Accounting Outsourcing and Audit Lag

• In Event: Continental Breakfast and Research & Education Forum
  In Roundtable Session: Table 12: Job-Specific Auditing Issues

Abstract

We examine whether accounting outsourcing is associated with the length of time between the end of the client’s fiscal year and the date of the auditor’s report (i.e., audit lag). Accounting outsourcing could reduce the risk of misstatement, reducing the amount of audit work necessary and thereby reducing audit lag. Alternatively, outsourcing the accounting process could increase the amount of coordination necessary among the auditor, client and outsourced accounting service provider. Based on a sample of closed-end mutual funds (31.8% of which outsource their accounting functions), we find a positive relationship between the use of outside accounting service providers and audit delay. These results suggest that client outsourcing of accounting functions may necessitate greater coordination during the audit, resulting in a longer audit.

Authors

• Charles P Cullinan, Bryant University

• Xiaochuan Zheng, Bryant University