A Research On The Effect Of Internal Control And Interim Audit On Audit Delay

Financial statements is an important channel from which the investors get imformation of earnings. Timely and reliable financial statements helps to enhance confidence of investors. Financial statements offered by the management is not always reliable because of principal-agent issues. Audit can improve reliability of financial statements but also caused longer reort lag which weakens the value of audit. Longer audit lag means auditors encountered difficulties during the work, that means audit lag also measures the audit efficiency. Researches on audit delay will help to enhance audit efficiency and timeliness of financial report, which will then improve the efficiency of capital market.Internal control is one of the key factors that affect audit delay. With effective internal control system auditor don't have to do a lot of substantive procedures, which cut down the time required to get enough audit evidence and helps to arrange audit work reasonably.Interim audit is also a factor affecting audit delay. Much audit evidence useful both for interim and annual audot is collected during interim audit , which helps to enhance audit efficiency. Researches show that interim audi could cut down audit delay.This paper first summarized research achievements on internal control, interim audit and audit delay and define the definition referred and measurement of variate. Then the paper discussed the interrelation of two different governance mechanism: internal control and audit by theory. The question that whether the impact on audit delay of one mechanism will be affected by another . Finally this paper selects the listed companies of A-shares in China between 2007 and 2012 to investigate whether or not interim audit and internal control affects audit delay of annual report, and analyzed whether the internal control was substitutionary or complementary with interim audit in reducing audit delay of annual report. We found that high quality internal control helped to reduce audit delay of annual report. Companies which had their interim report audited had shorter audit delay of annual report that year. Internal control substitute interim audit in reducing audit delay of annual report. That means if a company has its interim report audited, internal control could do little to reduce audit delay of annual report. On the other hand in company with high quality internal interim audit reduced audit delay less.In the end this paper gives some explains and several policy suggestions based on the empirical results. The listed company should improve the quality of internal control and take interim audit in good time. CPA should strive to reduce audit delays and combine interim audit evidence and inernal control. CPA should also review the internal control on a regular basis. Regulators should promote internal control audit and require public companies ,whitch cannot disclose financial reports on time,to take interim auditThere are two main points of innovation in this paper. First, this paper studied the effect on the annual audit delay from two angles of internal control and the interim audit,and discuss the specific ways of the two factor. Though Some scholars studied the effect of interim financial report or internal control auditing on annual report disclosure timeliness respectively, there are few studies discuss whether the internal control was substitutionary or complementary with interim audit in reducing audit delay of annual report.Second,this paper studied the economic consequences of internal control with the influence of other governance mechanisms consiidered.There are some studies focused on the economic consequences of internal control ,but few of them talked about wherher the function of internal control is influenced by the factors.