FACTORS THAT DETERMINES AUDIT DELAY IN NIGERIA . A RESEARCH PROJECT MATERIAL ON ACCOUNTING
This project examines the determinants of audit delay report in the 40 Nigeria listed companies and to find out the impact of selected corporate attributes, on audit delay in Nigeria. Timeliness of financial report is one of the attributes of good corporate governance identified by the organization for Economic Cooperation and Development (OECD) and World Bank. Shareholders and other stakeholders need information while it is still fresh and the more that passes between year-end and disclosure the more stale the information becomes and the less value it has. Nigeria listed companies take approximately four months on the average beyond their balance sheet date before they are finally ready for the presentation of the audited accounts to the shareholders at the annual general meeting. The results of the 40 listed Nigerian companies showed that most of the explanatory variables namely, profitability, total assets, total debt, total equity, audit fees and industry type have no significant impact on audit delay. While only international linkage showed significant impact on audit delay.
1.1 BACKGROUND OF THE STUDY
The usefulness of published corporate reports depends on their accuracy and their timeliness. As early as 1954, it was recognized that one of the essential elements of adequate disclosure was timeliness of reporting as first considered by the American Accounting Association (AAA, 1954). Past experience in capital markets shows that timeliness critically affects the investors’ chance of being defrauded, with respect to capital markets, disclosing information regarding company activities is the primary element that ensures efficacy of capital markets (Celik, 2002). Submission of activities as well as information regarding result of activities by companies to shareholders in a complete and correct manner is important for permanency of economy and maintaining welfare of individuals. Active data flow in economy mainly depends on accounting information disclosed to public and thus on financial statement (Cilik, 2003).
Therefore, it is not surprising to see policy maker expressing concern about the timeliness of disclosures (FASB 1980 and SEC 2002).
However, the safeguard against misstatements provided by audit requirements seems to contradict the concept of reporting timeliness. Kathari and Robin, (2000) found that companies in jurisdiction that have a strong shareholder orientation tend to disclose earnings information sooner than companies in countries operating under a legal code system. If information is released sooner, the effect on stock prices is more pronounced. The longer the time lapse between year-end and the release of the financial information, the less effect there is on stock price, all other things being equal. However, it is not possible to release annual reports unless it is certified as true and fair by professional chartered accountants. Put differently, one of the most tangible reasons for the late publication of annual reports by public limited companies is that accounts need to be audited before they can be published. Time lag in financial report publication and audit delay are intertwined and used interchangeably in reporting literature. As a result, in most cases timeliness has actually dealt with audit delays.
In other words, Gigler and Hemmer (2001) discuss this point in their study, which finds that firms with more conservative accounting systems are less likely to make timely voluntary disclosures than are firms with less conservative accounting systems.