the Audit Committee on the Stock Prices Crash Risk: Looking ‎at the Ethical Voluntary Disclosure. Journal of Financial Accounting Research, 10(1), 95-110 [In Persian].
Vishal, Munsif. (2011). Internal Control Reporting by Non-Accelerated Filers, Ph.D. Dissertation. Florida International University.
Yeung, W. H., & Lento, C. (2018). Ownership structure, audit quality, board structure, and stock price crash risk: Evidence from China. Global Finance Journal, 37, 1-24.