The Office Effects of Audit Time Pressure: The Acceleration of 10-K Filing Deadlines

• In Event: Auditing

Abstract

This study examines the audit office effects of changes in client time pressure, using the acceleration of 10-K filing deadlines as the research setting. The extant literature provides evidence that increased client time pressure adversely affects the timing and quality of individual engagements. We argue that because audit offices possess finite resources and production capacity, client pressure can have intra- and inter- office effects. We document intra-office differences related to changes in audit timeliness; within the same audit office, clients with no pressure (with pressure) post-acceleration experience an increase (a decrease) in audit report lag. This evidence suggests auditors alter the timing of concurrent engagements in response to client pressure and clients of the same office are not uniformly affected by changes in time pressure. We also document inter-office effects related to (audit and filing) timeliness and audit quality; clients of audit offices with more time pressure across the entire client portfolio have a greater increase in audit delay, are more likely to file late, and experience lower audit quality. Taken as a whole, our results are consistent with auditors’ response to increased resource constraints allowing client pressure to produce office effects. These results should be informative to regulators and practitioners concerned with the consequences of audit office resource constraints.

Authors

• Bei Dong, University of South Florida

• Jonathan Nash, University of New Hampshire

• Le Xu, University of New Hampshire