Impacts Of Scheduled Annual Report Disclosure Delay On CPA Audit

Annual financial reports of listed companies are the main information resource of corporate financial situations, as well as important information based on which investors’ decisions are made. Considering that timeliness is one critical criteria for information usefulness, most countries and areas have made strict rules that require listed companies to disclose their annual reports on time. As the number of the public companies increases, the time distribution of annual report disclosure is becoming more and more unbalanced, and companies tend to release their annual reports together near the deadline of disclosure. In order to solve the problem above, China Securities Regulatory Commission(CSRC) has established the annual report scheduled disclosure system since 2002, which required that hand over their annual report disclosure schedule to the stock exchanges in advance, then the stock exchanges will make adjustments according to the equilibrium disclosure principle and make the final schedule public.It is a beneficiary measure for China to enhance information transparency by requiring that listed companies turn over annual report disclosure schedules to stock exchanges, which then make the reservation information available to the public. In practice, however, scheduled disclosure date alteration, especially delay is not rare. Both domestic and foreign scholars have done numerous and extensive researches about the timeliness of annual report disclosure schedule from different aspects. As far as the factors contributed to the timeliness of annual report disclosure, current literature has discovered that the timeliness of annual report disclosure can be substantially affected by firm sizes, financial risks, corporate performances, audit opinions and auditor turnovers, and concluded that phenomenon of releasing good news earlier than the bad news exists in both developed countries such as America and developing markets like China. In the aspect of the economic consequences following the timeliness of annual report disclosure, most researches focus on the market reactions, and have reached the agreement that releasing annual reports ahead of time can result better market reactions and thus increase corporate value. As one of the outside monitors of listed companies’ information disclosure, on the one hand, CPA audit plays a particularly critical role in improving the timeliness of annual report disclosure, on the other hand, as companies delaying the schedule are basically under-performed and financially distressed, they have higher audit risks, which may influence audit decisions such as audit opinions, audit fees and audit switches. However, researches in audit consequences of the timeliness of annual report disclosure are rare.Therefore, based on the tests on the samples from the A-share listed companies in Shanghai and Shenzhen Stock Exchange from 2008 to 2011 and the empirical analysis in related data, this paper examines the relationship between the delay of annual report disclosure schedule, audit opinion and audit fees. This paper firstly provides a review of current domestic and foreign literature about scheduled disclosure delay of annual reports, and then introduces the hypothesis based on the organization and analysis of related theories of the scheduled annual report system. The research design as well as the empirical results of the paper is thoroughly explained. The conclusion of the research and relevant policy suggestions are given at last. This paper finds that companies that delayed the annual report release are more likely to receive an non-standard audit opinion and be charged a higher level of audit fees; in addition, the longer the delay and the more the times of change in scheduled dates, the higher the probability of non-standard audit opinion and higher audit fees. The results above show that in practice, auditors do make rational audit decisions based on the assessments of clients’ risks required by the risk-oriented audit method, which implies that listed companies should establish scientific information disclosure procedures, and improve the timeliness of information disclosure by strictly sticking to the annual report disclosure schedule system and thus increase their market value. What’s more, due attention should be paid to the problem of the annual report disclosure schedule delay and supervise listed companies more effectively.