The Impact of Earnings Volatility on Audit Report Lag: The Moderating Role of Income Smoothing — Evidence from Indonesia

Research Aims: This study examines the effect of earnings volatility on audit report lag and analyzes the moderating role of income smoothing. It provides empirical evidence on how earnings volatility and earnings management practices influence audit timeliness in Indonesian listed companies. Design/methodology/approach: A quantitative design is employed using secondary data from firms with delayed financial reporting during 2019–2023. Purposive sampling was applied, resulting in a final sample of 210 firm-year observations. Moderated panel regression analysis was used to test the relationships. Research Findings: The results show that earnings volatility has a significant positive effect on audit report lag, while income smoothing has a significant negative effect. Furthermore, income smoothing moderates the relationship between earnings volatility and audit report lag, altering the direction of the relationship and influencing auditors’ risk perceptions. Theoretical Contribution/Originality: This study contributes to the literature by introducing income smoothing as a moderating variable in the relationship between earnings volatility and audit report lag, thereby extending the understanding of how it influences auditors’ risk assessments and audit timeliness, particularly among late-reporting firms. Research limitation and implication: This study focuses on firms with late financial reporting and examines only earnings volatility as the main predictor, which may limit generalizability. Future studies could include broader samples and additional variables. The findings offer practical insights for companies, auditors, and investors, and highlight income smoothing as a factor influencing perceived audit risk and audit timeliness.