Phase 3: Methodology and Results -Research Paper -Team Project

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Phase 2: Understanding the Auditing Issue

Timely submission of financial reports is an important component of the external auditing process because various stakeholders, including investors, regulators, and creditors, rely on financial reporting to make critical economic decisions. Timely filing with the Securities and Exchange Commission (SEC) is one of the most significant activities for U.S. public companies because delays can postpone the availability of audited information to capital market participants. Organizational and engagement-level characteristics that influence audit report timeliness include auditor tenure, auditor changes, audit complexity, internal controls, and regulatory requirements.

Auditing is a critical component that determines the quality of the relationship between corporate managers and external stakeholders. Because managers generally have access to all financial information, external stakeholders expect them to use that information to guide investment decisions. An independent audit aims to increase trust between these two parties by providing external assurance about financial reporting. Agency theory helps evaluate whether the auditor-client relationship is primarily based on the timeliness of financial reporting. Among the critical factors that could influence an auditor's knowledge of the client's operations and systems is auditor tenure, as auditor changes can interrupt the knowledge an auditor has accumulated in a specific setting. Conversely, longer auditor tenure within a specific setting can allow the auditor to accumulate client-specific knowledge, which can help them perform audit procedures more efficiently.

Artificial Intelligence (AI) has become a prominent innovation in auditing, as audit organizations and their clients increasingly use technology to handle financial data, detect unusual activities, analyze risks, and streamline the audit process. I find it an interesting topic to explore because AI can affect how evidence is collected, risk is analyzed, and professional judgment is applied in the auditing process. Although AI can improve the speed and scope of the audit process, it may also create problems related to data accuracy, over-reliance on AI, and data interpretation.

This issue is relevant in modern auditing environments because audit quality primarily depends on the auditor's ability to identify material misstatements and obtain audit evidence. Recent studies show how much AI has contributed to improving overall audit efficiency. Most organizations that have invested heavily in AI to support the auditing process have ended up paying lower audit fees and usually receive fewer restatements. Agency theory provides the primary theoretical foundation. The theory supports examination of the auditor's monitoring role in reducing information asymmetry between managers and external stakeholders. Auditor tenure may affect auditor knowledge and monitoring effectiveness, while auditor changes may disrupt engagement continuity.

Research Problem

This study examines whether auditor tenure and auditor changes influence audit reporting timeliness among U.S. public companies. Prior research reports mixed evidence on the relationship between auditor tenure, auditor switching, and audit report lag. However, limited research examines these factors in relation to the likelihood of a non-timely SEC filing while considering the Public Company Accounting Oversight Board (PCAOB) auditor registration as a moderating factor. The study therefore addresses a specific auditing problem involving engagement continuity, audit completion, and timely regulatory reporting. The integration of artificial intelligence technologies in auditing procedures presents unprecedented challenges for audit quality assessment, yet current regulatory frameworks lack comprehensive guidance for evaluating AI-enhanced audit processes.

Auditor characteristics contribute significantly towards filing timeliness. When an organization changes auditors, the incoming auditor may need significant time to learn the client, evaluate prior audit work, recheck internal controls, and understand reporting risks. There is a significant relationship between auditor changes and reporting lags, especially when auditor changes occur toward the end of the fiscal year. Auditor changes can therefore create scenarios in which the organization experiences significant reporting delays. Auditor tenure is another significant factor, as a longer auditor-client relationship can increase the auditor's familiarity with clients' financial information. Auditor tenure was among the most significant audit-related factors associated with the overall reduction in audit report lag.

The regulatory status of the audit firm is also another significant component that warrants investigation. PCAOB rules require accounting firms to prepare and issue audit reports, which play a substantial role in examining potential delays. Therefore, the research problem is not simply whether audit delays exist, but whether auditor changes and auditor tenure are associated with the likelihood of untimely SEC filings, and whether changes in PCAOB regulations could influence the relationship between auditor changes and filing timeliness. Evaluating these relationships is critical because it reinforces existing auditing research and provides information relevant to auditors, regulators, and investors.

Research Questions and Objectives

Research Question 1

RQ1: Does an auditor change affect the likelihood of a non-timely SEC filing among U.S. public companies?

H1: Auditor changes are positively associated with the likelihood of a non-timely SEC filing.

H0₁: Auditor changes are not associated with the likelihood of a non-timely SEC filing.

Research Question 2

RQ2: Does auditor tenure affect the likelihood of a non-timely SEC filing among U.S. public companies?

H2: Longer auditor tenure is negatively associated with the likelihood of a non-timely SEC filing.

H0₂: Auditor tenure is not associated with the likelihood of a non-timely SEC filing.

Research Question 3

RQ3: Does PCAOB auditor registration moderate the relationship between auditor changes and the likelihood of a non-timely SEC filing?

H3: PCAOB auditor registration moderates the relationship between auditor changes and the likelihood of a non-timely SEC filing.

H0₃: PCAOB auditor registration does not moderate the relationship between auditor changes and the likelihood of a non-timely SEC filing.

The primary objective of this research is to investigate the link between AI use and audit quality and audit efficiency. In particular, this research will focus on how AI use affects audit report lags, audit fees, and financial reporting quality. Second, it will identify whether auditor and client characteristics influence the relationship between AI use and audit outcomes. This research may provide empirical evidence for auditors, regulators, investors, and corporate governance organizations regarding the impact of AI on auditing.

Significance of the Study

Theoretically, the study applies the Agency Theory to determine the relationship between external auditing and financial reporting timeliness. Managers of public companies may possess significant information that is not available to external stakeholders. Using independent auditors enables organizations to monitor management, which is critical to reducing information asymmetry and providing stakeholders with greater assurance that financial information is accurate. The study also contributes to the literature by bringing auditor change and auditor tenure into a common empirical framework. Existing research frequently examines these characteristics separately or focuses on audit quality, audit delay, and financial reporting outcomes. The proposed study instead evaluates their relationship with non-timely SEC filings among U.S. public companies.

Practically, the study provides audit firms and audit committees with evidence that can help them understand the impact of auditor transitions and auditor tenure on meeting financial reporting timelines. If auditor changes are more likely to lead to late filings, organizations must consider the timing and the full transition process between old and new auditors. The evidence the study provides on auditor tenure plays a critical role in informing discussions about the benefits and limitations of the knowledge the client accumulates. The study is also relevant to contemporary auditing, given the technological advancements occurring within audit processes. Implementing AI as a critical technological advancement helps improve audit efficiency, reduce audit report lag, and enhance audit quality.

Comprehensive Literature Review

Search Strategy and Key Search Terms

The literature search focuses on peer-reviewed research in accounting, auditing, and financial reporting. The literature provided for this study includes research published in Managerial Auditing Journal, Review of Accounting Studies, and International Review of Financial Analysis. The study uses Google Scholar and the university library as its primary databases. The following were the key search terms:

· "Auditor change" AND "audit report lag"

· "Auditor switching" AND "filing timeliness"

· "Auditor tenure" AND "audit report lag"

· "PCAOB registration" AND "audit quality"

· "SEC filing delay" AND auditor

· "Non-timely SEC filing" AND auditor

· "AI" AND "audit efficiency"

Audit Changes and Audit Timeliness

Azizkhani et al. (2021) emphasize that changes in audit personnel can greatly influence audit timeliness and pricing. Auditor changes are critical because audit engagements partly rely on the knowledge auditors have accumulated while working in the client's business and financial reporting environment. Auditor changes do not necessarily increase audit delays, but their consequences depend on the nature and timing of the changes.

Bajary et al. (2023) demonstrated that when an organization invests more in its internal audit function, it helps reduce the adverse effect of reporting lag. The study shows that organizational capacity and environmental conditions are among the most significant factors influencing audit timeliness. Ciğer et al. (2025) demonstrate that audit complexity and disclosure requirements can affect completion time. Handoko et al. (2022) provide additional evidence that audit report timeliness is not determined by a single factor but by a combination of multiple factors, including audit characteristics.

Behbahaninia (2024) examined agency costs and auditor choice. The study shows that firms with higher agency costs were more likely to select auditors from lower-quality classes. At the same time, greater board financial expertise played a critical role in reducing this relationship. Hrazdil et al. (2024) examined auditor choice and the informativeness of 10-K reports. The study is relevant because Form 10-K reporting is central to the proposed dependent variable.

Auditor Tenure and Audit Report Lag

Wiedjaja and Eriandani (2021) show that the longer the auditor-client relationship, the more knowledge the auditor has about the client. The research examined auditor characteristics and audit report lag through 945 firm-year observations. The findings suggest that longer auditor-client relationships may reduce workload and, consequently, delays.

Cheynel and Zhou (2024) utilize a dynamic oligopoly model to examine the relationship between auditor tenure and misreporting. The study shows that auditor tenure may have competing implications, as accumulated client knowledge can significantly improve efficiency. However, concerns may also arise about the independence and financial reporting quality of such auditors. Brooks et al. (2022) evaluated whether audit-firm tenure plays a significant role in improving firm value and considered corporate social responsibility as a potential way to address the expectation gap. The study shows how stakeholders interpret longer auditor-client relationships.

Artificial Intelligence and Contemporary Audit Efficiency

Fedyk et al. (2022) examine whether AI has contributed to a general improvement in the audit process. The study provides empirical evidence of how technological advancements have impacted the auditing process. Although AI is not a primary independent variable in the study, it provides important context for contemporary auditing. In recent years, the auditing profession has incorporated automated procedures, machine learning, and AI-related technologies. Han et al. (2023) similarly demonstrate the significant role of blockchain technology and AI in the auditing process.

Rahman et al. (2024) examine how AI adoption by audit firms and clients could contribute to audit quality and efficiency. The researchers use audit lag to measure audit efficiency and annual report restatements as a proxy for audit quality. The researchers find that when clients adopt AI in the auditing process, it plays a critical role in reducing potential delays. AI adoption also significantly reduced the likelihood of restatements.

Liao et al. (2024) examined the relationship between AI education among the auditors and the reported timeliness. The findings revealed that auditors with AI educational backgrounds were generally associated with shorter audit report lags. Lai (2025) also provides further evidence of the relationship between AI and audit fees. The findings revealed that when an organization adopts AI, it plays a critical role in reducing audit fees and improving the quality of accounting information. Overall, the literature suggests that audit timeliness is increasingly linked to traditional auditor characteristics and technological capabilities. While studies have examined AI in audit planning, research on its impact during the evidence-gathering phase of audits remains limited.

Methodological Limitations

One of the most significant gaps is that much of the existing research examines audit report lag rather than the likelihood of a non-timely SEC filing. Although these terms are closely related, they are not identical. The key difference is that audit report lag measures the period between fiscal year-end and the audit report date. Meanwhile, a non-timely SEC filing reflects a failure to meet the applicable filing deadline. The difference between these two terms creates an opportunity to investigate whether auditor characteristics relate to actual regulatory reporting outcomes. Literature suggests that audit timeliness is increasingly linked to traditional auditor characteristics.

Another gap in the existing research is that auditor tenure research mostly focuses on audit report lag in countries other than the United States. Therefore, although these studies provide useful evidence, they do not directly relate to the regulatory and institutional environment of U.S. public companies. Another gap is that the research pays less attention to PCAOB registration as one of the most significant variables for understanding the relationship between auditor changes and filing timeliness. Another gap is that AI has developed rapidly, but there is less evidence on how AI shapes auditor characteristics and its impact on filing timeliness.

Theoretical Framework

Agency theory is the appropriate theoretical framework for this problem. It uses outside auditors to eliminate the information asymmetry between managers and shareholders. AI can strengthen auditing as a monitoring device. The theory supports examination of the auditor's monitoring role in reducing information asymmetry between managers and external stakeholders. External auditing provides an important monitoring mechanism because auditors independently examine financial statements and provide assurance concerning the reliability of reported financial information. Auditor tenure may affect auditor knowledge and monitoring effectiveness, while auditor changes may disrupt engagement continuity. PCAOB registration introduces a regulatory condition that may alter the relationship between auditor changes and filing timeliness.

External auditing provides an important monitoring mechanism that examines the relationship between managers and auditors. Auditors are primarily responsible for evaluating financial information and providing external stakeholders with assurance that auditing procedures reduce possible uncertainties. From this perspective, auditor characteristics may affect the effectiveness and efficiency of the monitoring process. Auditor tenure is generally relevant to this relationship because greater familiarity with a client includes the amount of knowledge the auditor has about that client's financial operations. This information allows the auditor to monitor more efficiently and contribute to timely reporting. However, changing auditors result to completely different results. This is because a new auditor may initially have limited information about the client, but that continues to grow as they spend more time with the client.

PCAOB registration is also key towards introducing a regulatory condition into the agency relationship. The fact that a company operates publicly generally means it is exposed to a formal oversight framework. Agency Theory also plays a critical role in providing a basis for considering the consequences of delayed filings of financial reports. When organizations fail to provide financial information on time, information asymmetry between management and external stakeholders persists longer.

Conceptual Model

PCAOB Auditor Registration

(Moderating Variable)

Auditor Change

(Independent Variable)

Likelihood of Non-Timely SEC Filing

(Dependent Variable)

Auditor Tenure

(Independent Variable)

The conceptual model directly corresponds with the three research questions and hypotheses. RQ1 examines how auditor change affects the likelihood of a non-timely SEC filing among U.S. public companies. Auditor changes are positively associated with the likelihood of a non-timely SEC filing. Auditor changes are not associated with the likelihood of a non-timely SEC filing. RQ2 examines how auditor tenure affects the likelihood of a non-timely SEC filing among U.S. public companies. Longer auditor tenure is negatively associated with the likelihood of a non-timely SEC filing. Auditor tenure is not associated with the likelihood of a non-timely SEC filing. RQ3 examines how PCAOB auditor registration moderates the relationship between auditor changes and the likelihood of a non-timely SEC filing.

The model reflects the theoretical assumption that auditor characteristics among the critical components that affect the efficiency of the external monitoring process. Once auditor change takes place, it is then a requirement for the new auditor to be provided with more time so that they can acquire more knowledge about the new client while longer auditor tenure may lead to accumulated knowledge about the client. PCAOB registration represents a regulatory condition that may affect the relationship between auditor transition and filing timeliness.

Justification for the Theoretical Framework

Agency theory provides the primary theoretical foundation. The theory supports examination of the auditor's monitoring role in reducing information asymmetry between managers and external stakeholders. Auditor tenure may affect auditor knowledge and monitoring effectiveness, while auditor changes may disrupt engagement continuity. PCAOB registration introduces a regulatory condition that may alter the relationship between auditor changes and filing timeliness. Agency Theory is appropriate for this study because it focuses on the role of external auditors in reducing information asymmetry between corporate management and external stakeholders. Therefore, the theory plays a significant role in explaining why audit quality and reporting timeliness are among the most important factors for investors and other financial stakeholders.

A key strength of Agency Theory is its direct link to the monitoring role of external auditing. The theory plays a significant role in explaining why independent auditors are required and why differences in auditor characteristics may affect the effectiveness of that monitoring function through auditing processes. The theory also provides a foundation for understanding the role of regulatory oversight, especially the PCAOB, which is relevant to public-company auditing. Another significant strength relates to agency theory, as it leaves room for future research to incorporate technological variables, such as AI adoption, to help organizations maintain audit efficiency. Agency Theory also plays a critical role in providing a basis for considering the consequences of delayed filings of financial reports.

However, a significant limitation related to Agency Theory is that it does not explain every operational factor affecting audit timeliness. Critical elements that could lead to audit delays include firm complexity, internal controls, auditor workload, and technological capabilities, among others. Agency Theory should generally serve as the primary framework, while the empirical analysis includes the necessary control variables. The theory also provides a coherent theoretical foundation for each hypothesis related to effectiveness, continuity, and the regulatory context of external auditing.

Conclusion

Timely completion and filing of all audited financial information is one of the most significant components of an effective financial reporting system. The literature for this study shows that various factors, including auditor characteristics, client characteristics, governance conditions, regulatory requirements, and technological advancements, can influence audit report lag and reporting timeliness. Timely financial reporting remains an important auditing concern because delays can limit investors' access to audited financial information and lead to untimely SEC filings. Prior research reports mixed findings regarding auditor tenure, auditor changes, and audit report lag. Limited evidence integrates these auditor characteristics with the likelihood of non-timely SEC filings among U.S. public companies or examines PCAOB auditor registration as a moderating regulatory factor.

The study primarily focuses on relationships between auditor changes and non-timely SEC filings, auditor tenure and non-timely SEC filings, and PCAOB registration as the primary moderator of the relationship between auditor changes and filing timeliness. This study examines whether auditor changes and auditor tenure affect the likelihood of non-timely SEC filings among U.S. public companies. It also examines whether PCAOB auditor registration moderates the relationship between auditor changes and filing timeliness. Agency theory provides the theoretical foundation by linking auditor monitoring, information asymmetry, and auditor-client relationships.

Auditor change and auditor tenure serve as primary independent variables, while PCAOB auditor registration and its interaction with auditor change test the moderation hypothesis. Appropriate firm and audit characteristics will be incorporated as controls where available. The study is expected to extend auditing research by connecting auditor tenure and auditor changes with regulatory filing timeliness. Findings may provide evidence relevant to auditors, audit committees, investors, the SEC, and PCAOB concerning auditor-related factors associated with non-timely public-company filings. Agency theory provides the primary theoretical foundation. The theory supports examination of the auditor's monitoring role in reducing information asymmetry between managers and external stakeholders. Auditor tenure may affect auditor knowledge and monitoring effectiveness, while auditor changes may disrupt engagement continuity. PCAOB registration introduces a regulatory condition that may alter the relationship between auditor changes and filing timeliness.

References

Azizkhani, M., Hossain, S., Jiang, A., & Yap, W. (2021). Mandatory partner rotation, audit timeliness and audit pricing. Managerial Auditing Journal, 36(1), 105-131. https://doi.org/10.1108/MAJ-12-2019-2506

Bajary, A. R., Shafie, R., & Ali, A. (2023). COVID-19 pandemic, internal audit function and audit report lag: Evidence from emerging economy. Cogent Business & Management, 10(1), 2178360. https://doi.org/10.1080/23311975.2023.2178360

Behbahaninia, P. S. (2024). Agency costs and auditor choice: moderating role of board’s expertise and internal control. Journal of Financial Reporting and Accounting, 22(4), 1014-1038. https://doi.org/10.1108/JFRA-11-2021-0406

Brooks, L. L. Z., Gill, S., Wong-On-Wing, B., & Yu, M. D. (2022). Does audit firm tenure enhance firm value? Closing the expectation gap through corporate social responsibility. Managerial Auditing Journal, 37(8), 1113-1145. https://doi.org/10.1108/MAJ-11-2020-2902

Cheynel, E., & Zhou, F. S. (2024). Auditor tenure and misreporting: Evidence from a dynamic oligopoly game. Management Science, 70(8), 5557-5585. https://doi.org/10.1287/mnsc.2023.4944

Ciğer, A., Kınay, B., & Ocak, M. (2025). Further evidence regarding the effect of KAMs on audit report lag. Plos one, 20(3), e0320183. https://doi.org/10.1371/journal.pone.0320183

Fedyk, A., Hodson, J., Khimich, N., & Fedyk, T. (2022). Is artificial intelligence improving the audit process? A. Fedyk et al.  Review of accounting studies,  27(3), 938-985. https://doi.org/10.1007/s11142-022-09697-x

Han, H., Shiwakoti, R. K., Jarvis, R., Mordi, C., & Botchie, D. (2023). Accounting and auditing with blockchain technology and artificial Intelligence: A literature review. International journal of accounting information systems, 48, 100598. https://doi.org/10.1016/j.accinf.2022.100598

Handoko, B. L., Lindawati, A. S. L., & Thomas, G. N. (2022, July). Analysis of Determinants of Audit Report Lag on Non-Financial Companies Listed on LQ-45 Index. In Proceedings of the 9th International Conference on Management of e-Commerce and e-Government (pp. 72-79). https://doi.org/10.1145/3549823.3549835

Hrazdil, K., Simunic, D. A., & Suwanyangyuan, N. (2024). Auditor choice and the informativeness of 10-K reports. Journal of Accounting, Auditing & Finance, 39(2), 388-413. https://doi.org/10.1177/0148558X211062430

Lai, J. (2025). Artificial intelligence applications and audit fees: An empirical study. International Review of Economics & Finance, 104421. https://doi.org/10.1016/j.iref.2025.104421

Liao, F. N., Zhang, C., Zhang, J. J., Yan, X., & Chen, T. X. (2024). Hyperbole or reality? The effect of auditors' AI education on audit report timeliness. International Review of Financial Analysis, 91, 103050. https://doi.org/10.1016/j.irfa.2023.103050

Rahman, M. J., Zhu, H., & Hossain, M. M. (2023). Auditor choice and audit fees through the lens of agency theory: evidence from Chinese family firms. Journal of Family Business Management, 13(4), 1248-1276. https://doi.org/10.1108/JFBM-02-2023-0027

Rahman, M. J., Zhu, H., & Yue, L. (2024). Does the adoption of artificial intelligence by audit firms and their clients affect audit quality and efficiency? Evidence from China. Managerial Auditing Journal, 39(6), 668-699. https://doi.org/10.1108/MAJ-03-2023-3846

Wiedjaja, D. A., & Eriandani, R. (2021). Auditor characteristics and audit report lag: Industry specialization and long tenure as moderating variables. Jurnal Dinamika Akuntansi, 13(2), 106-116. http://dx.doi.org/10.15294/jda.v13i2.25496