An examination of municipal audit delay

Our study examines the effects of municipal audit and audit-firm characteristics on municipal audit delay. Although the effects of audit characteristics are largely determined by municipal structure and reporting requirements, the effects of audit-firm characteristics are likely to be controllable through the external audit procurement process. If issuing a timely financial report is important to municipalities, municipal officers must understand what factors they should consider regarding the municipalities organizational form, the external auditor procurement process, and what auditor characteristics to consider when selecting an independent external auditor. Our results suggest that several municipal audit and audit-firm characteristics influence municipal audit delay. Specifically, management incentives for timely reporting, including a city manager form of government, the presence of a high quality financial reporting system, and bonded indebtedness all tend to decrease audit delay. State regulations regarding the audit procurement process increase audit delay. Audit delay is significantly increased by municipal characteristics, such as municipal size, audits performed during the external auditor's busy season, the receipt of a qualified audit opinion, and for municipalities that were required to comply with the Single Audit Act. Investigation of external auditor characteristics indicates that auditors that perform several municipal audit engagements provide audits on a more timely basis. Additionally, larger audit-firm offices appear to be able to allocate resources in such a manner to expedite the audit. We also investigate municipal audit and audit-firm characteristics for small (population < 20,000) and large cities (population > 20,000), separately. Our results indicate that the characteristics that influence audit delay are quite different between the two size classifications. Overall, our results provide useful information to both large and small cities regarding the determinants of municipal audit delay.