Key Audit Matter and Audit Report Lag: A Preliminary Evidence from Indonesia

Abstract

The purpose of this study is to explore the potential influence of key audit matter on audit report lag. The authors analyzed data from key audit matter reporting in Indonesia for Indonesian public companies to test the relationship between the number of key audit matters and audit report lag. Data obtained from annual reports and multivariate linear regressions were employed to test the hypotheses. We find that key audit matters disclosure does not affect audit report lag. This suggests that audit firms in Indonesia may be treating key audit matters reporting superficially, as the selection of reported key audit matters does not appear to be closely linked to the audit efforts required to address these matters. The article focuses only on the Indonesian context, which limits generalizability. The results of this research will be informative for assessing the economic impact of key audit matter disclosures, which should be important for regulators, auditors, and accounting researchers. To the best of the authors’ knowledge, no prior study has examined key audit matters and audit report lag in Indonesia. This research contributes to the limited body of work exploring the consequences of key audit matters in developing country markets, particularly in Indonesia. It is also the first study to demonstrate that key audit matters are associated with delays in audit reports in Indonesia following the implementation of key audit matters in 2022.