VOL. 4, NO. 1, JUNE 2021: 44–54 DOI: 10.9744/ijbs.4.1.

44–54
E-ISSN 2621-6426

Factors Affecting Audit Report Lag (Empirical Studies on Manufacturing Listed

Companies on the Indonesia Stock Exchange)

Jacqueline Vania Jessica Jura1*), ML. Denny Tewu2

1,2
Dept. of Magister Management, Graduate School, Universitas Kristen Indonesia
Jl. Pangeran Diponegoro No. 84-86, Jakarta 10430, Indonesia
*Corresponding author; Email: [email protected]

Abstract
This research aims to determine whether Company Size, Company Age, Debt to Equity (DER), Return
on Assets (ROA), Audit Opinion, and Auditor Reputation significantly affect Audit Reports Lag. This research
was conducted at manufacturing companies listed on the Indonesia Stock Exchange from 2015 to 2019. The
study used 87 companies as samples, a total of 435 samples as a whole. The data analysis technique used is
panel data analysis. The results obtained are that the Company Size and ROA have a significant negative effect
on ARL. Company Age has a significant positive effect on ARL. In contrast, DER, Audit Opinion, and Auditor
Reputation have no significant effect.

Keywords: Audit Report Lag, Company Size, Company Age, DER, ROA, Audit Opinion, Auditor’s
Reputation.

1. Introduction The objective is to gain legitimacy and increase public

confidence in the financial statement presented to the
Based on statistical data recorded in KSEI during public (Fujianti & Satria, 2020).
2020, there was an increase in the number of stock The regulations regarding audited financial report
investors by 36.14% compared to 2019. This increase reporting are stated in POJK No. 29/POJK. 04/2016
in stock investors led to an increase in the usefulness of about the Annual Report of Issuers or Public
the information presented in financial reports, primarily Companies. Despite the regulations, the IDX noted that
for the new investors. Financial reports describe a up till June 30th, 2020, 80 issuers did not submit their
company’s performance in a period; the timeliness of 2019 annual reports on time. Audit Report Lag (ARL)
its presentation is one of the characteristics of a or Audit Delay is measured by the period or the number
financial report that supports the investor’s decision- of days from the end of the fiscal year till the date of
making process (IASB, 2018). Factual and valuable signing the audit report (Pizzini & Ziegenfuss 2015).
information can be irrelevant if it is not available when Decreasing the delay is considered essential to increase
it is needed. Delays in the release of financial reports the timeliness and promote investors’ trust in the
can expose companies to adverse situations such as company and capital markets (Sujarwo, 2019), and the
negative and unexpected responses from the market, delay can also affect the image and the company’s
increasing information asymmetry, and increasing quality in investors’ eyes. Previous studies noted the
erratic investment decisions (Abbot et al., 2012; importance of conducting more profound research
Aryaningsih & Budiarta, 2014, Muktharuddin et al., about the delay due to its impact on timeliness and data
2015). The most significant thing that affects the disclosure (Oussii & Taktak, 2018, Nouraldeen et al.,
timeliness of the release is the timeliness of the external 2021).
audit reports. Companies may pressure their inde- There are many determinants stated in previous
pendent auditor to finalize the audit as quickly as studies regarding ARL, namely; Company size,
possible when they want to convey the information, but company age, solvency, profitability, information
the final decision remains with the auditor. Auditors systems, audit committee, board size, gearing,
want to avoid the risk of litigation; therefore, they will extraordinary items, auditor switching, audit fees,
not issue the report without fair and good judgment. auditor reputation, and other factors. (Suryanto, 2016;
(Ezat, 2015). Financial reports that have been com- Ginting & Hidayat, 2019; Yuyanti & Mulya, 2020;
pleted by the company’s management and have gone Nouraldeen et al., 2021). This study focused on a few
through the audit process by an external auditor must factors from the company and auditor side because the
be reported to the Financial Services Authority (OJK). main factor causing audit report lag came from both

44
 Jura: Factors Affecting Audit Report Lag 45

entities. Factors from the company side that influence manufacturing company included few sectors that can
ARL include company size, company age, DER, and reflect the reaction of the capital market. The usefulness
ROA, while the auditor side factor that influence ARL of this research is to provide empirical support for the
include auditor opinion and auditor reputation. relationship between agency theory, signal theory, and
However, several inconsistencies regarding the result, compliance theory with the influence of company size,
especially about the direction and significance effect of company age, DER, ROA, auditor opinion, and auditor
the ARL determinants on ARL, also several limitations reputation on ARL. In addition, this research is expec-
on previous studies regarding the period and com- ted to be a reference material for future researchers and
pany’s sectors. The different results might also happen can be used as a reference for decision-making for
because of the different variables used, companies’ investors.
industries or sectors, different periods, and the different The rest of this study arranged as follows: The
calculation and research methods. second section presents the literature review about the
Previous studies examined company size varia- grand theories, determinant factors and develops the
bles’ effect on ARL, and most of it provided evidence study’s hypotheses. The third section displays the
that the two variables are related significantly. Larger research’s methods. The fourth section displays the
companies with greater total assets tend to quickly analysis result, and the fifth section discusses the result
complete their audit process because they have better and also the limitations and directions for future
resources and are strictly monitored by investors, research. Lastly, the sixth section presents the con-
regulators, and the government. Contrary to Oussii & clusion of the study.
Taktak (2018), studies found that the larger company
takes longer to complete the audit process. Another 2. Literature Review
factor that led to ARL is company age, measured by the
length of time the company has operated since listing. 2.1. Compliance Theory
Older companies are considered to have better expe-
rience in reducing ARL; this is aligned study conducted Compliance theory is identified as an approach in
by Amani & Waluyo (2016) but contrary with the organization to integrate ideas and conceptions in
Widhiasri & Budhiarta (2016) that found the older the policies that authorized parties often put together
company, the longer the ARL. Nouraldeen et al. (2021) regarding certain matters through management partici-
found that companies with higher DER levels tend to pation. (Luneberg, 2012). When submitting the annual
have longer ARL because the auditor will make more financial reports, public companies in Indonesia are
effort and be more cautious to examine the report, expected to comply with the regulations stated in
contrary to the study conducted by Fujianti & Satria POJK No. 29/POJK.04/2016 about the Annual Report
(2020) that showed no significant relationship between of Issuers or Public Companies. It was stated that
two variables. According to Khoufi & Khoufi (2018), public companies were required to submit their
companies that can generate better profit based on financial reports to the OJK no later than the end of the
certain assets tend to have shorter ARL, while studies fourth month (120 days) after the financial year ends.
conducted by Annisa & Hamzah (2020) showed that In terms of financial reporting, companies are
ROA has no significant relationship with ARL. A encouraged to report their financial statements because
previous study about the relation between audit opinion of the incentives that were obtained, namely good
by Lestariningrum et al. (2020) found that companies public response, and because it was considered a
with unqualified opinions tend to have shorter ARL, necessity, especially for a bigger company and public
while a study conducted by Ibrahim & Triyanto (2020) accountant public. This requirement could be one of
did not find any relation between audit opinion and the reasons to pursue timeliness in reporting the audited
ARL. Another factor from the auditor side is auditor financial statement.
reputation. Irman (2017) found that Big4 Public
Accounting Firm tend to complete audit faster and 2.2. Signaling Theory
reduce the ARL, while Widhiasari & Budhiartha
(2016) found no significant effect between the two The signal theory states the behavior of managers
variables. in communicating information about the company’s
This study was conducted on 435 annual financial condition through signals (Givoly & Palmon, 1982).
reports from 87 manufacturing companies listed on This theory is rooted in the pragmatic accounting
Indonesia Stock Exchange from 2015 to 2019. The use theory that focuses on the influence of information on
of the manufacturing sector is because the listed changing the information user’s behavior. The relation
46 PETRA INTERNATIONAL JOURNAL OF BUSINESS STUDIES, VOL. 4, NO. 1, JUNE 2021: 44–54

with the timeliness of financial reporting is that when 2.5. Company Size
companies submit financial reports in time means that
the company has good news such as profit or the Company size can be classified into total assets,
unqualified audit opinion. Companies with good news log size, the market value of shares, and others (Lai,
tend to want to immediately convey the news to the 2019; Habib et al., 2018; Bangun & Subagyo, 2012).
public faster, so that share prices are expected to This study uses total assets as a proxy for measurement
increase. The timeliness of presenting a financial because it is considered more stable and describes the
statement is a signal from companies that shows useful company size better than market capitalization and
information for an investor to make a decision (Dewi sales, which are influenced by demand and supply
& Suputra, 2017). Conversely, companies that are late (Mareta, 2015). Previous studies that examined the
in submitting financial reports can cause uncertainty in relationship between company size and ARL provided
the stock price movement, and investors can assume evidence that the two variables are related signi-
that the lag was because the company has bad news ficantly, but the direction still varies. Most studies have
that they do not want to publish immediately found that the larger the company size, the faster the
(Muktharuddin et al., 2015). company reports its audited financial statements. This
is because larger companies are considered to have a
2.3. Agency Theory stronger internal control system that minimizes their
financial statements’ errors. Also, larger companies
Agency theory suggests a relationship between have sufficient funding sources to pay higher audit
the principal as the party that gives authority or the fees, have better technology, and more investors and
investor and the agent to exercise the authority given or regulations that they must obey. Therefore, companies
the manager. However, nonalignment of interest tend to report their financial reports more quickly and
between the principal and agent would lead to reduce the ARL (Nouraldeen et al., 2021; Hassan,
asymmetric information and conflict of interest 2016; Abbott et al., 2012; Habib & Bhuiyan, 2011).
between two parties. Two underlying factors caused Contrary to others, Oussii & Taktak (2018) and Pizzini
asymmetric information: moral hazard and adverse & Ziegenfuss (2015) found that company size
selection (Jensen & Meckling, 1976). These two positively affects ARL, and studies were done by
factors required the third party to act as a mediator; in Yanasari et al. (2021), and Yuyanti & Mulya (2020)
this case, the public accounting firm act as an found that the two variables did not significantly affect
intermediary between the principal and agent to reduce ARL. Based on the argument of these studies, the first
the risk of the agency problem. The information from research hypothesis is as follow:
the financial statement is essential; that is why getting H1: Company size has a negative effect on Audit
the factual and valuable information from audited Report Lag
financial statements can be an essential benchmark to
make it easier for the principal to make the right 2.6. Company Age
decision.
Company age is interpreted as the length of time
2.4. Audit Report Lag (ARL) the company has operated since its establishment. The
company’s age is calculated from its first time listed on
Audit Report Lag is the length/period of audit the Indonesia Stock Exchange until the year of its
completion measured from the date of the financial research. Companies listed longer are considered to
statements (the end of the fiscal year) to the date when have better experience in dealing with problems
the audit report is signed. The submission of financial because of their opportunity to learn from their
reports can influence the decisions made by investors. experiences and are more likely to have strong internal
The delay in the presentation of financial statements control procedures (Dibia & Onwuchekwa, 2013).
would reduce the usefulness and economic value of This argument is aligned with the learning curve
information (Apadore & Noor, 2013). External theory, which in this research means that the more
stakeholders consider audit report as an important input financial reports produced, the more likely it is to
for investment decision-making; hence the timing of reduce the possibility of delays in reporting financial
the release is matter (Habib et al., 2018). The timeliness statements. Previous studies conducted by Amani &
of preparing or reporting a financial report can affect Waluyo (2016) and Dibia & Onwucheka (2013)
the value of the financial report because ARL can showed that the older the companies, the shorter the
reduce the quality of financial statement information ARL. So they had a significant negative effect between
(Fujianti & Satria, 2020). the two variables. However, on the contrary, Togasima
 Jura: Factors Affecting Audit Report Lag 47

& Yulius (2014) and Widhiasari & Budiarhta (2016) while studies conducted by Nouraldeen et al. (2021)
found that there is a significant positive effect between and Oussii & Taktak (2018) found insignificant effect
the two variables, while research conducted by between ROA and ARL. Based on the argument of
Pradana & Wirakusuma (2013) and Laksono & Mu’id these studies, the fourth research hypothesis is as
(2014) found that company age did not affect ARL. follow:
Based on the argument of these studies, the second H4: Return on Asset has a negative effect on Audit
research hypothesis is as follow: Report Lag
H2: Company age has a negative effect on Audit
Report Lag 2.9. Audit Opinion

2.7. Debt to Equity The audit opinion is a standard report of the

conclusions obtained by the auditor during the audit
Debt to Equity (DER) is an indicator of company process based on evidence and findings evaluated
health that measures its ability to pay off its obligations. during his duties (Arens et al., 2017). Companies that
Companies with a higher DER level may increase the received unqualified opinions or got better audit
likelihood of financial distress and put the company at opinions tend to report their financial statements more
risk. This situation requires companies to be more quickly because companies immediately notify
careful in presenting the financial statement and tend to shareholders of this good news. Companies that
be slower to report their financial statements because received opinions other than unqualified opinions will
management wants to delay delivering the bad news. negotiate with the auditor, while the auditor will also
Auditors will make more efforts and be more cautious need to consult with the senior auditor or other staff to
to examine financial reports to reduce the risks (Habib make sure about the opinion given. This results in the
et al., 2018; Alali & Elder, 2014). This argument aligned longer ARL (Lestariningrum et al., 2021; Amani &
with previous studies conducted by Nouraldeen et al. Waluyo, 2016; Iskandar & Trisnawati, 2010). This is
(2021), Pizzini & Ziegenfuss (2015), and Abbott et al. aligned with previous studies conducted by Lestari-
(2012) that showed a significant positive relation ningrum et al. (2021), Yuyanti & Mulya (2020), and
which means that companies who had higher DER will Apriliane (2015), who found that companies who got
have longer ARL. However, Yuyanti & Mulya (2020) the unqualified opinion have a negative effect or
found a significant negative relation between DER and reduce the ARL. While Jayati et al. (2020) and Lestari
ARL, and the studies conducted by Fujianti & Satria & Latrini (2018) found that Audit Opinion has no
(2020) and Annisa & Hamzah (2020) showed that significant effect on ARL. Based on the argument of
there is no significant relationship between the two these studies, the fifth research hypothesis is as follow:
variables. Based on the argument of these studies, the H5: Audit Opinion has a negative effect on Audit
third research hypothesis is as follow: Report Lag
H3: Debt to Equity has a positive effect on Audit
Report Lag 2.10. Auditor Reputation

2.8. Return on Asset The reputation of the Auditor or Public

Accounting Firm (KAP) is the public trust held based
Return on Asset (ROA) measures the company’s on the firm size. Auditor reputation can be categorized
ability to generate profits based on a certain asset level into Big Four and Non-Big Four (Abdillah et al.,
which is used as one of the measurement proxies used 2019). A public accounting firm with a good reputation
to measure the strength of the company’s profitability or the Big Four has an efficient, effective, and good
(Abdillah et al., 2019). Higher ROA indicates the audit quality to finish the audit process faster; this is
higher rate of return generated by the company, which also because they have a larger number of professional
means that the asset is utilized rightly. This finding resources. (Juliardi et al., 2021). Public accounting
made companies tend to report audited financial firms tend to complete audits faster to maintain their
statements quicker to convey the good news to reputation and also the clients’ existence (Sunanungsih,
shareholders (Khoufi & Khoufi, 2018; Scott, 2010). 2013). Previous studies conducted by Irman (2017)
This result aligned with studies conducted by Fujianti show that Auditor Reputation negatively affects ARL,
& Satria (2020) and Khoufi & Khoufi (2018) that which means that the Big4 Public Accounting Firm
found companies with higher ROA reduce ARL or has reduces the ARL, while a study conducted by
a significant negative effect between the two variables, Widhisari & Budiartha (2016) shows that both
48 PETRA INTERNATIONAL JOURNAL OF BUSINESS STUDIES, VOL. 4, NO. 1, JUNE 2021: 44–54

variables are insignificant. Based on the argument of Chow test, the Hausman test and the Langrage
these studies, the last research hypothesis is as follow: Multiplier test. The panel data regression model is as
H6: Auditor’s Reputation has a negative effect on follow:
Audit Report Lag 𝑌 = 𝛼 + 𝛽1𝑋1𝑖𝑡 + 𝛽2𝑋2𝑖𝑡 + 𝛽3𝑋3𝑖𝑡
+ 𝛽4𝑋4𝑖𝑡 + 𝛽5𝑋5𝑖𝑡
3. Methods + 𝛽6𝑋6𝑖𝑡 + 𝜀
Notes:
3.1. Research Variables Y : Audit Report Lag
α : Constant Term
The dependent variable in this research is Audit β1-6 : Regression coefficient
Report Lag, while the independent variables in this X1 : Company Size
research are Company Size, Company Age, Debt to X2 : Company Age
Equity, Return on Asset, Audit Opinion, and Auditor’s X3 : Debt to Equity (DER)
Reputation. X4 : Return on Asset (ROA)
Table 1. Research Variables X5 : Audit Opinion
X6 : Auditor Reputation
Variables Measurement i : Entity – i
Audit Report Lag (Y) Auditor Sign Date – December t : Period - t
31st
ε : error
Company Size (X1) ln (Total Aset)
Company Age (X2) Research Year – Listed Year
4. Results
Debt to Equity (X3) (Debt / Total Equity) x 100%
Return on Asset (X4) (Net Profit/Total Asset) x 100%
4.1. Descriptive Statistics Analysis
Audit Opinion (X5) 1: Unqualified Opinion; 0: Non-
Unqualified Opinion Based on the processed data, which includes the
Auditor Reputation (X6) 1: Big Four; 0: Non-Big Four dependent variable, namely Audit Report Lag and
independent variables: Company size, Company age,
3.2. Sampling Debt to Equity, Return on Asset, Audit Opinion and,
Auditor Reputation. The minimum, maximum, mean,
This research uses a descriptive method with and standard values can be seen in the table as follows:
secondary data of the manufacturing company listed
on the Indonesia Stock Exchange, the data obtained Table 3a Descriptive Statistic Analysis
from www.idx.co.id, and the official website from the Frequencies Mean Min Max
company. The sampling technique used in this Audit Opinion 1 262 79.17 22 157
research is the purposive sampling techniques carried 0 173 82.01 29 191
out based on the following criteria: Auditor Reputation 1 215 77.7 29 150
0 220 83.22 22 191
Table 2. Sampling Criteria
Based on the descriptive statistical analysis results
Variables Measurement
in table 3, the amount of data observed in this study was
Audit Report Lag (Y) Auditor Sign Date – December
485 data. The Audit Report Lag (Y) variable has a
31st
Company Size (X1) ln (Total Aset) minimum value of 22 days Semen Baturaja (Persero)
Company Age (X2) Research Year – Listed Year Tbk owns. (SMBR) in 2017 while Sunson Textile
Debt to Equity (X3) (Debt / Total Equity) x 100% Manufacturer Tbk owns the maximum value of 191
Return on Asset (X4) (Net Profit/Total Asset) x 100% days. (SSTM) in 2017. The average ARL is 80.494 or
Audit Opinion (X5) 1: Unqualified Opinion; 0: Non- 81 days, which means that the average company
Unqualified Opinion publishes its financial statements earlier than the
Auditor Reputation (X6) 1: Big Four; 0: Non-Big Four regulations set by the OJK, which is 120 days. The
standard deviation of this variable is 20.241.
3.3. Analysis Method The company size variable (X1) is proxied by ln
(Total Assets). Natural logarithms are used to minimize
The data analysis technique used in this study is the difference in numbers that are too far from the data
panel data regression analysis with the Random Effect obtained. The minimum value of this variable is
Model. This method was used after going through the 25.4879 equals Rp. 117.290.628.918 owned by
 Jura: Factors Affecting Audit Report Lag 49

Betonjaya Manunggal Tbk. (BTON) in 2016, while audited the sample companies, and 1 means that Big
the maximum value is 33.4945 equals Rp. Four KAP audited the sample companies. There are
351.958.000.000.000 owned by Astra International 215 financial reports audited by Big Four KAP with an
Tbk. (ASII) in 2019. The average value of the company average of 77.7 or 78 days, a minimum of 29 days, and
size variable is 28.5663 or approximately equals to Rp. a maximum of 150 days of ARL, while the other 220
11.181.410.308.213 with a standard deviation of financial reports audited by non-Big Four KAP with an
1.5636. The company age variable (X2) has a minimum average of 83.22 or 84 days, minimum 22 days and
value of 1 owned by Impack Pratama Industri Tbk. maximum 191 days of ARL.
(IMPC) in 2015, while the maximum value is 42
owned by Solusi Bangun Indonesia Tbk. (SMCB). The 4.2. Model Selection Criteria
average value of this variable is 20.88 or 21 years, with
a standard deviation of 8.9718. There are three tests to choose the panel or
The Debt to Equity (X3) variable has a minimum estimation technique: the Chow test, the Hausman test,
value of 0.067 or 6.97% owned by Inti Agri Resource and the Langrage Multiplier test. The result of the test
Tbk. (IIKP) in 2019, which means the company uses can be seen in the table below:
Rp. 0.067 of debt financing for every Rp. 1.00 equity Table 4. Model Fit Test
financing, while the maximum value is 5.442 or
544.26% owned by Alakasa Industrindo Tbk. (ALKA) Test Prob.
in 2019, which means the company uses Rp. 5.442 of Chow Test Cross-Section F 0.0005
debt financing for every Rp. 1.00 equity financing. The Cross-Section Chi-
0.0000
Square
average value of this variable is 0.977 or 97.7%, which
Hausman Test 0.8702
means average companies use Rp. 0.977 of debt
Lagrange Multiplier Test 0.0003
financing for every Rp. 1.00 equity financing, and the
standard deviation is 0.831. The variable Return on The first test is the Chow test to choose between
Asset (X4) has a minimum value of -0.4014 or -40.14%, the Common Effect Method or the Fixed Effect
which Keramika Indonesia Assosiasi Tbk owns. Method. According to the test, the suitable model is the
(KIAS) in 2019, which means every Rp. 1.00 invested Fixed Effect Model because the Cross-Section F (P-
in asset produced Rp. 0.4014 of net loss, the maximum Value) showed a significance level of 0.0000 (<0.05).
value is 0.921 or 92.1% owned by Merck Tbk. The second test is the Hasman test to choose between
(MERK) in 2018, which means every Rp.1.00 invested the Fixed Effect Method or the Random Effect
in asset produced Rp. 0.921 of net profit. The average Method. According to the test, the suitable model is the
value of this variable is 0.0596 or 5.96% which means Random Effect Method because the Cross-Section
every Rp. 1.00 invested in asset produced Rp. 0.0596 Random shows a significance level of 0.8702 (>0.05).
of net profit, and the standard deviation is 0.09895. The last test is the Langrage Multiplier test to choose
Table 3b. Descriptive Statistics Analysis between the Common Effect Method or the Random
Effect Method. According to the test, the most suitable
Frequencies Mean Min Max model is the Random Effect Method because the
Audit Opinion 1 262 79.17 22 157 Cross-Section Breusch-Pagan shows a significance
0 173 82.01 29 191 level of 0.0003 (<0.05).
Auditor Reputation 1 215 77.70 29 150
The three tests to find the suitable model show
0 220 83.22 22 191
that the suitable model is the Random Effect Model.
The Audit Opinion Variable (X5) is a dummy
4.3. Data Panel Regression Analysis
variable; 0 means that the sample company has an
Opinion other than Unqualified, and 1 means that the Based on EViews processed data, the model of
sample company has an Unqualified Opinion. Two data panel regression analysis with Random Effect
hundred sixty-two financial reports got Unqualified Model in this study are as follows:
Opinion with an average of 79.17 or 80 days, a 𝑌 = 131.456 − 1.852𝑋1 + 0.3153𝑋2
minimum of 22 days, and a maximum of 157 days of + 0.1868𝑋3 − 50.5032𝑋4
ARL, while the other 173 financial reports got opinion − 2.7994𝑋5 − 0.2289𝑋6
other than Unqualified with an average of 82.01 or 83 Notes:
days, minimum 29 days and maximum 191 days of Y : Audit Report Lag
ARL. The Auditor Reputation variable (X6) is also a X1 : Company Size
dummy variable, 0 means that a non-Big Four KAP X2 : Company Age
50 PETRA INTERNATIONAL JOURNAL OF BUSINESS STUDIES, VOL. 4, NO. 1, JUNE 2021: 44–54

X3 : Debt to Equity (DER) Company Age, DER, ROA, Audit Opinion, and
X4 : Return on Asset (ROA) Auditor Reputation of 36.39%. In comparison, other
X5 : Audit Opinion variables can explain the rest, 63.61%.
X6 : Auditor Reputation The F test is conducted to test whether the
independent variable significantly affects the depen-
A constant value of 131.456 means that if the dent variable. To be significant, the value of sig. F
variables of Company Size, Company Age, DER, <0.05. In table 5, there is an F value of 8.095496 with a
ROA, Audit Opinion, and Auditor Reputation are in a significance level of 0.000 (<0.05). In conclusion, the
stable position (value 0), the ARL that occurs is regression model in this study can be used and, the
131.456 or 132 days. The coefficient value of -1,852 independent variable affects the dependent variable.
on the company size variable (X1) means that if every The t-test is carried out to test whether the
increase of 1 (one) unit variable is associated with a independent variable can explain the variation of the
decrease in ARL of 1.85 or 2 days with the assumption dependent variable (Ghozali, 2018: 98). A variable can
that other variables are constant. The coefficient value be said to be significant if the value is sig. t <0.05. In
of 0.3153 on the Company Age variable (X2) means table 5, three independent variables have a sig.t value
that increase of 1 unit of the variable is associated with of> 0.05, namely the Debt to Equity variable has a
an increase in ARL of 0.3153 or 1 day with the
value of 0.872, the Audit Opinion variable has a value
assumption that other variables are constant. The
of 0.155 and, the Auditor Reputation variable has a
coefficient value of 0.1868 in the Debt to Equity (X3)
value of 0.918. It means that the three variables do not
variable means that if every increase of 1 (one) unit
have a significant effect on ARL. The other three
variable is associated with an increase in ARL of
variables, namely Company Size, Company Age, and
0.1868 or 1 day, assuming that other variables are
Return on Asset, significantly affect ARL. The
constant. The coefficient value – 50.5042 on the
Return on Asset (X4) variable means that if every Company Age variable has a sig.t value of 0.004
increase of 1 (one) unit variable is associated with a (<0.05) and a coefficient value of 0.3153; even though
decrease in ARL of 50.5042 or 51 days, assuming that it has a significant value, the direction’s result is
other variables are constant. The coefficient value – different from the initial hypothesis. The other two
2.7994 on the Audit Opinion variable (X5) means that variables, namely Company Size and Return on Asset,
if every increase of 1 (one) unit variable or getting an have both significant effects and the same direction as
unqualified opinion is associated with a decrease in the hypothesis.
ARL of 2.7994 or 3 days, assuming that other variables
are constant. The coefficient value of 0.2289 on the 5. Discussion
Auditor Reputation variable (Xs) means that if every The coefficient of -1.852 with a significance level
increase of 1 (one) unit variable is associated with a of 0,007 (<0.05) means that the first hypothesis is
decrease in ARL of 0.2289 or 1 day with the
accepted, and there is a significant negative influence
assumption that other variables are constant.
of Company Size on ARL. The results of this study are
Table 5. Panel Data Analysis in line with studies conducted by Ginting & Hidayat
Variable Coefficient Std. Eror t Prob.
(2019), Irman (2017) and, Muktharuddin et al. (2015).
(Constant) 131.4560 18.9819 6.9253 0.000 Companies with larger assets have shorter ARL
Company Size -1.852 0.6878 -2.6931 0.007 compared to the company with smaller assets for
Company Age 0.3153 0.1108 2.8459 0.004 several reasons. First, larger companies are considered
DER 0.1868 1.1637 0.1605 0.872
to have stronger internal control systems due to better
ROA -50.5032 10.1368 -4.9821 0.000
Auditor Opinion -2.7994 1.9682 -1.4223 0.155 information systems and technology that can minimize
Auditor Reputation -0.2289 2.230 -0.1026 0.918 errors (Abbott et al., 2012). Second, the companies
R-Square 0.363990 have sufficient funding to pay higher audit fees to push
Adj. R-Squared 0.192899 the auditor to present the audited financial statement
F-Statistic 8.095496
Prob(F-Statistic) 0.000000 faster (Modugu et al., 2012). Third, larger companies
face higher pressure as they are monitored closely by
The coefficient of determination (R2) measures investors, regulatory agencies, and trade unions to
how far the research model can explain variations in the present their financial statements faster (Fujianti &
dependent variable (Ghozali, 2018: 97). Table 5 Satria, 2020). The company Age variable has a
indicated the R-Square value is 0..3639. The dependent coefficient of 0.3153 with a significance level of 0.004
variable ARL can be explained by variations in the (<0.05), which means that the Company Age positively
independent variables, namely Company Size, influences ARL. Even though the two variables have a
 Jura: Factors Affecting Audit Report Lag 51

significant relationship, the result is not in line with the Lestari & Latrini (2018), and Ulfa & Primasari (2017).
second hypothesis of this study, so the second Auditor reputation was initially thought to influence
hypothesis is rejected. The results of this study ARL, but the results of this study state that the
contradict the previously proposed theory regarding the auditor’s reputation variable does not affect ARL; this
learning curve theory, but this research is in line with can be seen in the value of sig.t 0.9183 (> 0.05). This
the research results of Widhisari and Budiartha (2016) indicates that both Big Four and Non-Big Four Firm do
and Laksono and Mu’id (2014). Company age cannot not affect financial reporting because all Public
guarantee that the completion of the audit will be faster. Accountant Firm is increasingly competing to provide
First, older companies have a bigger operational scope good services and always try to show high pro-
and also more complicated transactions due to the fessionalism. This research is also in line with several
branches in several regions (Lianto & Budi, 2010). previous studies, namely research conducted by
Second, the newer listed companies want to publish Widhisari & Budiartha (2016) and Angruningrum and
their financial statement faster to attract investors to buy Made (2013).
their stock (Laksono & Mu’id, 2014). The managerial teams can use this result to help
The DER variable has a significant level of 0.872 them prevent the audit report lag by noting few
(>0.05) with a coefficient value of 0.1868, which variables that negatively affect the audit report lag,
means that DER has no significant effect on ARL so namely, Company Size and ROA, because these two
that the third hypothesis in this study is rejected. These variables can reduce the ARL. Maintaining the
results align with research conducted by Annizah & company’s total assets and profit might attract new
Hamzah (2020) & Debbianita et al. (2017). There was investors because it can make the investor confident in
an indication that companies with higher DER reported the company. As for the Company Age variable that
their financial statement before 120 days in this study; has a significant positive effect on audit report lag,
for example, Indomobil Sukses Internasional (IMAS) companies have to take extra care of their operating
has an average DER of 293.87%, but their average system, branch office and keep learning to achieve
ARL is 89.2 or 90 days and Indal Aluminum Industry better as the company gets more experience. However,
Tbk. (INAI) has an average DER of 370.41%, but their those are not the only variables that can be used to
average ARL is 81.2 or 82 days. These indicate that determine the factors affecting audit report lag. This
auditors have enough time to complete the audit research still has many limitations and needs to be
perfected to have a better result. This research only used
process for liabilities, so large liability would not affect
five years of data and only used the manufacturing
the audit completion on a financial statement. A value
companies as the sample. It could be better to increase
of sig indicates acceptance of the fourth hypothesis.t
the research years and also use the other sectors as the
0.000 (<0.05) and a coefficient value of -50.5032, sample.
which means that ROA has a negative effect on ARL.
The greater the company’s ability to generate profits 6. Conclusions
means that the company wants to inform the good news
that is there immediately, and of course, this will It is concluded that the Company Size and ROA
accelerate the ARL. The results of this study are in line variables have a significant negative effect on ARL.
with research conducted by Fujianti and Satria (2020), The larger the company and the higher the ROA level,
Estrini & Laksito (2013) and, Lianto and Kusuma the audit process will tend to be carried out faster.
(2010). Meanwhile, the Company Age variable has a
Audit Opinion has an insignificant effect on ARL; significant positive effect on ARL due to the complex
statistically, this is evidenced by the sig.t value of 0.155 operations, and many branches the companies have
(>0.05). In this study, 262 financial reports got might increase the ARL. The other three variables like
Unqualified Opinion, and the average ARL is 80 days, DER, Audit Opinion, and Auditor Reputation, do not
while the other 173 financial reports which got other significantly affect ARL. The DER level does not
than unqualified opinion have an average ARL of 83 prove to affect ARL because it is believed that auditors
days. The results of the average ARL between the two have enough time to conduct an audit on the liability in
opinions are not too far apart. Suppose the company the manufacturing companies. As for the audit,
gets an unqualified opinion with a long ARL. In that opinions do not affect ARL because the average ARL
case, this could be due to the long time it takes for days are not too far apart. With the increasingly
the auditor to gather evidence and the conditions competitive Audit Firm providing good services, the
needed for audit qualification. The result of this study auditor’s reputation is considered less capable of
is in line with studies conducted by Jayati et al. (2020), showing an influence in ARL.
52 PETRA INTERNATIONAL JOURNAL OF BUSINESS STUDIES, VOL. 4, NO. 1, JUNE 2021: 44–54

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