Does Financial Distress Has an Effects on Audit Report Lag? (Study on Manufacturing Companies Listed in Indonesia Stock Exchange)

Abstract

This study aims to examine the effect of financial distress on audit report lag and how the size of CPA Firm moderate the effect between financial distress and audit report lag. This study was held at manufacturing companies listed on the Indonesia Stock Exchange in 2017-2019. The final sample there were 318 observations, with a purposive sampling method. The variable financial distress is measured by the Altman Z Score proxy, which is the best model for measuring the state of financial distress being experienced by the company. The size of CPA Firm is measured by dummy variables, given a value of 1 if it is a Big Four CPA Firm and 0 if it is not a Big Four CPA Firm. This study use multiple linear regression to analyze the data. Based on the results of the analysis found that financial distress has negative and significant effect on audit report lag. It means that the smaller the Z Score of a company (which means the company is experiencing financial distress), the longer the financial statement audit process will be. This negative relationship between financial distress is strengthened by the size of CPA Firm.

The Role of Audit Report Lag in Mediating the Effect of Auditor Switching and Financial Distress on Financial Statement Fraud

“…One of them is that when a company is having financial difficulties, it takes longer to report its financial statements. When a company is in financial trouble, its desire to improve its financial statements (Khamisah et al 2021) eventually leads to financial statement fraud (Widharma and Susilowati 2020). Thus, the hypothesis in this study is: H7: Financial distress has a positive effect on financial statement fraud through audit report lag…”

“…The audit process will take longer when companies try to improve their financial statements to show good performance, even when the company is really in bad condition. Therefore, when a company is in financial distress, the auditor must go through a lengthy auditing process (Khamisah, Listya, and Saputri 2021). The study (Abdillah et al 2019) states that financial distress as measured using the leverage ratio has an influence on audit report lag.…”

Analisis Pengaruh Financial Distress Terhadap Berita Negatif Pada Perusahaan Asuransi di Indonesia

“…Hasil penelitian Rubab et al (2022) menyimpulkan bahwa financial distress memiliki dampak negatif terhadap performa keuangan perusahaan manufaktur di Pakistan. Beberapa penelitian juga menyatakan bahwa financial distress memberikan dampak negatif terhadap pengungkapan sukarela (voluntary disclosure) perusahaan manufaktur yang listing di pasar modal Indonesia (Pernamasari, 2020), financial distress mempunyai pengaruh negatif terhadap audit report lag (Khamisah et al, 2021), financial distress berpengaruh negatif terhadap opini going concern Bank yang terdaftar di pasar modal Indonesia (Jamaluddin, 2018), dan financial distress berpengaruh secara signifikan terhadap return saham pada perusahaan manufaktur yang listing di pasar modal Indonesia (Fachrudin, 2021).…”

Pengaruh CEO Financial Expertise, Audit Committee Financial Expertise, dan Financial Distress Terhadap Audit Delay Pada Perusahaan Properti dan Real Estate Yang Terdaftar di BEI Periode 2019-2021

“…Financial distress menurut Platt dan Platt (dalam Kisman & Krisandi, 2019) adalah tahapan penurunan kondisi perusahaan yang terjadi sebelum kebangkrutan atau likuidasi. Khamisah et al (2021) menjelaskan bahwa financial distress bermula ketika perusahaan gagal memenuhi kewajiban mereka. Abdillah et al (2019) yang menyatakan bahwa perusahaan yang mengalami financial distress cenderung mengalami audit delay yang panjang.…”