Title: Determinants of audit report lag in the banking industry: updated evidence

Authors: Fatima A. Alali; Randal J. Elder

Addresses: Department of Accounting, California State University Fullerton, 800 N. State College Blvd., Fullerton, CA 92834, USA ' Lubin School of Accounting, Syracuse University, 721 University Avenue, Syracuse, NY 13244, USA

Abstract: This study examines the determinants of audit report lag (ARL) in the banking industry. Using data from 2001-2010 and models developed from prior research for banks, the pooled sample results show that bank size measured by market capitalisation and profitability measured by return on assets are associated with shorter ARL. Extraordinary items and higher abnormal audit fees are associated with longer ARL. We find that these results are driven by large banks that are subject to internal control requirements under the Federal Deposit Insurance Corporation Improvement Act and Sarbanes-Oxley Act. We find that the audit of internal controls over financial reporting and the presence of material weaknesses in internal controls are associated with longer ARL in the large bank subsample. The study provides updated evidence on the determinants of audit report lag in the banking industry and finds that the determinants of ARL have changed over a period of regulatory and economic changes in the last decade.

Keywords: audit report lag; ARL; banks; Sarbanes-Oxley Act; SOX; Federal Deposit Insurance Corporation Improvement Act; FDICIA; regulatory change; economic change; accounting; auditing; banking industry; bank size; market capitalisation; profitability; return on assets; extraordinary items; abnormal audit fees; internal controls.

DOI: 10.1504/IJAAPE.2014.066391

International Journal of Accounting, Auditing and Performance Evaluation, 2014 Vol.10 No.4, pp.364 - 394

Received: 08 Nov 2013
Accepted: 20 Jan 2014
Published online: 27 Dec 2014 *

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