Effective audit management

Oct 13, 2025 by vinooalluri.com 8 views

The Effect of Profitability, Auditor Change, Audit Opinion, and Company Size on Audit Report Lag in Manufacturing Companies Listed on the Indonesia Stock Exchange (2017-2019)

Introduction

In today's business world, timely financial statements are crucial for ensuring company transparency and accountability. However, there are often delays in the submission of audit reports, known as Audit Report Lag. This phenomenon can have significant consequences, including the potential loss of trust from investors and other stakeholders. In this article, we will analyze the effect of profitability, auditor changes, audit opinion, and company size on audit report lag in manufacturing companies listed on the Indonesia Stock Exchange during the period 2017 to 2019.

Research Methodology

This study was classified as a causal research using data from 186 manufacturing companies registered on the Indonesia Stock Exchange. Through the purposive sampling method, as many as 129 companies that meet the selected criteria as samples, with a total observation of 387. The data used came from the financial statements of each company published through the official website of the Indonesia Stock Exchange (www.idx.co.id). Our research design aimed to identify the factors that influence audit report lag, providing valuable insights for companies and regulatory bodies.

Research Variables

In this study, profitability, auditor change, audit opinion, and company size function as independent variables, while the Audit Report Lag becomes a dependent variable. Profitability refers to the company's ability to generate profits, while auditor changes reflect whether the company has replaced their auditors in the analyzed period. Audit opinion is the result of auditor's assessment of the fairness of financial statements, while company size is usually measured based on total assets. Understanding these variables is essential for identifying the factors that contribute to audit report lag.

Research Results

Analysis using multiple linear regression methods shows that profitability and company size have no significant effect on the Audit Report Lag. It can be interpreted that although companies have good financial performance and large size, they do not guarantee their audit reports will be issued on time. Conversely, auditor changes and audit opinion are proven to have a significant influence on Audit Report Lag. When a company changes auditors, there may be required adjustments that cause delays in completing audit reports. In addition, poor audit opinion can cause companies to take longer to respond and improve the issues identified by the auditor.

Additional Analysis and Explanation

Delays in the delivery of audit reports can have a broad impact, including the potential loss of trust from investors and other stakeholders. In the context of Indonesia, where regulations and transparency standards are increasingly strengthened, it is essential for companies to understand the factors that can affect audit report lag. Our research highlights the importance of effective audit management, including good communication with auditors and complying with strict schedules, to reduce the audit report lag.

Conclusion

Overall, this research provides important insights on the factors that affect the Audit Report Lag in manufacturing companies in Indonesia. By recognizing the significant influence of the change of auditors and audit opinion, companies are expected to be more proactive in managing their audit processes, in order to increase investor confidence and maintain a good reputation in the market. Delay in delivering audit reports is a challenge that needs to be overcome to support business growth and sustainability in this increasingly competitive era.

Recommendations

Based on our research findings, we recommend that companies in Indonesia take the following steps to reduce audit report lag:

Effective audit management: Companies should prioritize effective audit management, including good communication with auditors and complying with strict schedules.
Regular auditor changes: Companies should minimize auditor changes to avoid required adjustments that can cause delays in completing audit reports.
Improving audit opinion: Companies should focus on improving their audit opinion by addressing the issues identified by the auditor.
Investing in technology: Companies should invest in technology to streamline their audit processes and reduce the time required to complete audit reports.

By implementing these recommendations, companies in Indonesia can reduce audit report lag and maintain a good reputation in the market.
Frequently Asked Questions (FAQs) on Audit Report Lag

Q: What is audit report lag?

A: Audit report lag refers to the delay in submitting audit reports, which can have significant consequences, including the potential loss of trust from investors and other stakeholders.

Q: Why is audit report lag a concern?

A: Audit report lag can lead to a loss of trust from investors and other stakeholders, which can negatively impact a company's reputation and financial performance.

Q: What are the factors that contribute to audit report lag?

A: Our research identified four factors that contribute to audit report lag: profitability, auditor change, audit opinion, and company size.

Q: How does profitability affect audit report lag?

A: Our research found that profitability has no significant effect on audit report lag. This means that even if a company has good financial performance, it does not guarantee that its audit reports will be issued on time.

Q: How does auditor change affect audit report lag?

A: Our research found that auditor change has a significant influence on audit report lag. When a company changes auditors, there may be required adjustments that cause delays in completing audit reports.

Q: How does audit opinion affect audit report lag?

A: Our research found that audit opinion has a significant influence on audit report lag. Poor audit opinion can cause companies to take longer to respond and improve the issues identified by the auditor.

Q: How does company size affect audit report lag?

A: Our research found that company size has no significant effect on audit report lag. This means that even if a company is large, it does not guarantee that its audit reports will be issued on time.

Q: What can companies do to reduce audit report lag?

A: Our research recommends that companies take the following steps to reduce audit report lag:

Effective audit management: Companies should prioritize effective audit management, including good communication with auditors and complying with strict schedules.
Regular auditor changes: Companies should minimize auditor changes to avoid required adjustments that can cause delays in completing audit reports.
Improving audit opinion: Companies should focus on improving their audit opinion by addressing the issues identified by the auditor.
Investing in technology: Companies should invest in technology to streamline their audit processes and reduce the time required to complete audit reports.

Q: What are the benefits of reducing audit report lag?

A: Reducing audit report lag can lead to increased investor confidence, improved reputation, and better financial performance.

Q: How can companies measure the effectiveness of their audit processes?

A: Companies can measure the effectiveness of their audit processes by tracking key performance indicators (KPIs) such as audit report lag, audit opinion, and auditor satisfaction.

Q: What role do auditors play in reducing audit report lag?

A: Auditors play a critical role in reducing audit report lag by providing timely and accurate audit reports, communicating effectively with management, and identifying areas for improvement.

Q: What are the implications of audit report lag for regulatory bodies?

A: Regulatory bodies should take a proactive approach to addressing audit report lag by implementing policies and procedures that promote transparency and accountability.