Abstract:
ABSTRACT
The purpose of the study was to investigate the relationship between Audit
Report Lag (ARL) and earnings quality of listed firms in Ghana. Audit Report
Lag (ARL) was measured as the number of calendar days from year-end to the
date of the auditor's report while earnings quality was measured base on the
relations among income, cash, and accruals. Hence, the study adopted
Earnings Smoothness (SM), Earnings Surprise (ES), Closeness to Cash (CC),
and Accrual Quality (AQ) measures for earnings quality. The study collected
data on 33 firms listed on the Ghana Stock Exchange (GSE) between the
period of 2009 to 2019 and employed a Systems Generalized Method of
Moments estimator to analyze the data. It was revealed that ES, CC, and AQ
have a positive significant relationship with ARL whiles SM has a negative
significant relationship with ARL. Hence, the study concluded that a longer
ARL improves the quality of the earnings in terms of reducing unexpected
discrepancies between anticipated earnings and actual earnings, producing
earnings that can easily be approximated to operating cashflows and producing
earnings that have less deceptive manipulative variation in working capital
which will cause operating cashflows volatility but provide management an
opportunity to engage in irregular earnings variation or volatility by shifting
revenues and expenses from one fiscal period to another. Therefore, auditors
are expected to put in place measures by ensuring or advising owners not
structure management’s compensations and incentive against their financial
performance in other to reduce these irregularities.
