Determinants of Audit Report Lags of Public Companies in Indonesia

Abstract

The Indonesian Financial Service Authority (FSA) mandates that every listed company submit its financial reports by the end of the fourth month following the end of the financial year. When COVID-19 struck the world in 2020, the FSA extended the reporting deadline until the end of May. This policy was implemented to account for delays caused by COVID-19. This research aims to determine the factors associated with audit report lags and ensure the timeliness of financial reporting. This research is categorized as descriptive verification research. The descriptive method employed in this study aims to elucidate the determinants of audit report lags. The verification research aspect involves conducting hypothesis tests to examine the relationship between profitability, leverage, the size of Public  Accounting firms, and audit opinions on audit report lags. Our research was conducted to gather empirical evidence regarding the relationship between profitability, leverage, the size of accounting firms, and audit opinions on audit report lag. This research contributes to maintaining the relevance of the information contained in financial reports. The test results indicate that profitability positively correlates significantly with audit report lags. Companies audited by the Big Four firms have shorter audit durations compared to non-Big Four firms.Additionally, companies with standard audit opinions experience shorter audit durations than those with non-standard audit opinions. Leverage was found to have no significant correlation with audit report lags. Our findings suggest that smaller firms tend to delay their reports. However, they are published as soon as possible when audited by a reputable accounting firm and receive a standard audit opinion. The COVID-19 pandemic may have prompted our sample companies to postpone their reports. Future studies should consider the pandemic's impact on audit report lag.