AJA Arab J. Admin. 1110-5453 2663-4473 The Arab Journal of Administration League of Arab States, Arab Administrative Development Organization Cairo, Egypt 10.21608/aja.2025.341395.1760 631 Research Article Impact of Sustainability Reporting Level on Audit Report Lag: An Empirical Study in Saudi Arabia Alsheikh Awatif Hodaed ahsheikh@uqu.edu.sa Alsheikh Warda Hodaed whshiakh@uqu.edu.sa Accounting Department, Faculty of Administration and Economics, Umm Al-Qura University Saudi Arabia 03 2025 28 01 2026 02 2026 12 2024 03 2025 03 2025 46 1 343 354 This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License (CC BY-NC 4.0).

As sustainability reporting becomes increasingly important, companies worldwide are putting more effort into reporting the impacts of their operations on governance, economics, society, and the environment. At the same time, auditors are under pressure to mitigate audit report lag, which indicates the quality and reliability of financial reporting. This study explores the association between sustainability reporting levels and audit report latency of Saudi non-financial firms. With two distinct measures for the dependent and independent variables extracted from previous research, we have built up a comprehensive dataset from 140 non-financial firms in Saudi Arabia. The hypothesis was tested through a regression analysis. The finding demonstrates that there is a significant negative correlation between sustainability reporting levels and audit report lag, which means that increasing sustainability disclosures improves financial reporting substantially. This study is the first attempt in the Saudi Arabian environment. The nation’s 2030 Vision emphasizes the importance of fostering an efficient capital market framework and increasing international investor trust. The findings provide vital information for the Capital Markets Authority, policymakers, and stakeholders to make informed decisions.

 Sustainability Reporting Audit Report Lag Regression Analysis Non-Financial Firms Introduction

Sustainability has become essential as a strategy to address social and environmental concerns and is used as a criterion for performance and investment decisions. Stakeholders demand transparency, driving sustainability reporting, while capital markets emphasize timely financial reporting. Audit report lag (ARL)—the days between fiscal year-end and audit report release—signals timeliness. Limited evidence exists in Saudi Arabia on how sustainability reporting level (SRL) affects ARL. This study examines 140 Saudi listed non-financial firms (654 firm-year observations, 2018–2022) to test whether higher SRL reduces ARL.

 Prior Literature and Hypothesis Development

Research on sustainability disclosure shows mixed impacts on firm performance and earnings management. Agency and legitimacy theories suggest higher SRL enhances governance and transparency, potentially reducing ARL. Conversely, stakeholder theory posits disclosures may mask financial impacts. Empirical studies (e.g., Qasem et al., 2023; Al-Absi et al., 2024; Wang & Wang, 2023; Oh & Jeon, 2022) generally find higher CSR/SRL associates with shorter ARL. Thus, the study hypothesizes an inverse relation:

\[ \text{H1: Higher sustainability reporting level is associated with lower audit report lag.} \] Research Design

Sample: 140 Saudi listed non-financial firms, 654 firm-year observations (2018–2022). Dependent variable: ARL (days from fiscal year-end to audit report date). Independent variable: SRL index covering governance, economic, social, and environmental disclosures. SRL is scored (1/0) per item, then scaled:

\[ \mathrm{SRL}_i = \frac{\sum_{k=1}^{n} d_{ik}}{n} \]

Controls: board size (BSize), board female directors (BFDir), audit committee size (ACSize), audit committee busyness (ACBusy), audit opinion (ARType, qualified=1), audit quality (AQ, Big 4=1), firm size (FSize, ln assets), profitability (ROA), leverage (Lev), and year fixed effects.

Regression model:

\[ \text{ARL}_{it} = \beta_0 + \beta_1 \text{SRL}_{it} + \beta_2 \text{BSize}_{it} + \beta_3 \text{BFDir}_{it} + \beta_4 \text{ACSize}_{it} + \beta_5 \text{ACBusy}_{it} + \beta_6 \text{ARType}_{it} + \beta_7 \text{AQ}_{it} + \beta_8 \text{FSize}_{it} + \beta_9 \text{ROA}_{it} + \beta_{10} \text{Lev}_{it} + \text{Year}_t + \varepsilon_{it} \] Results Descriptive Statistics Descriptive Statistics
Variable N Mean S.D Minimum Maximum
ARL65474.14324.05116197
SRL6540.7540.2060.251.00
BSize6547.9921.574311
BFDir6540.0160.04500.25
ACSize6543.4760.69725
ACBusy6540.6220.28501
ARType6540.0870.28201
AQ6540.4470.49801
FSize6549.3090.7597.38012.367
ROA6540.0230.256-6.0130.462
Lev6540.5060.6470.00510.000
Correlation Analysis Pearson Correlation Matrix
Variable ARL SRL BSize BFDir ACSize ACBusy ARType AQ FSize ROA Lev
ARL1-0.285***-0.150***-0.099***-0.147***-0.134***0.367***-0.202***-0.316***-0.135***0.333***
SRL10.311***0.0540.277***0.174***-0.171***0.307***0.529***0.212***-0.046
BSize10.138***0.398***0.043-0.0300.256***0.512***0.070*-0.008
BFDir1-0.016-0.0090.0100.0400.0330.071*0.051
ACSize10.058-0.0560.200***0.447***-0.011-0.036
ACBusy1-0.0220.099***0.190***0.009-0.068*
ARType1-0.202***-0.213***-0.095**0.119***
AQ10.511***0.078**-0.033
FSize10.087**-0.099***
ROA1-0.017
Lev1

Notes: *** 1% level, ** 5% level, * 10% level (two-tailed).

 Multicollinearity Check Variance Inflation Factors
Variable VIF 1/VIF
FSize2.320.431
BSize1.480.674
SRL1.420.702
AQ1.420.706
ACSize1.340.748
ROA1.260.791
ARType1.140.877
ACBusy1.060.944
BFDir1.060.945
Lev1.030.972
Mean VIF1.35
Regression Results Regression Test (Dependent variable: ARL)
Variables Expected Sign Coefficient (t-stat)
SRL--17.877*** (t = -3.82)
BSize-0.029 (t = 0.05)
BFDir--51.167*** (t = -2.80)
ACSize--1.000 (t = -0.82)
ACBusy--5.099* (t = -1.71)
ARType+21.131*** (t = 4.72)
AQ--0.196 (t = -0.12)
FSize--2.893 (t = -1.63)
ROA--33.517*** (t = -3.09)
Lev+10.318* (t = 1.67)
Constant92.853*** (t = 16.09)
Year effectsYes
No. of observations654
R² / Adjusted R²0.33 / 0.316

Notes: *, ***, indicate significance at 10% and 1% (two-tailed).

 Robustness Tests Robustness Tests with Alternative Measures (ARL2 = ln(ARL); SRL2 = ln(SRL))
Variables Expected Sign ARL2 ARL ARL2
SRL--0.185*** (t = -2.87)——
SRL2-—-32.843*** (t = -3.81)-0.317*** (t = -3.40)
BSize-0.008 (t = 0.97)0.149 (t = 0.25)0.010 (t = 1.14)
BFDir--0.692*** (t = -2.61)-61.598*** (t = -3.51)-0.836*** (t = -3.25)
ACSize--0.025 (t = -1.29)-0.619 (t = -0.52)-0.020 (t = -1.04)
ACBusy--0.056 (t = -1.23)-4.217 (t = -1.43)-0.046 (t = -1.02)
ARType+0.212*** (t = 5.40)22.703*** (t = 5.31)0.237*** (t = 6.24)
AQ-0.006 (t = 0.22)-1.264 (t = -0.77)-0.010 (t = -0.35)
FSize--0.062** (t = -2.34)-3.359** (t = -2.01)-0.072*** (t = -2.88)
ROA--0.497*** (t = -3.95)-6.623** (t = -2.00)-0.097** (t = -2.05)
Lev+0.056** (t = 2.19)10.444* (t = 1.76)0.058** (t = 2.48)
Constant4.566*** (t = 55.91)92.851*** (t = 16.66)4.566*** (t = 56.89)
Year effectsYesYesYes
No. of observations654654654
R² / Adjusted R²0.223 / 0.2060.327 / 0.3120.213 / 0.196

Notes: *, **, *** denote significance at 10%, 5%, 1% (two-tailed).

 Conclusion

Across 654 firm-year observations (2018–2022), higher sustainability reporting levels are significantly associated with shorter audit report lags for Saudi non-financial firms, robust to alternative measures of ARL and SRL. This supports agency and legitimacy perspectives: transparent sustainability reporting aligns with timely, higher-quality financial reporting. The findings inform regulators, investors, and firms pursuing Saudi Vision 2030 objectives. Future work could examine ownership structure as a moderator and include financial firms subject to distinct reporting regimes.

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