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This research investigates the effect of audit report lag on the cost of equity capital. We argue that an extended audit report lag reduces the value of information and raises concerns for investors, resulting in an increased cost of equity capital.

We hypothesize that audit report lag increases the firm cost of equity capital. We conduct ordinary least squares (OLS) regression analyses to examine our hypothesis. Finally, we also perform a range of sensitivity tests to examine the hypothesis and robustness of findings.

Using a sample of the listed US firms from 2003 to 2018, we find that firms with higher audit report lag have a higher cost of equity capital. Our findings are economically significant as one standard deviation increase in audit report lag raises 3.82 basis points of cost of equity capital. Furthermore, our results remain robust to endogeneity concerns and alternative proxies for the cost of equity capital measures. Finally, we confirm that audit report lag increases the firm cost of equity capital through increasing information asymmetry and future financial restatement as a mediating channel.

We contribute to the theoretical discussion about the role of audit report lag and investors' perceptions. Overall, our results suggest that audit report lag affects a firm cost of equity capital.

This study aims to examine whether the impact of international financial reporting standards (IFRS) on audit fees differs between early and late adopters.

The authors use robust econometric estimation on a sample of 314 firms from both early and late IFRS adopting countries.

The authors find that IFRS is positively and significantly associated with an increase in audit fees for early adopters, but the impact is very weak for late adopters and insignificant in some cases. The results on auditing time suggest that increase in audit fees around IFRS adoption is due to an increase in audit reporting lags. After accounting for pre- and post-years, the authors find that the relationship between IFRS and audit fees, as well as audit time for late adopters, is significant only in the adoption year. However, early adopters experience a significant increase in audit fees and audit time in the transition year to one-year post-adoption.

The findings imply that countries that are yet to adopt IFRS are less likely to experience a significant increase in audit fees audit time. Hence, is probable that the benefit of IFRS will outweigh the cost.

The results, therefore, suggest that early adopters paid a premium for been the first users of IFRS, which is consistent with any innovation. The study provides new insights by demonstrating that the consequences of IFRS differ between early and late adopters.