The study examined energy-sector companies listed on the Indonesia Stock Exchange (IDX) during 2021–2024. The researchers analyzed 60 companies, producing 240 firm-year observations. The findings are important because timely audited financial statements provide investors, creditors, regulators, and other stakeholders with more up-to-date information for economic decision-making.
Why Audit Timeliness Matters
Audit Report Lag refers to the number of days between a company's fiscal year-end and the date the independent auditor signs the audit report. A shorter lag generally means financial information becomes available to users more quickly.
For companies listed on the IDX, timely financial reporting is particularly important because audited financial statements are a key source of information for investors. Delays can increase uncertainty and potentially affect investment decisions.
The study highlights that late reporting remains an issue in Indonesia's energy sector. Based on IDX data cited by the researchers, the number of energy-sector companies experiencing late financial-report submission was 12 companies in 2021, 16 in 2022, 15 in 2023, and 14 in 2024.
Several individual cases illustrate the seriousness of the problem. PT Ratu Prabu Energi Tbk, for example, experienced delays of 118 days in 2021, 191 days in 2022, and 255 days in 2023. PT Sky Energy Indonesia Tbk recorded a 766-day delay in submitting its 2022 audited financial statements. These cases demonstrate that financial reporting delays can persist for several reasons, including company resources, organizational complexity, and the effectiveness of internal governance.
Company Size Can Speed Up the Audit Process
One of the clearest findings from the research is the negative and significant relationship between firm size and Audit Report Lag.
The researchers measured firm size using the natural logarithm of total assets. The regression analysis produced a coefficient of -3.250 with a significance value of 0.000. This means larger energy companies in the sample tended to complete their audits more quickly.
Zahira Rahma Shofa, Roza Mulyadi, and Sabaruddinsah associate this result with the greater resources typically available to large companies. Larger firms are more likely to have established accounting systems, stronger internal controls, more experienced financial personnel, and better technological infrastructure.
Large companies also tend to face greater scrutiny from investors, creditors, and regulators. This creates stronger incentives for management to ensure financial reports are prepared and audited within the applicable reporting period.
The finding supports previous research cited by the authors, including studies by Wahyu and Nelvirita, Setiawan and Christian, and Saputra and colleagues.
More Complex Operations Mean Longer Audits
The opposite pattern appears for operational complexity.
Operational complexity had a positive and significant effect on Audit Report Lag, with a regression coefficient of 0.129 and a significance value of 0.000. In practical terms, companies with more subsidiaries generally require more time to complete their audits.
This result is particularly relevant to the energy industry, where business activities can involve exploration, production, processing, distribution, and operations across different locations.
Auditors working with companies that have many subsidiaries must examine more transactions, consolidated financial statements, supporting documents, and intercompany balances. The wider audit scope can increase the amount of evidence that auditors need to review before issuing their opinions.
The study recorded substantial variation in operational complexity. Across the 240 observations, the number of subsidiaries ranged from zero to 196, with an average of 18.5 subsidiaries.
Managerial Ownership Also Shortens Audit Delays
Another significant finding concerns managerial ownership. The researchers found that managerial ownership has a negative and significant effect on Audit Report Lag.
The regression coefficient was -0.026, with a significance value of 0.045. This indicates that companies with greater managerial share ownership tended to have shorter audit completion periods.
The researchers explain that managers who also own company shares have stronger economic incentives to maintain company performance and ensure financial information is prepared accurately and promptly.
This relationship is consistent with agency theory, which suggests that managerial ownership can align the interests of managers and shareholders. When managers have a direct financial stake in the company, the potential conflict between management and shareholders may be reduced.
Three Governance Mechanisms Show No Significant Effect
Interestingly, not all corporate governance mechanisms examined in the study were associated with audit timeliness.
Institutional ownership, the proportion of independent commissioners, and the number of audit committee members did not have statistically significant effects on Audit Report Lag.
Institutional ownership produced a significance value of 0.633, while the independent board of commissioners recorded 0.714. The audit committee produced a significance value of 0.197. All three values exceeded the 5% significance threshold.
The findings suggest that simply having a large institutional shareholder presence, meeting the required proportion of independent commissioners, or having more audit committee members does not necessarily make the audit process faster.
The researchers argue that the effectiveness of governance may depend more on the quality of oversight than on the formal size or proportion of governance bodies. Factors such as expertise, independence, meeting frequency, and active involvement may be more important than simply meeting regulatory requirements.
Six Variables Explain 18.6% of Audit Delay Variation
The statistical model showed that the six variables examined—firm size, operational complexity, managerial ownership, institutional ownership, independent commissioners, and audit committee—jointly had a significant effect on Audit Report Lag.
However, the Adjusted R² value was 0.186. This means the variables in the model explained 18.6% of the variation in audit report lag, while the remaining 81.4% was associated with other factors outside the model.
This result indicates that audit timeliness is influenced by a much broader set of conditions than company size and governance structures alone.
Potential factors for further investigation include profitability, leverage, financial distress, auditor reputation, audit quality, audit opinion, and the amount of audit effort required.
Implications for Companies, Investors, and Regulators
The findings provide several practical implications for the energy sector.
For companies, strengthening internal controls, improving the quality of financial records, and coordinating earlier with external auditors could help reduce audit completion time. Companies with many subsidiaries may need stronger consolidation systems and more effective coordination between headquarters and subsidiaries.
For investors and creditors, firm size, operational complexity, and managerial ownership may provide useful signals when assessing the potential timeliness of audited financial information.
For regulators, the findings raise questions about whether corporate governance requirements should be evaluated not only from a formal compliance perspective but also from the perspective of their actual effectiveness.
The researchers also recommend that future studies examine governance quality more substantively, including the expertise of audit committee members, board meeting frequency, and the extent of interaction between governance bodies and external auditors.
About the Researchers
Zahira Rahma Shofa, Roza Mulyadi, and Sabaruddinsah are affiliated with the Department of Accounting, Faculty of Economics and Business, Universitas Sultan Ageng Tirtayasa, Indonesia. Their research focuses on accounting, auditing, corporate governance, financial reporting, and factors affecting the timeliness of audited financial statements.
Sabaruddinsah serves as the corresponding author for the article.
Research Source
Article Title: The Effect of Firm Size, Operational Complexity, and Corporate Governance on Audit Report Lag
Authors: Zahira Rahma Shofa, Roza Mulyadi, and Sabaruddinsah
Affiliation: Department of Accounting, Faculty of Economics and Business, Universitas Sultan Ageng Tirtayasa, Indonesia
Year: 2026
Journal: International Journal of Management, Business, and Innovation (IJMBI)
DOI: https://doi.org/10.59890/ijmbi.v4i4.33
ISSN-E: 3025-5589
Journal Website: https://journalijmbi.my.id/index.php/ijmbi
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