XBRL, Audit Fees, and Audit Report Lag

• In Event: Continental Breakfast and Research & Education Forum
  In Paper Session: Table 3: Audit Fees I

Abstract

There is considerable debate about whether the adoption of EXtensible Business Reporting Language (XBRL) will result in more or less efficient audits. We provide empirical evidence on this debate by investigating the effect of XBRL adoption on audit fees and audit report lag. Using a hand collected panel of S&P 1500 firms, we show that audit fees and audit report lag decrease following the mandatory adoption of XBRL. These results are robust to various sub-samples and model specifications. On average, audit fees decrease by 7.3 percent ($284,178) and audit report lag decreases by 2.9 percent (1.66 days) in the post-adoption period. In addition, we find that audit fees and audit report lag continue to decline in the years following adoption, which is indicative of a learning curve. Taken together, the evidence in this paper suggests that XBRL adoption increases audit efficiency. Our findings are informative for assessing the economic consequences of requiring XBRL adoption, which should be of interest to regulators and managers.

Authors

• Keval U Amin, Stony Brook University

• John Daniel Eshleman, Oklahoma State University

• Cecilia Qian Feng, Stony Brook University