The Effect of Information Risk on the Relationship between Abnormal Audit Report Delays and Abnormal Stock Returns

EXTENDED ABSTRACT
Introduction
The results of audit report are one of the tools to ensure the accuracy of financial statement information. If this report is available to users with unusual delays, it may affect investors' expectations of financial statement information while enhancing the information reliability and reducing the information timeliness. And if this delay is accompanied by more information risk and information inequality, investors' expectations of the company's value will change significantly. The purpose of this study was to investigate the effect of information risk on relationship between abnormal audit report delay and abnormal stock returns.
Hypothesis
According to the aforementioned theoretical foundations and previous researches such as Habib and Huang (2019), Lu et al. (2020), Blankley et al. (2014), Nikinen and Sahlstrom (2015), Zhang et al. (2013) and Sharad ( 2014) based on the reasons for abnormal delays in the audit report, investors' perception of these reasons and creating a balance between reliability and timeliness of the information obtained from the report with abnormal audit delays on the one hand and the scope of confidential information and the scope of confidential information and information risk as a sign of Information inequality and the existence of new information with important information content, from other hand, which affects the expected return of investors in the market and causes adjustment and revision of their previous expectations, the research hypotheses were formulated as follows:
 
The sales growth fluctuation affects the financial statements comparability.
The cash flows fluctuation affects the financial statements comparability.
The competition proprietary costs moderates the effect of sales fluctuation on financial statements comparability.
The competition proprietary costs moderates the effect of sales growth fluctuations on financial statements comparability.
The competition proprietary costs moderates the effect of cash flow fluctuations on financial statements comparability.
 
Method
 To test research hypotheses, the data of 123 companies accepted in Tehran Stock Exchange during the years 2012-2019 and multivariate regression has been used.
 Results
 The results of the research hypotheses test showed that with increasing abnormal delay in the audit report, abnormal stock returns increase and information risk while having a positive effect on abnormal stock returns, intensifies the effect of abnormal delay of the auditor report on abnormal returns. That is, abnormal delays in the audit report and information risk, as variables with significant information content and a sign of problematic information and private information, fundamentally change investors' expectations, which affect abnormal returns.
Conclusion
 It can be said that delays in the audit report have informative content and affect market expectations. In other words, the abnormal length of the audit report, both in terms of increasing the effectiveness of the audit and strengthening the reliability of information, and in terms of auditing problematic financial statements and reducing the timeliness of information, provides new information for investors that corrects or strengthens investors' expectations of previous forecasts. Also, despite the information risk and information asymmetry or confidential information within the organization, abnormal delays in the audit report send a more negative signal to the market and also affect market expectations for the results of the audit report. However, due to the implementation of the risk-based audit process, the existence of high information risk for audit firms is a reason for further consideration and audit risk management, which further delays the audit report and thus signals negative news to the market to revise capital expectations.