（2006）The Impact of Internal Control Quality on Audit Delay in the SOX Era.pdfVIP

The Impact of Internal Control Quality on Audit Delay in the SOX Era Michael Ettredge* University of Kansas Chan Li University of Kansas Lili Sun Rutgers University - Newark January 2006 *Corresponding author. 1300 Sunnyside Ave Lawrence, Kansas 66045-7585 (785) 864-7537 mettredge@ 1 Electronic copy available at: /abstract=794669 The Impact of Internal Control Quality on Audit Delay in the SOX Era SUMMARY: This study analyzes the impact of internal control quality on audit delay following the implementation of the 2002 Sarbanes-Oxley Act (SOX). Unlike prior studies that utilize survey samples, or that employ a proxy for internal control quality such as earnings restatements, our study employs external auditor assessments of internal control quality that are publicly disclosed in firms’ SEC 10-K filings as required by SOX Section 404. This makes our study results both timely and reliable (i.e. not subject to small sample bias or weak proxies). Consistent with our expectation, we find that the presence of material weakness in internal control over financial reporting (ICOFR) is associated with longer delays. The types of material weakness also matter. Compared to specific material weakness, general material weakness is associated with longer delays. Additional analyses indicate that companies with control deficiencies in personnel, process and procedure, segregation of duties, and closing process experience longer delays. This study also doc