Semarang — Profitability and the reputation of Public Accounting Firms (KAP) are associated with the length of the audit process for property and real estate companies listed on the Indonesia Stock Exchange (IDX). In contrast, larger companies tend to complete their audits more quickly. These findings come from research by Shafira Najwa Endri, Karlina Aprilia Kusumadewi, and Imam Ghozali of Universitas Diponegoro. The study analyzed property and real estate companies during 2022–2025 using 160 firm-year observations to examine factors influencing audit report lag, or the time between the end of a fiscal year and the issuance of an independent auditor’s report.
Audit report lag (ARL) is an important indicator of the timeliness of financial reporting. The longer it takes for an audited report to be issued after the end of a fiscal year, the longer investors and other stakeholders must wait to receive verified financial information. Delays can reduce the relevance of accounting information and increase information asymmetry between company management and external parties.
In Indonesia, companies listed on the IDX are required to submit audited annual reports to regulators and the public no later than 90 days after the end of the fiscal year. This requirement has been reinforced through several regulations, including Financial Services Authority (OJK) Regulation No. 14/POJK.04/2022. Despite these requirements, some listed companies continue to experience delays in submitting their financial reports.
The study focuses specifically on the property and real estate sector because of its distinctive characteristics. The sector represents a significant part of Indonesia’s capital market, is sensitive to macroeconomic conditions, and has previously shown relatively high levels of late financial reporting. In addition, previous studies have produced inconsistent findings regarding the effects of profitability, KAP reputation, and firm size on audit delays.
The researchers used secondary data obtained from audited annual reports for the 2022–2025 period. From the population of property and real estate companies listed on the IDX, 40 companies met the sampling criteria. Each company was observed for four years, producing a total of 160 firm-year observations. The data included net income, total assets, the identity of the KAP conducting the audit, the fiscal year-end date, and the date of the independent auditor’s report.
Profitability was measured using Return on Assets (ROA), which compares net income with total assets. KAP reputation was classified according to whether the auditor was affiliated with a Big Four accounting firm, while firm size was measured using the natural logarithm of total assets. Audit report lag was calculated based on the number of days between the fiscal year-end and the date of the independent auditor’s report.
The analysis used panel data regression and compared several statistical models. Based on the Chow, Lagrange Multiplier, and Hausman tests, the Fixed Effect Model was selected as the most appropriate model for examining the relationship between profitability, KAP reputation, firm size, and audit report lag.
The descriptive results show that companies in the sample required an average of 85.2 days to issue their audited reports. This figure is close to the 90-day reporting deadline established by the OJK. However, the maximum ARL reached 249 days, indicating that some companies experienced substantial delays. The minimum ARL was 41 days.
The average ROA of the companies in the sample was approximately 2.2 percent, indicating relatively low profitability for a capital-intensive sector such as property and real estate. Meanwhile, only 18 of the 160 firm-year observations, or 11.25 percent, involved companies audited by Big Four-affiliated KAPs. The remaining 142 observations, or 88.75 percent, involved non-Big Four accounting firms.
The regression results show that profitability has a positive and significant effect on audit report lag. The ROA coefficient was 0.0949, with a probability value of 0.0457. This means that companies with higher profitability in the sample tended to require more time to complete their audits. The researchers suggest that highly profitable companies may have more complex operations and larger transaction volumes, requiring auditors to conduct more extensive procedures to ensure the fairness of the reported financial results.
The finding indicates that higher profits do not necessarily mean faster audit completion. Auditors may pay greater attention to revenue and profit accounts because of their importance in evaluating company performance. From an agency-theory perspective, companies with strong financial performance may also face less pressure to accelerate reporting because their current performance already provides a favorable signal to shareholders.
KAP reputation also showed a positive relationship with audit report lag. Companies audited by Big Four-affiliated KAPs tended to have longer audit processes than those audited by non-Big Four firms. The relationship was statistically significant at the 10 percent level, with a coefficient of 0.2458 and a probability value of 0.0553.
According to the researchers, one possible explanation is the stricter auditing standards applied by highly reputable accounting firms. Big Four auditors have strong incentives to protect their reputation and reduce legal risks. As a result, they may conduct broader testing, collect more audit evidence, and apply additional quality-control procedures. These practices can lengthen the audit process while potentially strengthening audit quality.
In contrast, firm size has a negative and significant effect on audit report lag. The coefficient for firm size was -0.0937, with a probability value of 0.0016. Larger companies tended to complete their audits more quickly. The researchers associate this finding with stronger internal control systems, more experienced accounting and finance personnel, more structured information systems, and greater resources to support the audit process.
Larger companies are also subject to greater scrutiny from investors, creditors, and regulators. This pressure can encourage management to ensure that financial reports are prepared and released on time. More established internal systems and better coordination can also allow auditors to obtain the information they need more efficiently.
Overall, the three variables were jointly significant in explaining audit report lag. The adjusted R-squared value was 0.5697, indicating that profitability, KAP reputation, and firm size collectively explained approximately 57 percent of the variation in audit report lag, while the remaining variation was associated with factors outside the model. The F-test also confirmed that the three variables were jointly significant.
For companies, the findings highlight the importance of strengthening internal controls and improving coordination with auditors, particularly among smaller companies. Better audit-process management may help reduce unnecessary reporting delays. For investors, audit report lag can serve as one additional source of information when assessing reporting quality and company risk, although it should not be treated as the sole indicator of a company’s financial condition.
The researchers also emphasize that a longer audit process does not necessarily indicate poor audit quality. In highly profitable companies or companies audited by highly reputable accounting firms, a longer audit may reflect more extensive and careful examination. Therefore, audit timeliness needs to be considered alongside the quality and thoroughness of the audit process.
The study has several limitations because it focuses only on property and real estate companies and does not include primary information from auditors or company personnel. In addition, the relatively small number of observations involving Big Four auditors limits the statistical strength of the analysis concerning KAP reputation. Future studies could use a more balanced sample of Big Four and non-Big Four audited companies and consider more advanced approaches such as the Generalized Method of Moments (GMM) or dynamic panel models.
Overall, the research by Shafira Najwa Endri, Karlina Aprilia Kusumadewi, and Imam Ghozali shows that audit timeliness among Indonesian property and real estate companies is influenced by both company and auditor characteristics. Profitability and KAP reputation are associated with longer audit processes, while larger companies tend to complete audits more quickly. The findings demonstrate that the speed of issuing audited financial reports depends not only on a company’s profitability, but also on audit complexity, auditor reputation, and the company’s internal capacity.
Author Profiles
Shafira Najwa Endri — Universitas Diponegoro.
Karlina Aprilia Kusumadewi — Universitas Diponegoro.
Imam Ghozali — Universitas Diponegoro.
Research Source
Article Title: The Effect of Profitability, Public Accounting Firm Reputation, and Firm Size on Audit Report Lag: Evidence from Property and Real Estate Companies Listed on the Indonesia Stock Exchange (2022-2025)
Journal: East Asian Journal of Multidisciplinary Research (EAJMR), Vol. 5 No. 8, 2026, pp. 3505–3518.
DOI: https://doi.org/10.55927/eajmr.v5i8.283
Journal Website: https://journaleajmr.my.id/index.php/eajmr
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