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ABSTRACT

This study is to examine the forces behind Audit Report Lag (ARL) with employing agency theory. Generally Non- Audit Services (NASs) are recognized as those services, which impair the auditor independence. In addition, NAS is the matter of knowledge Spillover (KS) but it affects the audit risk positively. The present study aims to explore the causes for ARL. This research utilized secondary data in investigation. The results are confined to Karachi Stock Exchange (KSE) listed companies for year 2013. Structural Equation Modeling (SEM) technique has been applied through SmartPLS 3.2.3. This study contributes in the existing knowledge by offering the new horizon to bridge the gap between public perception from auditor and the practical application of audit. The empirical results demonstrated that there is no correlation between ARL and NASs. This research highlights important insights regarding NASs and auditor independency that invites upcoming researches to reinforce the concepts discussed in this study in Pakistan.

Keywords: Audit Report Lag, Non-Audit Services, Enterprise Resources Planning, Audit Risk.

(ProQuest: ... denotes formulae omitted.)

INTRODUCTION

Growth of risk management theories introduced new paradigm in the field of audit. Explosion of Enron, WorldCom, Cendant and some other big financial scandals are become the causes for public consciousness in audit report lag. Development of information technology has enhanced the accuracy and standardization of accounting information system. Enterprise Resource Planning (ERP) system is the essential mover for timely, accurate and comprehensive financial and non-financial reporting. An ERP system integrates suite of accounting software for streamlining business information. Financial statements provide qualitative characteristics to present timely report. At present, it has become vital as stakeholders' demand. Consequently, unexpected delay in audit report shows management inefficiency and associated with lower quality information and misreporting (Naimi, 2010). Financial information condenses its usefulness if it is not timely reported. Capital market efficiency can be attained by reducing the time lag of publishing of audited annual reports.

International Standards on Auditing (ISA 300) requires that the knowledge of business enable the auditor to perform an audit of financial statements. Such knowledge helps the auditor to calculate Audit Risk (AR) that enables the auditor to determine the nature, timing and extend of audit procedures. The auditor should be in fact and in appearance be independent means...

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