Why Audit Timeliness Matters
Public companies are expected to publish audited financial statements promptly so investors, creditors, regulators, and the public can make informed decisions. Delays reduce the usefulness of financial information and may increase uncertainty in financial markets.
Indonesia's Financial Services Authority (OJK) requires listed companies to submit audited annual financial statements within three months after the fiscal year ends. Although overall compliance has improved, significant differences remain among companies.
According to the study, property and real estate companies required an average of 100.45 days to complete the audit process during the 2020–2024 observation period, with some companies finishing in only 41 days, while others took as long as 388 days.
Researchers note that the property sector presents unique auditing challenges because companies frequently deal with:
- Long-term construction projects
- Revenue recognition based on project progress
- Property valuation
- Land and building assets
- Complex accounting estimates
- Large investment property portfolios
These factors naturally require more detailed audit procedures than many other industries.
Examining Corporate Governance
The researchers investigated whether three corporate governance characteristics influence audit completion time:
- Audit committee meeting frequency
- Audit committee financial expertise
- Board size
They also examined whether ownership concentration—the proportion of shares held by major shareholders—changes the relationship between governance and audit report timing.
The analysis covered 61 property and real estate companies listed on the Indonesia Stock Exchange (IDX) over five years, producing 305 company-year observations. Researchers analyzed audited annual reports using panel regression and Moderated Regression Analysis (MRA).
Key Findings
The research produced several findings that challenge conventional expectations.
Audit committee meetings alone were not enough to shorten audit time.
Companies holding more audit committee meetings generally showed slightly shorter audit delays, but the relationship was not statistically significant.
Researchers suggest that simply increasing the number of meetings does not necessarily improve coordination or accelerate decision-making.
Audit committee expertise actually lengthened audit completion.
Companies with more financially experienced audit committee members tended to experience longer audit report lags.
Rather than indicating weak governance, the researchers argue that knowledgeable committee members often conduct more comprehensive reviews of complex accounting issues before approving financial statements.
Larger boards were also associated with longer audits.
Although larger boards provide broader oversight, they also require greater coordination and more extensive discussions, particularly in industries involving complicated transactions such as property development.
Ownership Concentration Changed the Picture
The study's most significant contribution concerns ownership concentration.
When companies had dominant shareholders, ownership concentration altered how governance mechanisms affected audit timing.
The analysis showed that concentrated ownership:
- Strengthened the effectiveness of audit committee meetings.
- Strengthened the influence of audit committee expertise.
- Reduced the negative coordination effects associated with larger boards.
According to the researchers, major shareholders often exercise stronger oversight, encourage faster decision-making, clarify priorities, and ensure management addresses audit issues more efficiently.
As a result, ownership concentration became an important factor influencing whether governance mechanisms helped or slowed audit completion.
Implications for Companies and Regulators
The findings suggest that improving corporate governance requires more than simply increasing the number of board members or audit committee meetings.
Instead, companies should focus on:
- Improving coordination among boards, audit committees, management, and external auditors.
- Ensuring governance activities emphasize effectiveness rather than administrative compliance.
- Encouraging major shareholders to strengthen oversight without creating unnecessary review processes.
- Balancing audit quality with reporting speed.
For regulators, the study highlights that governance structures should be evaluated not only by formal characteristics but also by how effectively they operate in practice.
Investors may also benefit from considering ownership structure when evaluating the quality and timeliness of corporate financial reporting.
Academic Perspective
The authors conclude that governance quality cannot be measured solely by how frequently committees meet or how many commissioners sit on a board.
As Shanaya Alayka, Mazda Eko Sri Tjahjono, and Muhammad Nawawi of Sultan Ageng Tirtayasa University explain, ownership concentration serves as an important contextual factor that determines whether corporate governance mechanisms become effective in improving audit timeliness or instead extend the review process through more intensive oversight.
About the Authors
Shanaya Alayka is a researcher from the Faculty of Economics and Business, Sultan Ageng Tirtayasa University, specializing in corporate governance, financial reporting, and auditing.
Mazda Eko Sri Tjahjono, S.E., M.Acc. is a faculty member at the Faculty of Economics and Business, Sultan Ageng Tirtayasa University, whose expertise includes accounting, auditing, and corporate governance.
Muhammad Nawawi, S.E., M.Ak. is an academic at the Faculty of Economics and Business, Sultan Ageng Tirtayasa University, focusing on financial accounting, auditing, and corporate governance research.
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