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    Office-Level Characteristics of the Big 4 and Audit Report...
    research summary posted September 17, 2015 by Jennifer M Mueller-Phillips, tagged 05.0 Audit Team Composition, 05.02 Industry Expertise – Firm and Individual, 05.08 Impact of Office Size, 10.0 Engagement Management, 10.01 Budgeting and Audit Time Management, 12.0 Accountants’ Reports and Reporting, 12.05 Changes in Reporting Formats 
    Office-Level Characteristics of the Big 4 and Audit Report Timeliness.
    Practical Implications:

    This study provides further support for the importance of office-specific characteristics on audit and financial reporting outcomes and provides evidence of the benefit of office-specific industry expertise. The study should be of interest to financial reporters and audit firms interested in reducing audit report lag times and to regulators and investors interested in increasing the timeliness of financial reporting information.


    Whitworth, J. D., and T. A. Lambert. 2014. Office-Level Characteristics of the Big 4 and Audit Report Timeliness. Auditing: A Journal of Practice & Theory 33 (3): 129-152.

    audit report lag, industry expertise, office-level characteristics, product specialist strategy, timeliness
    Purpose of the Study:

    Timeliness of annual financial reporting information has long been a concern of investors, regulators, financial reporters, and auditors. Recent changes in the audit and financial reporting environment have resulted in longer audit report lags and have increased the importance of identifying factors associated with a timely audit. The authors examine timeliness implications of office specific attributes of the audit firm. Specifically, they examine whether office-specific industry expertise, office size, and the importance of the client to the local office are associated with audit delay (i.e., the time between fiscal year-end and the audit report date). The authors explore the sensitivity of the results to various measures and consider the impact of earnings quality. They examine two types of industry expertise and whether the aforementioned audit firm attributes are associated with a propensity to issue an early earnings announcement.

    Design/Method/ Approach:

    The authors use a regression model to test their hypotheses. They obtain audit delay, audit fees, and other audit-related information from Audit Analytics and financial information from Compustat for the years 20032008. Combining the Audit Analytics and Compustat samples provides a sample of 14,948 firm-year observations after excluding firms not audited by one of the Big 4 auditors.

    • The authors find that office-specific industry expertise is negatively associated with audit delay (for all but the largest quartile of firm offices, suggesting that such expertise allows audit firms and their clients to realize efficiencies within the audit process in the form of reduced post-fiscal-year-end audit time.
    • However, sensitivity analyses suggest that office-specific industry expertise is not significantly associated with audit delay for firms with the lowest accruals quality.
    • Office size and client importance are both positively associated with audit delay.
    • However, the most important clients are associated with a more timely audit.
    • Office-specific industry expertise is positively associated with the propensity to announce earnings substantially early and such expertise garnered via a product-specialist strategy is positively associated with audit delay relative to a low-cost specialist strategy.
    Accountants' Reporting, Audit Team Composition, Engagement Management
    Budgeting & Audit Time Management, Changes in Reporting Formats, Impact of Office Size, Industry Expertise – Firm and Individual