The Audit Report Lag of Subsidiaries: The Role of Deadline Determined by Parent Company

Abstract

The purpose of this study is to investigate the role of the annual general assembly's deadline of the parent company on subsidiaries’ audit report lag (ARL). For this purpose, 1119 observations from annual financial reports of listed and unlisted companies from 2014 to 2022 are collected. The results reveal that there is a direct relationship between the ARL of the subsidiary company and each of the three variables - the deadline of the parent company’s general assembly in the current year, the deadline of the parent company’s general assembly in the previous year, and the average of ARL of the parent company in the last 4 years. The findings of the present study indicate that the relationship between the parent company and the subsidiary is not only effective in the operation of the subsidiary company but can also affect its financial reporting policies. Considering the increasing number of business groups in recent decades, the evidence provided by this research can highlight the importance of the parent company's financial reporting policies on the financial reporting procedures of subsidiaries for a wide range of users such as auditors, capital market participants, and oversight bodies

Keywords

• audit report lag
• parent company
• subsidiary company
• deadline of the parent company’s general assembly