The effect of non-audit services of audit institutions on the audit report lag

Subject Areas : Accounting

Sadegh Sadeghi Dehcheshmeh ¹ , Hamid Reza Jafari Dehkordi ² , Bahareh Banitalebi Dehkordi ³

1 - Department of Accounting, ShK.C., Islamic Azad University, Shahrekord, Iran.
2 - Department of Accounting, ShK.C., Islamic Azad University, Shahrekord, Iran.
3 - Department of Accounting, ShK.C., Islamic Azad University, Shahrekord, Iran.

Received: 2023-11-19 Accepted : 2024-09-11 Published : 2025-03-19

Keywords: Audit Report Delay, Audit Services, Non-audit Services.,

Abstract :

Purpose: Timely submission of audited financial statements reduces information asymmetry and facilitates prompt decision-making by stakeholders. However, delays in the issuance of audit reports may undermine this advantage. Accordingly, the purpose of this study is to examine the relationship between the provision of non-audit services (NAS) by audit institutions and audit report lag, using a structural equation modeling (SEM) approach.

Methodology: The research employs a quantitative methodology based on 624 firm-year observations derived from the audited financial statements of companies listed on the Tehran Stock Exchange over the period 2014 to 2021. A structural model is estimated to assess the correlation between the extent of non-audit services and audit report lag, while controlling for other relevant variables.

Findings: The results reveal a positive association between the provision of non-audit services and an increase in audit report lag. Specifically, audit firms offering more extensive non-audit services tend to exhibit greater delays in audit report issuance. However, this correlation diminishes over subsequent periods, eventually contributing to a reduction in audit delay over time.

Originality / Value: The findings contribute to the understanding of how audit firms’ service portfolios influence audit timeliness. Moreover, they underscore the potential implications of audit firm independence and market expectations, thereby enhancing the credibility of financial statements and supporting more efficient decision-making by users.

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