دانلود رایگان مقاله انگلیسی ارتباطات سیاسی و تاخیر در ارائه گزارش حسابرسی: شواهد اندونزیایی - امرالد 2018

1. Introduction

This paper investigates the association between political connections and audit report lag (hereafter ARL) in Indonesia and whether related party transactions (hereafter RPTs) conducted by the connected firms moderate the association between the two. Political connections formed and maintained by corporations are pervasive (Faccio, 2006; 2010) because such connections allow firms preferential access to borrowings, among many other benefits (Faccio, 2006, Khwaja and Mian, 2005, among others). However, political connections are also viewed as harmful to the minority shareholders, as these connections can lead to high agency costs (Khan et al., 2016), corporate overinvestment (Su et al., 2013), rent-seeking activities (Frye and Shleifer, 1997), tunnelling (Qian et al., 2011), and earnings management (Chaney et al., 2011).1 Given the implications of political connections for financial reporting, it is useful to examine auditors’ response to firms’ political connections empirically. Whether auditors consider both the benefits and costs associated with political connections while conducting their audit work is important for the credibility of financial statements. Prior research has examined the effect of political connections on auditor choice (Guedhami et al., 2014) and audit fees (Gul, 2006). We consider another important aspect related to external auditing: the ARL.

6. Conclusion

This paper examines the association between political connections and audit report lag and whether related party transactions moderate the association between the two. Firms often maintain political connections with government because such connections allow firms to reap many benefits. However, political connections are also viewed as harmful to the minority shareholders, as they can lead to rent-seeking. We test these competing hypotheses in the context of audit output for firms with and without political connections. Results show that politically connected firms have shorter ARLs: an observation that supports the signalling hypothesis. Since connected firms are subject to intense public scrutiny, disseminating audit reports in a timelier manner signals the credibility of their financial reports. ARL increases when firms engage in RPTs, suggesting that RPTs increase audit risk because of their opportunistic nature. This study contributes to the ARL literature by introducing the political connections variable: a hitherto unexplored determinant of ARL. Understanding the determinants of ARL in emerging economies like Indonesia is policy-relevant, because stakeholders of many emerging economies rely on published financial statements for their investment and lending decisions. Since connected firms may engage in rent-seeking activities, a longer ARL may protect minority shareholders against expropriation by detecting financial statement manipulation designed to mask rent-seeking activities.