Study On The Effect Of The Auditing Methodology And The Client Business Risk On Auditing Report Lag

Timeliness is one of the important features of financial statements, which conveyfinancial information to investors. It is important for listed Companies to disclose financialstatements in time, because it is able to reduce the negative impact caused by asymmetricinformation, to enhance the investors’ confidence to the market, even to foster efficientcapital market. Auditing report lag(ARL) is the most important factor for the timelydisclosure of financial statements（Givoly and Palmon，1982）. Auditing report lag refersto the number of days between the client’s fiscal year-end and the auditing report date.Therefore, further research and exploration effecting auditing report lag has importantimplications for improving the timeliness of financial statements.In this paper, we utilize empirical research methods and examine the effects ofmodern risk-oriented auditing methodology and the client business risk on the ARL usingdata of Chinese listed companies from the year2003to2011. The research result indicates:(1) The ARL shows an overall increasing trend from the year2003to2011;(2) Comparedwith traditional auditing methodology before2007, Modern risk-oriented auditingmethodology performed after2007has the significantly higher ARL. The significantdifferences between the "Big Four" and domestic firms are eliminated when modernrisk-oriented auditing was carried out. This shows that CPAs are more cautious andincrease more time after the Modern risk-oriented auditing methodology performed.(3)The higher the client business risk, the higher the ARL. But we also find that onlyprofitability and competitiveness of the industry through significance test, this illustratesthat profitability and competitiveness of the industry are focused on by CPAs.