Internal Control Reporting and Audit Report

Auditing: A Journal of Practice & Theory
Vol. 31, No. 3

August 2012
pp. 203218
American Accounting Association

DOI: 10.2308/ajpt-50190
Internal Control Reporting and Audit Report

Lags: Further Evidence
Vishal Munsif, K. Raghunandan, and Dasaratha V. Rama
SUMMARY: Internal control reporting continues to be of significant interest to regulators and
legislators, as evidenced by the internal control-related requirements of the Dodd-Frank Act
(2010) and the JOBS Act (2012) to exempt smaller firms from the requirements of Section
404. We extend prior research on the association between internal control weaknesses and
audit report lag by (1) using data from 2008 and 2009, (2) comparing accelerated and nonaccelerated filers, and (3) examining the impact of remediation of previously disclosed
internal control problems. We find that (1) in 2008, the increase in audit report lag in the
presence of material weaknesses in internal control is lower for non-accelerated filers as
compared to accelerated filers, and (2) while the effect of a material internal control weakness
on audit report lag is significantly lower in 2009 than in 2008 for accelerated filers, there is no
such change for non-accelerated filers. We also find that for firms remediating previously
disclosed internal control problems, there is a significant decline in audit report lag; yet, the
remediating firms continue to have higher reporting lags than firms that had clean Section 404
opinions in both years. We also find that, at least with respect to the effect of internal control
problems on audit report lag, the small accelerated filers (defined as those with market
capitalization less than $250 million) are treated by the auditors as being (1) substantively
similar to other accelerated filers, and (2) quite distinct from non-accelerated filers.
Keywords: audit report lag; Section 404; internal control.
INTRODUCTION
ttredge et al. (2006; hereafter, ELS) find that in the first year of the Sarbanes-Oxley Act
(SOX) (U.S. House of Representatives 2002) Section 404 reporting, the presence of a
material weakness in internal controls over financial reporting leads to longer audit delay
(i.e., the length of time from a companys fiscal year-end to the audit report). ELS (2006, 20) note
that their study:
has its limitations, some of which might be resolved by future research. To ensure the
timeliness of the study, we only examine data for the initial year in which SOX 404 is
Vishal Munsif is an Assistant Professor at California State University, San Bernardino, and K. Raghunandan
and Dasaratha V. Rama are Professors, both at Florida International University.
We gratefully acknowledge many useful comments from Marshall Geiger (editor) and two anonymous reviewers.
Editors note: Accepted by Marshall Geiger.
Submitted: August 2011

Accepted: April 2012
Published Online: April 2012
203
204
Munsif, Raghunandan, and Rama
implemented. Future research can analyze whether and how the impact of Section 404
affects audit delay over time as more data become available.
In this paper, we extend ELS by examining the association between internal control weaknesses and
audit report lags for (1) a later time period; specifically, the fifth and sixth years of Section 404
reporting, and (2) both accelerated and non-accelerated filers. In addition, we also examine the
association between remediation of previously disclosed internal control problems and audit report
lag.
Motivation for this study comes from the following factors. First, as noted by ELS, the initial
year of Section 404 reporting is unique given the significant demands placed on both clients and the
auditors. Many companies found it difficult to complete their Section 404 preparations in the first
year (Taub 2004). Such lack of readiness, coupled with the fact that standards and guidance for
auditors were evolving throughout 2004, make the first-year Section 404 audits unique.1 Auditors
and clients have noted in submissions to the Securities and Exchange Commission (SEC) about the
manpower constraints associated with Section 404 work in the initial year (SEC 2005a); at that
time, clients with material weaknesses in internal control would have been particularly problematic
for auditors. Additional evidence from future years would be useful to determine the extent to
which audit report lag is higher for clients with different types of Section 404 reports, particularly
since report lags are strongly related to the extent of the auditors work (Knechel and Payne 2001).
Second, there have been many changes in the audit environment since the first year of internal
control audits. Criticism of Auditing Standard (AS) No. 2 (which was the applicable internal
control-related standard during ELSs sample period) led to its replacement in 2007 by AS No. 5
(PCAOB 2007). Recent studies (Jiang and Wu 2009; Doogar et al. 2010; Krishnan et al. 2011) have
documented that AS No. 5 has resulted in a general reduction in audit fees, although audit fee
premiums for companies with material weaknesses have continued to be high (Hoag and
Hollingsworth 2011; Munsif et al. 2011). Prior researchers, and others, have attributed such
changes to the top-down, risk-based approach introduced by AS No. 5, which possibly impacted
auditor effort. It is not clear how these changes could have impacted the audit lag for firms with
material weaknesses.
Third, the inclusion of non-accelerated filers in our study constitutes an important extension of
ELS, since the requirements of Section 404(a) for non-accelerated filers were not in place during
ELSs sample period.2 Section 404(a) of SOX requires a report on internal control by management,
while Section 404(b) requires auditor attestation of internal controls. Section 404 requirements,
particularly for non-accelerated filers, continue to be of significant interest to policy-makers. While
accelerated filers were subject to the requirements of both Sections 404(a) and 404(b) for fiscal
years starting on or after November 15, 2004, the SEC provided numerous extensions to
non-accelerated filers.3 Before the final postponement ended, the Dodd-Frank Wall Street Reform
and Consumer Protection Act of 2010 provided permanent exemption from the requirements of
Section 404(b) for non-accelerated filers. More recently, the Jumpstart Our Business Startups Act
(JOBS 2012) creates a new category of firms called emerging growth companies and exempts
them from the requirements of Section 404(b) of SOX. Thus, internal control reporting pursuant to
SOX Section 404 continues to be of significant interest to legislators and regulators; more
1
2
3
Auditing Standard No. 2 (which provided guidance about Section 404 audits) was issued by the Public Company
Accounting Oversight Board (PCAOB 2004) only in March 2004, and was then approved by the SEC only in
June 2004.
Non-accelerated filers have public float less than $75 million.
The SEC postponed the deadline for non-accelerated filers in February 2004, March 2005, September 2005,
December 2006, and October 2009.

August 2012
204
implemented. Future research can analyze whether and how the impact of Section 404
affects audit delay over time as more data become available.
In this paper, we extend ELS by examining the association between internal control weaknesses and
audit report lags for (1) a later time period; specifically, the fifth and sixth years of Section 404
reporting, and (2) both accelerated and non-accelerated filers. In addition, we also examine the
association between remediation of previously disclosed internal control problems and audit report
lag.
Motivation for this study comes from the following factors. First, as noted by ELS, the initial
year of Section 404 reporting is unique given the significant demands placed on both clients and the
auditors. Many companies found it difficult to complete their Section 404 preparations in the first
year (Taub 2004). Such lack of readiness, coupled with the fact that standards and guidance for
auditors were evolving throughout 2004, make the first-year Section 404 audits unique.1 Auditors
and clients have noted in submissions to the Securities and Exchange Commission (SEC) about the
manpower constraints associated with Section 404 work in the initial year (SEC 2005a); at that
time, clients with material weaknesses in internal control would have been particularly problematic
for auditors. Additional evidence from future years would be useful to determine the extent to
which audit report lag is higher for clients with different types of Section 404 reports, particularly
since report lags are strongly related to the extent of the auditors work (Knechel and Payne 2001).
Second, there have been many changes in the audit environment since the first year of internal
control audits. Criticism of Auditing Standard (AS) No. 2 (which was the applicable internal
control-related standard during ELSs sample period) led to its replacement in 2007 by AS No. 5
(PCAOB 2007). Recent studies (Jiang and Wu 2009; Doogar et al. 2010; Krishnan et al. 2011) have
documented that AS No. 5 has resulted in a general reduction in audit fees, although audit fee
premiums for companies with material weaknesses have continued to be high (Hoag and
Hollingsworth 2011; Munsif et al. 2011). Prior researchers, and others, have attributed such
changes to the top-down, risk-based approach introduced by AS No. 5, which possibly impacted
auditor effort. It is not clear how these changes could have impacted the audit lag for firms with
material weaknesses.
Third, the inclusion of non-accelerated filers in our study constitutes an important extension of
ELS, since the requirements of Section 404(a) for non-accelerated filers were not in place during
ELSs sample period.2 Section 404(a) of SOX requires a report on internal control by management,
while Section 404(b) requires auditor attestation of internal controls. Section 404 requirements,
particularly for non-accelerated filers, continue to be of significant interest to policy-makers. While
accelerated filers were subject to the requirements of both Sections 404(a) and 404(b) for fiscal
years starting on or after November 15, 2004, the SEC provided numerous extensions to
non-accelerated filers.3 Before the final postponement ended, the Dodd-Frank Wall Street Reform
and Consumer Protection Act of 2010 provided permanent exemption from the requirements of
Section 404(b) for non-accelerated filers. More recently, the Jumpstart Our Business Startups Act
(JOBS 2012) creates a new category of firms called emerging growth companies and exempts
them from the requirements of Section 404(b) of SOX. Thus, internal control reporting pursuant to
SOX Section 404 continues to be of significant interest to legislators and regulators; more
1
2
3
Auditing Standard No. 2 (which provided guidance about Section 404 audits) was issued by the Public Company
Accounting Oversight Board (PCAOB 2004) only in March 2004, and was then approved by the SEC only in
June 2004.
Non-accelerated filers have public float less than $75 million.
The SEC postponed the deadline for non-accelerated filers in February 2004, March 2005, September 2005,
December 2006, and October 2009.

August 2012
Internal Control Reporting and Audit Report Lags: Further Evidence
205
importantly, such actions underscore the need to distinguish between accelerated and nonaccelerated filers in Section 404-related research.
Because there is no auditor attestation requirement for non-accelerated filers, the auditors
involvement in internal control assessment is significantly lower for non-accelerated filers than for
accelerated filers. Further, evidence from prior studies suggests that smaller firms are less likely to
have strong internal controls (e.g., Doyle et al. 2007; Ogneva et al. 2007). This, in turn, suggests that
auditor reliance on internal controls will be lower for non-accelerated filers than for accelerated filers.
Together, the above factors suggest that the effects of internal control problems on audit effort and,
hence, audit delay, should be lower in the case of non-accelerated filers than for accelerated filers.
Finally, while many studies have examined issues related to internal control problems,4
research related to the remediation of discovered problems is relatively sparse. Li et al. (2010) show
that hiring a new CFO with better qualifications is more likely to result in the remediation of
internal control problems, while Johnstone et al. (2011) find that remediation of internal control
problems is associated with improvements in various corporate governance and management
characteristics. Feng et al. (2009) find that management forecasts are more accurate after firms
remediate internal control problems. We also add to this stream of remediation-related research, and
examine the association between remediation of internal control problems and audit report lag.
BACKGROUND AND RESEARCH QUESTIONS
Timeliness is recognized as one of the fundamental characteristics of financial information that
makes it useful. Accordingly, regulators have always been concerned about the need for timely
financial information for investors and other financial statement users. Prior studies have shown that
late disclosure of accounting information can lead to a higher degree of information asymmetry
(Hakansson 1977), and non-timely information leads to negative market reaction (Chambers and
Penman 1984; Kross and Schroeder 1984; Easton and Zmijewski 1993).
As noted by ELS and Knechel and Payne (2001), research related to audit reporting lag is
important because audit delay affects the timeliness of accounting information; such timeliness is a
key to promoting investors confidence in capital markets. Additional impetus for audit delay
research comes from recent actions of legislators and regulators. Recognizing the need for timely
financial reporting, Section 409 of SOX authorized the SEC to require registrants to disclose to the
public on a rapid and current basis such additional information concerning material changes in the
financial condition or operations of the issuer. Accordingly, the SEC has accelerated the financial
reporting process by reducing the time lag from the end of the fiscal year/quarter within which the
relevant annual or quarterly report has to be filed with the Commission (SEC 2002, 2005b). Thus,
the SEC now requires large accelerated filers (companies with public float of $700 million or more)
and accelerated filers (companies with public float between $75 million and $700 million) to file
their annual report within 60 and 75 days, respectively, of the fiscal year-end for fiscal year-ends on
or after December 2006 (SEC 2005b). Initially, the SEC sought to have a shortened reporting lag
also for non-accelerated filers, but the SEC later relented and left unchanged the deadline for filing
by non-accelerated filers (Krishnan and Yang 2009). Hence, non-accelerated filers continue to have
a 90-day deadline to file their annual reports with the SEC (SEC 2005b).
Related Research
Ashton et al. (1987, 1989) and Bamber et al. (1993) examine the determinants of audit
reporting lag in general, while Schwartz and Soo (1996) examine the association between auditor
4
See Schneider et al. (2009) for a detailed summary of research related to SOX Section 404 reporting.

August 2012
206
changes and audit reporting lag. Knechel and Payne (2001) use a propriety database containing 226
audit engagements obtained from an international public accounting firm, and find that incremental
audit effort, the presence of tax issues, and the use of less experienced audit staff are positively
correlated with audit report lag.
Using a sample of 2,344 companies for fiscal years 2003 and 2004, ELS find that implementing
Section 404 of SOX led to significant audit delays; in addition, the presence of material weaknesses
in internal controls is associated with longer delays. Further, ELS also find that compared to specific
material weaknesses, general (systemic) material weaknesses are associated with longer delays.
Krishnan and Yang (2009) confirm the effects of Section 404 on audit reporting lag. Using a sample
of 1,077 firms from 2001 to 2006, they find that the audit report lag increased significantly from
2001 to 2006, but the increase was higher during the 20042006 period (i.e., after SOX Section 404
became effective).
In summary, only one prior study has examined the association between Section 404 opinion
type and audit report lag; ELS examine the association between the disclosure of different types of
internal control problems and audit report lag for accelerated filers in the first year of reporting
under SOX Section 404.
Research Questions
The first research question follows from the suggestion of ELS that future research should
examine the association between internal controls and audit report lag using data from later years.
Ex ante, if we accept that constraints of trained manpower will be less of a problem for both
auditors and clients in later years, then the presence of a material weakness in internal controls
should lead to a less pronounced increase in audit report lag for companies with a material
weakness in internal controls. In addition, as noted earlier, AS No. 5 was issued by the PCAOB in
2007 to make the internal control audit-related work more streamlined and efficient. Regulators
have noted that AS No. 5 should lead to a significant reduction in audit work (e.g., Cox 2007; Olson
2007), and prior research shows that AS No. 5 is associated with reductions in audit fees (Jiang and
Wu 2009; Doogar et al. 2010; Krishnan et al. 2011). This, in turn, suggests that audit report lag
associated with internal control problems should be less severe than in the pre-AS No. 5 period. A
counterargument is that with the passage of time and more experience, companies should be
increasingly less likely to have material weaknesses in internal controls; if a company still has a
material weakness in internal controls, then it is likely to be viewed as particularly problematic and,
hence, the auditor would be more careful with such a client leading to more audit effort and
longer report lags. Ultimately, this is an empirical issue, and our first research question provides
some relevant empirical evidence using data from fiscal years 2008 and 2009:
RQ1: What is the audit report lag associated with material weaknesses in internal control in
years five and six of Section 404 reporting?
As discussed earlier, we expect differences between the accelerated and non-accelerated filers
in terms of the effect of internal control problems on audit reporting lag for the following reasons.
First, accelerated filers are subject to both Section 404(a) (which requires managements assertion
on the effectiveness of internal controls over financial reporting) and 404(b) (auditors assessment
of internal controls). In contrast, non-accelerated filers are not required to have auditor attestation of
internal controls; in other words, the responsibility of the auditor with respect to internal control
evaluation is lower in case of the non-accelerated filers as compared to the accelerated filers.
Second, it is expected that larger firms have better internal control quality (DeFond and Jiambalvo
1991; Doyle et al. 2007). Ashbaugh-Skaife et al. (2007) find that in the context of internal control
problem disclosures made pursuant to Section 302 of SOX, large firms are less likely to have
August 2012
207
internal control problems. Ogneva et al. (2007) find that even when considering only the relatively
large firms subject to Section 404(b) of SOX, internal control material weakness disclosures are less
likely for larger firms.5 Further, prior research also shows that firm size is negatively related to fraud
(Beasley et al. 2000) and restatements (Romanus et al. 2008).6 Hence, auditors can be expected to
rely on internal controls to a lesser extent in the case of non-accelerated filers than in the case of
accelerated filers. This, in turn, implies that the effect of having a material weakness in internal
controls should be lower for non-accelerated filers than for accelerated filers. This leads to the
following research question:
RQ2: Is the audit report lag associated with material weaknesses in internal control shorter for
non-accelerated filers than for accelerated filers?
As noted earlier, we also examine the impact of remediation of previously disclosed internal
control weaknesses on audit report lag. Prior research shows that remediation of internal control
problems is associated with reduced cost of equity (Ashbaugh-Skaife et al. 2009), improvements in
various corporate governance and management characteristics (Johnstone et al. 2011), and more
accurate management forecasts (Feng et al. 2009). The above findings suggest that remediation of
internal control problems should lead to improvements in (that is, lower) audit report lag. However,
Munsif et al. (2011) and Hoag and Hollingsworth (2011) find that remediation of previously
disclosed internal control problems is associated with some reduction in audit fee premium, but that
firms that remediated previously disclosed internal control problems continue to pay a fee premium
even two years after the remediation. This evidence suggests that the same phenomenon might hold
with respect to audit report lag; that is, while remediation of material internal control weaknesses
might lead to some reduction in audit report lag, the lag after such remediation might still be higher
for the remediating firms than for firms that have clean Section 404 reports in both years. Thus, the
third research question is:
RQ3: Is the audit report lag for clients that remediated material internal control weaknesses:
(a) lower than for clients that did not remediate such weaknesses?
(b) higher than for clients that did not report such problems in the prior year?
While it seems intuitive that the answer to the first question above should be in the affirmative,
ex ante, it is not obvious that the answer to the second question above also must be in the
affirmative. Further, even if the direction is obvious, it is still useful to examine the magnitude of
the effects of remediation on audit report lag. Moreover, it is also interesting to see the extent to
which remediation impacts audit report lag differently for accelerated and non-accelerated filers.
METHOD
We use the following regression model to examine our research questions:
AUDELAY b0 b1 MWIC b2 SIZE b3 HIGHTECH b4 ROA b5 LEVERAGE
b6 GOCERN b7 EXT b8 SEGNUM b9 LOSS b10 RESTATE
b11 AFEE b12 AOPIN b13 AUDCHG error:
Doyle et al. (2007) use material weaknesses in internal control disclosed under both Sections 302 and 404 of
SOX from August 2002 to 2005, and similarly find that firm size is inversely related to the disclosure of internal
control problems.
However, Krishnan (2005) finds that in her sample of firms disclosing auditor changes, firm size is positively
related to disclosures of internal control problems. Conversely, Wright and Wright (1996) find that firm size is
negatively related to the presence of accounting errors.

August 2012
208
The variables are defined as follows (the data source and item code in Compustat are in
parentheses):
AUDELAY number of calendar days between fiscal year-end to date of the audits report
(Audit Analytics [AA]);
MWIC 1 if there is a material weakness in internal controls, else 0 (AA);7
SIZE natural logarithm of clients total assets (TA, Compustat [CS]);
HIGHTECH 1 if client is in high-tech industry (SIC codes 283, 284, 357, 366, 367, 371, 382,
384, or 737), else 0 (AA);
ROA net earnings divided by total assets (NI, TA [CS]);
LEVERAGE total debt divided by total assets (DLTT, TA [CS]);
GOCERN 1 if client receives a going-concern modified audit opinion, else 0 (AA);
EXT 1 if client reports an extraordinary item, else 0 (XIDO [CS]);
SEGNUM number of clients reportable segments (Compustat Segments);
LOSS 1 if client reports negative earnings for the year, else 0 (NI [CS]);
RESTATE 1 if client restated financial reports in the current year, else 0 (AA);
AFEE scaled total audit fees for the current year, measured as the total audit fees divided by
total assets (AUDIT FEES [AA], TA [CS]);
AOPIN 1 if auditors opinion modified for other than going-concern, else 0 (AUOP [CS]);
and
AUDCHG 1 if client changed auditor during the current year, else 0 (AA).
The model above is the same as in ELS, with one difference. ELS include companies in the
financial sector, but we delete such firms given the global financial crisis in 2008.8 As in ELS, as
part of our additional analysis, we partition material weakness in internal control into entity-level
material weaknesses (EMWIC) and account-level material weaknesses (AMWIC).
Data
Panel A of Table 1 presents the data selection process. We use the Audit Analytics database for
information about Section 404 reports, auditor information, and audit report date. Other financial
data are obtained from the Compustat annual database. We begin with the Audit Analytics database
and delete observations relating to firms that are (1) foreign, (2) in the financial sector (SIC 6067),
or (3) duplicate. As noted previously, AS No. 5 significantly changed the auditing process with
respect to internal controls; since 2007 represents the first year of implementing AS No. 5 (i.e.,
transition period), we focus on 2008 and 2009 in our analysis. We restrict our sample to firms with
fiscal year-ends between December 15 and February 28 of the following year. The December 15
cutoff is used because Section 404(a) became applicable only for fiscal year-ends on or after
December 15, 2007; the February 28 cutoff is to ensure that the firms are comparable. Otherwise,
for instance, a firm with fiscal year-end of December 31, 2008, would be treated on par with a firm
having a fiscal year-end of December 1, 2009. While both firms would technically still be in the
second year of Section 404(a) reporting, the time elapsed is such that both clients and auditors
would have obtained substantial experience and related learning effects in the latter case but not in
the former. We then delete observations with missing financial or audit fee data. Finally, as in ELS,
since we are examining report lags for two consecutive years, we delete observations that are not
7
Note that this construct is different for accelerated and non-accelerated filers. For the former group, it is based on
auditors internal control opinions, while for the latter group, it is based on managements internal control reports.
Our approach in dropping financial firms is also consistent with many prior studies that examine issues related to
auditing, because of the unique regulatory and financial characteristics of firms in the financial sector.

August 2012
209
TABLE 1
Sample Selection
Panel A: Sample by Year
2008
2009
Total Observations from Audit Analytics (AA)

Less Foreign Firms
Less Financial Firms (SIC 6067)
Less Duplicates
Less Fiscal Year other than between 12/15 and 2/29
Less not in Compustat
Less without Financial/Fee data
9,828
(1,659)
(2,121)
(133)
(1,613)
(1,068)
(128)
9,180
(1,575)
(1,993)
(66)
(1,468)
(1,046)
(99)
Total Sample from Compustat and AA

Less Observations not common in both years
3,106
(267)
2,933
(94)
Final Sample for analysis
2,839
2,839
Panel B: Material Weakness in Internal Control (MWIC) by Filer Status

Accelerated Filers
Entity-level MWIC
Account-level MWIC
Non-Accelerated Filers
Entity-level MWIC
Account-level MWIC
2008
2009
2,003
(100%)
53
(2.6%)
35
(1.7%)
836
(100%)
131
(15.7%)
24
(2.9%)
1,973
(100%)
32
(1.6%)
26
(1.3%)
866
(100%)
139
(16.1%)
30
(3.5%)
common to both years. This process yields a final sample size of 2,839 firms. For our analyses, we
winsorize ROA and LEVERAGE at absolute values of 10 and other continuous variables at the 1st
and the 99th percentiles.
Panel B of Table 1 provides descriptive data about the sample, partitioned by filer and internal
control types. We classify any company that had both Section 404(a) and 404(b) internal control
reports (management and auditors report, respectively) as an accelerated filer, and any company
that only had a 404(a) (management) report as non-accelerated filer. We classify an internal control
weakness as entity-level if the problem was in any one or more of the following categories: senior
management competency, tone, reliability; accounting personnel resources, competency/training;
segregations of duties; information technology, software, security, and access; ethical/compliance
issues with personnel; ineffective, non-existent, or understaffed audit committee; insufficient or
non-existent internal audit function; and ineffective regulatory compliance. For the purposes of our
classification, a firm reporting both entity-level and account-level internal control problems is
classified as having an entity-level problem.
August 2012
210
The data in Panel B of Table 1 show some interesting patterns. First, the proportion of
accelerated filers with an adverse Section 404 report is much lower than those reported in either
ELS or other studies that have used data from the initial years of Section 404 reporting (e.g., Li et
al. 2010; Feng et al. 2009). Given that we are examining the fifth and sixth years of Section 404
reporting for accelerated filers, this is not surprising. Second, the proportion of companies with an
adverse Section 404 report is higher for non-accelerated filers than for accelerated filers. This is
consistent with the view that smaller firms are more likely to have internal control problems. Third,
given an adverse internal control report, it is much more likely to be entity-level than account-level
in the case of non-accelerated filers.
RESULTS
Descriptive Data
Panel A of Table 2 provides descriptive data about audit report lag for fiscal years 2008 and
2009 for accelerated and non-accelerated filers, partitioned by internal control opinion type. For
both fiscal years 2008 and 2009, the mean audit report lag is higher for firms with material
weaknesses as compared to firms that do not have such disclosures. In the case of accelerated filers,
the mean AUDELAY for firms with material weaknesses in 2008 (2009) is 86.86 (76.86), as
compared to 62.44 (61.69) for firms with no such disclosures; in the case of non-accelerated filers,
the mean AUDELAY for firms with material weaknesses for fiscal 2008 (2009) is 99.79 (98.67), as
compared to 82.78 (83.00) for firms with a clean internal control report.
Panel B of Table 2 provides descriptive data about the variables in the audit report lag model. For
both years, firms with material weaknesses (both accelerated and non-accelerated filers) are smaller in
size. Other significant differences between firms with and without weaknesses (for both the
accelerated filers and non-accelerated filers) are that firms with material weaknesses have lower return
on assets, are more likely to have losses from operations, and have restatements. The results also show
that firms with material weaknesses are more likely to have a going-concern or other modified audit
opinion, be in the initial year of an audit engagement, and pay higher scaled audit fees.
Regression Results: Research Questions 1 and 2
Table 3 shows the results for the regressions, for accelerated and non-accelerated filers, in
2008 and 2009. Each of the four regressions is significant, and the models explain between 20 and
27 percent of the variation in audit report lag. Among the control variables, the coefficients of
SIZE, LOSS, GOCERN, and AUDCHG are significant and have the expected sign in both 2008 and
2009 for accelerated and non-accelerated filers. The results indicate that larger firms have shorter
audit report lag, and firms with poor financial conditions, measured by LOSS and GOCERN, have
longer audit report lag. Firms in the initial year of an audit engagement have higher audit report
lag.
The regression results also show that the coefficient of MWIC is positive and significant in both
the accelerated and non-accelerated filer samples for 2008 and 2009. Results from the 2008
regression show that accelerated (non-accelerated) firms with material weakness in their internal
control reporting face an audit report lag that is higher by 20.03 (10.45) days compared to firms
without such material weaknesses in internal controls; the corresponding values in the 2009
regression are 10.49 and 9.91 days for accelerated filers and non-accelerated filers, respectively.
Tests of comparisons of the above MWIC coefficients indicate that (1) the magnitude of the
MWIC coefficient is significantly (p , 0.05) different between accelerated and non-accelerated
filers for 2008, but not in 2009, and (2) there is significant (p , 0.05) decline from fiscal 2008 to
2009 in the magnitude of the MWIC coefficient for the accelerated filers, but the corresponding
August 2012
211
TABLE 2
Descriptive Statistics
Panel A: Dependent VariableAUDELAY (Audit Report Lag)
Fiscal 2008
(n 2,839)
Accelerated
(n 2,003)
Fiscal 2009
(n 2,839)
Non-Accelerated
(n 836)
Accelerated
(n 1,973)
Non-Accelerated
(n 866)
Statistics
MWIC No MWIC MWIC No MWIC MWIC No MWIC MWIC No MWIC

(n 88) (n 1,915) (n 155) (n 681) (n 58) (n 1,915) (n 169) (n 697)
Mean
Std. Dev.
25th Percentile
Median
75th Percentile
86.86***
32.08
69.00
75.00
89.50
62.44
13.25
56.00
59.00
70.00
99.79***
22.23
87.00
93.00
105.00
82.78
17.32
73.00
85.00
90.00
76.86***
16.41
69.00
74.00
85.00
61.69
12.22
56.00
59.00
70.00
98.67***
18.48
89.00
96.00
105.00
83.00
16.37
74.00
85.00
90.00
Panel B: Control Variables

Fiscal Year 2008
(n 2,839)
Accelerated
(n 2,003)
Variable
SIZE
Non-Accelerated
(n 836)
Fiscal Year 2009

(n 2,839)
Accelerated
(n 1,973)
Non-Accelerated
(n 866)
MWIC No MWIC MWIC No MWIC MWIC No MWIC MWIC No MWIC

(n 88) (n 1,915) (n 155) (n 681) (n 58) (n 1,915) (n 169) (n 697)
19.59***
(19.78)
HIGHTECH
0.27
(0.00)
ROA
0.20**
(0.05)
LEVERAGE
0.56
(0.57)
GOCERN
0.10**
(0.00)
EXT
0.19
(0.00)
SEGNUM
1.93
(1.00)
LOSS
0.68***
(1.00)
RESTATE
0.13**
(0.00)
AFEE
0.01***
(0.00)
AOPIN
0.42***
(1.00)
AUDCHG
0.16***
(0.00)
20.60
(20.50)
0.28
(0.00)
0.08
(0.03)
0.57
(0.55)
0.03
(0.00)
0.20
(0.00)
2.08
(1.00)
0.39
(0.00)
0.05
(0.00)
0.00
(0.00)
0.56
(1.00)
0.04
(0.00)
15.33***
17.38
19.99***
(15.65)
(17.24) (19.42)
0.38
0.38
0.35
(0.00)
(0.00)
(0.00)
2.47*** 0.76
0.20***
(0.57)
(0.11) (0.02)
2.70***
1.07
0.57
(0.80)
(0.56)
(0.55)
0.61***
0.25
0.14**
(1.00)
(0.00)
(0.00)
0.10
0.11
0.14
(0.00)
(0.00)
(0.00)
1.45
1.52
1.95
(1.00)
(1.00)
(1.00)
0.77***
0.64
0.64***
(1.00)
(1.00)
(1.00)
0.15***
0.05
0.29***
(0.00)
(0.00)
(0.00)
0.21***
0.03
0.01***
(0.02)
(0.01)
(0.00)
0.07***
0.21
0.38
(0.00)
(0.00)
(0.00)
0.26***
0.15
0.16**
(0.00)
(0.00)
(0.00)

August 2012
20.68
(20.56)
0.28
(0.00)
0.04
(0.02)
0.55
(0.52)
0.02
(0.00)
0.18
(0.00)
2.18
(1.00)
0.36
(0.00)
0.04
(0.00)
0.00
(0.00)
0.41
(0.00)
0.04
(0.00)
15.46***
17.26
(15.51)
(17.23)
0.34*
0.40
(0.00)
(0.00)
1.98*** 0.68
(0.43)
(0.08)
2.78***
1.05
(0.92)
(0.54)
0.63***
0.23
(1.00)
(0.00)
0.14
0.11
(0.00)
(0.00)
1.28***
1.50
(1.00)
(1.00)
0.75***
0.65
(1.00)
(1.00)
0.13***
0.05
(0.00)
(0.00)
0.18**
0.03
(0.02)
(0.01)
0.10**
0.15
(0.00)
(0.00)
0.29***
0.15
(0.00)
(0.00)
(continued on next page)
212
TABLE 2 (continued)
*, **, *** Significantly different at the 0.10, 0.05, and 0.01 levels from non-MWIC firms, respectively.
The sample includes 2,839 firms (derived as described in Table 1).
Variable Definitions (the data source and item code in Compustat are in parentheses):
AUDELAY number of calendar days between fiscal year-end to date of the audits report (Audit Analytics [AA]);
MWIC 1 if there is a material weakness in internal controls, else 0 (AA);
SIZE natural logarithm of clients total assets (TA, Compustat [CS]);
HIGHTECH 1 if client is in high-tech industry (SIC codes 283, 284, 357, 366, 367, 371, 382, 384, or 737), else 0
(AA);
ROA net earnings divided by total assets (NI, TA [CS]);
LEVERAGE total debt divided by total assets (DLTT, TA [CS]);
GOCERN 1 if client receives a going-concern modified audit opinion, else 0 (AA);
EXT 1 if client reports an extraordinary item, else 0 (XIDO [CS]);
SEGNUM number of clients reportable segments (Compustat Segments);
LOSS 1 if client reports negative earnings for the year, else 0 (NI [CS]);
RESTATE 1 if client restated financial reports in the current year, else 0 (AA);
AFEE scaled total audit fees for the current year, measured as the total audit fees divided by total assets (AUDIT FEES
[AA], TA [CS]);
AOPIN 1 if auditors opinion modified for other than going concern, else 0 (AUOP [CS]); and
AUDCHG 1 if client changed auditor during the current year, else 0 (AA).
change from 2008 to 2009 is not statistically significant for the non-accelerated filers.9 The
difference in the degree of auditor involvement for the two types of filers provides a possible
explanation for the observed pattern of results. The greater auditor involvement (for accelerated
filers) and lesser reliance on internal controls (for non-accelerated filers) may account for the higher
coefficient of accelerated filers. The decline in the coefficients value from 2008 to 2009 for
accelerated filers could reflect auditor learning effects, while the no-change result for nonaccelerated filers may be because auditors do not formally express an opinion on internal controls
for such filers (since such filers are not subject to the requirements of Section 404(b)).
As in ELS, we divide the material weakness sample into two groups: entity-level material
weaknesses (EMWIC) and account-level material weaknesses (AMWIC). The (untabulated) results
show that for accelerated filers in fiscal 2008, the coefficients of EMWIC and AMWIC are 21.19 and
19.26 (both significant at p , 0.01), respectively; the difference in magnitude between the two
coefficients is not statistically significant. For non-accelerated filers, the coefficients of EMWIC and
AMWIC are 10.64 and 9.56 (both significant at p , 0.01); the difference between the two
coefficients is not statistically significant. However, for 2009, the results indicate that for
accelerated filers, the coefficients of EMWIC and AMWIC are 15.85 (p , 0.01) and 4.08 (p 0.04),
respectively; the difference between the coefficients is significant (p , 0.05). For non-accelerated
filers, the coefficients of EMWIC and AMWIC are 12.19 days and 9.37 days (both significant at p ,
.01), respectively; the difference between the two coefficients is not statistically significant. Thus, it
appears that the overall decline in the report lag for accelerated filers (Table 3) comes from a decline
in the lag associated with account-level weaknesses.
9
We note that some of the firms changed categories between 2008 and 2009that is, some of the non-accelerated
filers for 2008 moved into the accelerated filer category in 2009, and vice versa. Hence, we further restrict the
sample to only those firms that remain in the same category (accelerated or non-accelerated) in both 2008 and
2009. The results with this subsample also are consistent with the results presented in the main analysis in Table
3; the difference between the accelerated and non-accelerated filer groups is significant ( p , 0.01) in 2008, but
not in 2009.

August 2012
213
TABLE 3
Regression Results for RQ1 and RQ2Effects of Material Weakness on Audit Report Lag
Model:
AUDELAY b0 b1 MWIC b2 SIZE b3 HIGHTECH b4 ROA b5 LEVERAGE
b6 GOCERN b7 EXT b8 SEGNUM b9 LOSS b10 RESTATE
b11 AFEE b12 AOPIN b13 AUDCHG error
Fiscal 2008
(n 2,839)
Variable
Intercept
MWIC
SIZE
HIGHTECH
ROA
LEVERAGE
GOCERN
EXT
SEGNUM
LOSS
RESTATE
AFEE
AOPIN
AUDCHG
F
p
Adj. R2
Fiscal 2009
(n 2,839)
Accelerated
(n 2,003)
Non-Accelerated
(n 836)
Accelerated
(n 1,973)
Non-Accelerated
(n 866)
76.93
(,0.01)
20.03
(,0.01)
2.19
(,0.01)
0.76
(0.15)
0.19
(0.41)
0.32
(0.37)
9.42
(,0.01)
1.53
(0.03)
0.30
(0.09)
3.50
(,0.01)
0.50
(0.36)
39.75
(0.31)
2.65
(,0.01)
1.87
(0.10)
50.27
,0.001
0.24
82.21
(,0.01)
10.45
(,0.01)
1.63
(,0.01)
1.69
(0.10)
0.92
(0.01)
1.40
(,0.01)
4.91
(,0.01)
0.19
(0.46)
1.81
(,0.01)
4.72
(,0.01)
2.55
(0.14)
2.99
(0.04)
5.20
(,0.01)
2.96
(0.03)
25.04
,0.001
0.27
77.88
(,0.01)
10.49
(,0.01)
2.47
(,0.01)
1.14
(0.04)
1.21
(0.05)
1.11
(0.07)
3.92
(0.01)
0.37
(0.29)
0.04
(0.40)
2.45
(,0.01)
1.71
(0.08)
8.97
(0.45)
0.83
(0.06)
4.37
(,0.01)
39.38
,0.001
0.20
85.05
(,0.01)
9.91
(,0.01)
1.99
(,0.01)
1.56
(0.10)
0.99
(,0.01)
0.69
(0.03)
4.19
(,0.01)
2.50
(0.07)
0.30
(0.29)
3.72
(,0.01)
1.00
(0.32)
1.46
(0.15)
0.29
(0.43)
2.82
(0.03)
21.25
,0.001
0.23
p-values (two-tailed) are in parentheses.

Variables are defined as in Table 2.

August 2012
214
Overall, the results suggest that the impact of having a material weakness in internal controls
has a higher impact on accelerated filers as compared to non-accelerated filers. The results also
indicate a decline in the impact of material weaknesses in internal controls on the audit report lag
for the accelerated filers.
Additional Analyses: Results for Subsamples
Section 989G(b) of the Dodd-Frank Act (2010) also requires the SEC to conduct a study to
determine how the burden of complying with Section 404(b) can be reduced for registrants with
market capitalization up to $250 million. Hence, we form a subsample of accelerated firms with
market capitalization less than $250 million, and refer to this group as small accelerated filers.
Regressions for this group of firms indicate that the coefficient of the MWIC variable is 20.70 for
2008 and 8.88 for 2009. These values are not significantly different from the values obtained with
the full sample of accelerated filers in Table 3. Further, as with the full sample, the decline from
2008 to 2009 also is significant.
These results suggest that, at least with respect to the effect of internal control problems on
audit report lag, the small accelerated filers are treated by the auditors as being substantively
similar to other accelerated filers; while the small accelerated filers are close to non-accelerated
filers in terms of size, these two types of firms appear to be quite distinct from each other, in terms
of the association between internal control problems and audit report lag.
Impact of Remediation on Audit Report Lag
RQ3(a) examines if remediation of previously reported material internal control weaknesses
results in a reduction in audit report lag, while RQ3(b) examines if remediating firms continue to
have higher audit report lag compared to firms that had clean internal control reports for both years.
For such analyses, we use all firms except those that had a clean internal control report for 2008, but
disclosed one or more material weaknesses in internal control in 2009. Thus, there are three groups
in the subsample for analysis: Clean0809 (firms that had clean internal control reports for both 2008
and 2009), MWIC0809 (firms that had one or more material weaknesses in internal control in both
2008 and 2009; that is, firms that did not remediate previously disclosed problems), and
MWIC08_Clean09 (firms that disclosed one or more material weaknesses in internal control in
2008, but had clean internal control reports in 2009). We use the same model discussed earlier for
RQ1 and RQ2, but instead of a single indicator variable for MWIC, we include two indicator
variables, MWIC08_Clean09 and MWIC0809. If remediation leads to lower audit report lag, then
the coefficient of MWIC08_Clean09 should be significantly lower than the coefficient of
MWIC0809.
Table 4 presents the results from such analysis. First, each of the two coefficients
MWIC08_Clean09 and MWIC0809is significant in each of the two regressions. The positive and
significant coefficients of MWIC08_Clean09 in the two regressions suggest that remediating firms
continue to have higher audit report lags compared to firms that had clean internal control reports in
both 2008 and 2009; this addresses RQ3(b). These results are similar to the results of Munsif et al.
(2011) and Hoag and Hollingsworth (2011), who find that remediating firms continue to pay higher
audit fees compared to firms that always had clean internal control opinions.
A comparison the coefficients of MWIC08_Clean09 and MWIC0809 indicates that the
difference is significant (p , 0.01) for the accelerated filer sample, but is not significant for the nonaccelerated filer sample (p 0.34). Thus, there is yet another difference between accelerated and
non-accelerated filer firms; in the case of accelerated filers, remediation leads to a significant
reduction in audit report lag, but this is not the case in the case of non-accelerated filers.
August 2012
215
TABLE 4
Regression Results for RQ3Effects of Remediation
Model:
AUDELAY b0 b1 MWIC08 Clean09 b2 MWIC0809 b3 SIZE b4 HIGHTECH
b5 ROA b6 LEVERAGE b7 GOCERN b8 EXT b9 SEGNUM
b10 LOSS b11 RESTATE b12 AFEE b13 AOPIN b14 AUDCHG
error
Accelerated Filers
(n 1,934)
Non-Accelerated Filers
(n 808)
78.01
(,0.01)
3.83
(,0.01)
12.11
(,0.01)
2.50
(,0.01)
0.89
(0.07)
1.15
(0.06)
1.14
(0.06)
4.22
(0.01)
0.33
(0.32)
0.04
(0.41)
2.22
(,0.01)
2.21
(0.05)
34.67
(0.32)
0.61
(0.13)
3.79
(,0.01)
33.21
,0.001
0.19
85.46
(,0.01)
7.14
(0.02)
9.76
(,0.01)
1.95
(,0.01)
1.12
(0.18)
0.93
(0.02)
0.66
(0.05)
3.97
(0.01)
2.63
(0.07)
0.40
(0.23)
3.20
(,0.01)
0.36
(0.44)
1.30
(0.18)
0.73
(0.33)
1.65
(0.23)
16.24
,0.001
0.20
Intercept
MWIC08_Clean09
MWIC0809
SIZE
HIGHTECH
ROA
LEVERAGE
GOCERN
EXT
SEGNUM
LOSS
RESTATE
AFEE
AOPIN
AUDCHG
F
p
Adj. R2
p-values (two-tailed) are in parentheses.

This table includes all firms as described in Table 1 except those firms that did not have a material weakness in internal
controls in 2008, but did have at least one material weakness in internal controls in 2009. MWIC08_Clean09 1 if a firm
disclosed one or more material weaknesses in internal control in 2008, but had clean internal control report in 2009, else
0; and MWIC0809 1 if a firm disclosed one or more material weaknesses in internal control in both 2008 and 2009, else
0. Other variables are defined as in Table 2.

August 2012
216
Another way to examine RQ3(b) would be by using only the subsample of firms with a clean
Section 404 opinion in 2009. With this subsample, we include the MWIC_08 variable (material
weakness in 2008) in the 2009 sample regression to measure the impact of having a material
weakness in 2008 on audit report lag in 2009. The (untabulated) regressions for both accelerated
and non-accelerated filers are significant (p , 0.01); the results indicate that in both samples, firms
that remediated internal control problems have a longer audit report lag compared to firms with
clean internal control opinions in both fiscal 2008 and 2009. The coefficient for MWIC_08 for
accelerated (non-accelerated) filers is 3.87 (7.06), both significant at p , 0.01. Thus, remediating
firms continue to have higher audit report lags compared to firms that had clean internal control
opinions for both years.
As with the earlier analyses, we perform the remediation-related analyses on subsamples as
follows. First, we restrict the analysis to small accelerated filers. Next, we further restrict the
analysis to only those firms that did not change their filer status from 2008 to 2009. With such
subsamples, we obtain inferences that are qualitatively similar to those presented above:
remediating firms have shorter report lags when compared to firms that continue to have adverse
Section 404 reports for accelerated firms, but not for non-accelerated firms; however, remediating
firms still face longer report lags than firms with clean Section 404 reports in both 2008 and 2009.
SUMMARY AND DISCUSSION
Ettredge et al. (2006; hereafter, ELS) show that firms with an adverse Section 404 report have a
longer audit report lag. Their analysis is based on the initial few months of Section 404 reporting. In
this paper, we extend ELS in three ways. First, we use data from the fifth and sixth years of Section
404 reports; regulators and others have noted that the auditing of internal controls changed
significantly after the initial years of Section 404, particularly after Auditing Standard 5 (PCAOB
2007) became effective in 2007. Second, we compare accelerated and non-accelerated filers; this is
important given the differential treatment of accelerated and non-accelerated filers, including
exemptions from Section 404(b) of SOX for the latter group. Third, we examine the effects of
remediation of previously disclosed internal control problems. Our research is motivated by the fact
that internal control reporting continues to be of significant interest to policy-makers, as evidenced
by the internal control-related provisions of the Dodd-Frank Act of 2010 and the JOBS Act of 2012.
Our analysis includes 2,839 firms with available data for fiscal years 2008 and 2009.
Our multiple-regression results indicate that accelerated firms with an adverse Section 404
report had audit report lags that were higher by 20.03 and 10.49 days in 2008 and 2009,
respectively, after controlling for other factors shown to be associated with audit report lag. The
corresponding values for non-accelerated filers were 10.45 and 9.91 days in 2008 and 2009,
respectively. The results for 2008 indicate that the effect of having material weaknesses in internal
control on the audit report lag is significantly smaller for non-accelerated filers than for accelerated
filers. This finding is consistent with the position that auditors rely on internal controls to a much
lesser extent in the context of auditing non-accelerated filers; if the reliance on internal controls is,
in general, low, then the penalties associated with having material weaknesses will also be lower.
The regression results also indicate that the effect of internal control problems on audit report lag is
significantly lower in 2009 than in 2008 for accelerated filers, but not for the non-accelerated
filers.10 Finally, the results indicate that for accelerated filers (but not for non-accelerated filers),
firms that remediate previously disclosed problems have shorter audit report lags than firms that
10
While we have no ex ante prediction for such a reduction only for accelerated filers, discussions with audit
partners from large firms indicate that the market for audit services became more competitive, particularly for
accelerated filers, in more recent years. See, also, Whitehouse (2010).

August 2012
217
continue to have internal control problems; however, the remediating clients still face longer audit
report lag as compared to firms with clean internal control reports in both 2008 and 2009.
Overall, our results provide empirical evidence about the extent of additional audit effort
associated with clients internal control problems and the benefits of reduced audit report lag from
remediation of such problems. Finally, our results also suggest that there are significant differences
in the market for audit services for accelerated and non-accelerated firms, and underscore the need
to separately analyze the two types of firms.
REFERENCES
Ashbaugh-Skaife, H., D. W. Collins, and W. R. Kinney. 2007. The discovery and reporting of internal
control deficiencies prior to SOX-mandated audits. Journal of Accounting and Economics 44 (1):
166192.
Ashbaugh-Skaife, H., D. W. Collins, and R. LaFond. 2009. The effect of SOX internal control deficiencies
on firm risk and cost of equity. Journal of Accounting Research 47 (1): 143.
Ashton, R., J. J. Willingham, and R. K. Elliot. 1987. An empirical analysis of audit delay. Journal of
Accounting Research 25 (2): 275292.
Ashton, R. P., R. Graul, and J. D. Newton. 1989. Audit delay and the timeliness of corporate reporting.
Contemporary Accounting Research 5 (2): 657673.
Bamber, E. M., L. S. Bamber, and M. P. Schoderbek. 1993. Audit structure and other determinants of audit
report lag: An empirical analysis. Auditing: A Journal of Practice & Theory 12 (1): 123.
Beasley, M., J. V. Carcello, D. R. Hermanson, and P. D. Lapides. 2000. Fraudulent financial reporting:
Consideration of industry traits and corporate governance mechanisms. Accounting Horizons 14 (4):
441454.
Chambers, A. E., and S. H. Penman. 1984. Timeliness of reporting and the stock price reaction to earnings
announcements. Journal of Accounting Research 22 (1): 2147.
Cox, C. 2007. Speech by SEC Chairman: Opening Remarks at the SEC Open Meeting (July 25).
Washington, D.C.: SEC.
DeFond, M., and J. Jiambalvo. 1991. Incidence and circumstances of accounting errors. The Accounting
Review 66 (3): 643655.
Dodd-Frank Wall Street Reform and Consumer Protection Act. 2010. Conference Report. Report No. 111517. Washington, D.C.: GPO.
Doogar, R., P. Sivadasan, and I. Solomon. 2010. The regulation of public company auditing: Evidence from
the transition to AS5. Journal of Accounting Research 48 (4): 795814.
Doyle, J., W. Ge, and S. McVay. 2007. Determinants of weaknesses in internal control over financial
reporting. Journal of Accounting and Economics 44 (1/2): 193223.
Easton, P., and M. Zmijewski. 1993. SEC form 10K/10Q reports and annual reports to shareholders: Reporting
lags and squared market model prediction errors. Journal of Accounting Research 31 (1): 113129.
Ettredge, M., C. Li, and L. Sun. 2006. The impact of SOX Section 404 internal control quality assessment
on audit delay in the SOX era. Auditing: A Journal of Practice & Theory 25 (3): 123.
Feng, M., C. Li, and S. McVay. 2009. Internal control and management guidance. Journal of Accounting
and Economics 48 (2/3): 190209.
Hakansson, N. H. 1977. Interim disclosure and public forecasts: An economic analysis and a framework for
choice. The Accounting Review 52 (2): 396416.
Hoag, M. L., and C. W. Hollingsworth. 2011. An intertemporal analysis of audit fees and Section 404
material weaknesses. Auditing: A Journal of Practice & Theory 30 (2): 173200.
Jiang, W., and J. Wu. 2009. The impact of PCAOB Auditing Standard 5 on audit fees. The CPA Journal 79
(4): 3438.
Johnstone, K., C. Li, and K. H. Rupley. 2011. Changes in corporate governance associated with the
revelation of internal control material weaknesses and their subsequent remediation. Contemporary
Accounting Research 28 (1): 331383.
August 2012
218
Jumpstart Our Business Startups (JOBS) Act. 2012. Public Law 112106. Washington, D.C.: GPO.
Knechel, W. R., and J. L. Payne. 2001. Additional evidence on audit report lag. Auditing: A Journal of
Practice & Theory 20 (1): 137146.
Krishnan, J., J. Krishnan, and H. Song. 2011. The effect of Auditing Standard No. 5 on audit fees. Auditing:
A Journal of Practice & Theory 30 (4): 127.
Krishnan, J. 2005. Audit committee quality and internal control: An empirical analysis. The Accounting
Review 80 (2): 649675.
Krishnan, J., and J. Yang. 2009. Recent trends in audit report and earnings announcement lags. Accounting
Horizons 23 (3): 265288.
Kross, W., and D. A. Schroeder. 1984. An empirical investigation of the effect of quarterly earnings
announcement timing on stock returns. Journal of Accounting Research 22 (1): 153176.
Li, C., L. Sun, and M. Ettredge. 2010. Financial executive qualifications, financial executive turnover, and
adverse SOX 404 opinions. Journal of Accounting and Economics 50 (1): 93110.
Munsif, V., K. Raghunandan, D. Rama, and M. Singhvi. 2011. Audit fees after remediation of internal
control weaknesses. Accounting Horizons 25 (1): 87105.
Ogneva, M., K. Subramanyam, K. Raghunandan. 2007. Internal control weakness and cost of equity:
Evidence from SOX Section 404 disclosures. The Accounting Review 82 (5): 12551297.
Olson, M. 2007. Testimony on the PCAOB: House of Representatives Committee on Small Business.
Washington, D.C.: PCAOB.
Public Company Accounting Oversight Board (PCAOB). 2004. An Audit of Internal Control over Financial
Reporting Performed in Conjunction with an Audit of Financial Statements. Auditing Standard No. 2.
Public Company Accounting Oversight Board (PCAOB). 2007. An Audit of Internal Control over Financial
Reporting that is Integrated with an Audit of Financial Statements. Auditing Standard No. 5.
Romanus, R. N., J. J. Maher, and D. M. Fleming. 2008. Audit industry specialization, auditor changes, and
accounting restatements. Accounting Horizons 22 (4): 389413.
Schwartz, K. B., and B. S. Soo. 1996. The association between auditor changes and reporting lags.
Contemporary Accounting Research 13 (1): 353370.
Securities and Exchange Commission (SEC). 2002. Acceleration of Periodic Report Filing Dates and
Disclosure Concerning Website Access to Reports. (September 5). Washington, D.C.: GPO.
Securities and Exchange Commission (SEC). 2005a. Implementation of Internal Control Reporting
Provisions. Washington, D.C.: GPO.
Securities and Exchange Commission (SEC). 2005b. Revisions to Accelerated Filer Definition and
Accelerated Deadlines for Filing Periodic Reports. Release Nos. 33-8644, 34-52989. Washington,
D.C.: GPO.
Schneider, A., A. A. Gramling, D. R. Hermanson, and Z. Ye. 2009. A review of academic literature on
internal control reporting under SOX. Journal of Accounting Literature 28: 146.
Taub, S. 2004. No vacation from Section 404 prep work. CFO.Com. Available at: http://www.cfo.com/
article.cfm/3015183
U.S. House of Representatives. 2002. The Sarbanes-Oxley Act of 2002. Public Law 107-204 [H. R. 3763].
Washington, D.C.: GPO.
Whitehouse, T. 2010. Exclusive report: Audit fees continue to plummet. Compliance Week. Available at:
http://www.complianceweek.com/article/6122/exclusive-report-audit-fees-continue-to-plummet
Wright, A., and S. Wright. 1996. The relationship between assessments of internal control strength and error
occurrence, impact and cause. Accounting and Business Research 27 (Winter): 5871.

August 2012

Internal Control Reporting and Audit Report

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Internal Control Reporting and Audit Report

Uploaded by

Copyright:

Available Formats

Auditing: A Journal of Practice & Theory

Vol. 31, No. 3

American Accounting Association