Accounting Forum 37 (2013) 4053

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Accounting Forum
journal homepage: www.elsevier.com/locate/accfor

Effects of municipal, auditing and political factors on audit delay

Sandra Cohen a , Stergios Leventis b,
a
Assistant Professor of Accounting, Department of Business Administration, Athens University of Economics and Business, Greece
b
Lecturer in Accounting, School of Economics and Business Administration, International Hellenic University, Greece

a r t i c l e i n f o a b s t r a c t

Article history: We examine audit delay for nancial statements prepared by Greek municipalities. Greece
Received 27 July 2011 is an interesting setting because, despite the rigid regulatory framework that governs
Received in revised form 17 January 2012 reporting, the penalties imposed in cases of non-compliance with regulatory deadlines
Accepted 26 April 2012
are almost non-existent. We investigate specications indicated by previous research but
also municipal and political factors. Our results suggest a considerable variation in audit
Keywords:
delay which is inuenced by the political process under which municipalities operate and
Audit delay
Municipalities
make decisions. We analyse further determinants of non-compliance and we analyse the
Compliance characteristics of non-compliers separately. Political variables persist in explaining audit
Accrual accounting delay in terms of non-compliance.
Public sector 2012 Elsevier Ltd. All rights reserved.
Local governments
Greece

1. Introduction

Timeliness of nancial reporting is unequivocally recognised as an important qualitative characteristic of nancial infor-
mation (Payne & Jensen, 2002). This is the reason why it has attracted considerable attention from researchers and regulatory
agencies in both the private (see Krishnan & Yang, 2009; SEC, 2002) and public sectors (GASB, 1987; IFAC, 2007). Managers
are expected to prefer a minimal audit delay (described in some papers as audit time or audit lag) (Johnson, 1998). Audit
delay refers to the time from the end of the companys nancial year to the date of the audit report (Leventis, Weetman,
& Caramanis, 2005). Municipal nancial statements embody publicly available information regarding the municipalitys
nancial position and performance and, therefore, they constitute an accountability medium (Taylor & Rosair, 2000) and a
means for decision-making by several interested users (IFAC, 2007). Hence, their timely publication is deemed important
and, accordingly, regulation mandates their timely issuance. Given that comparability metrics are particularly difcult to
apply between municipalities, the timely report of nancial information is demanded by many stakeholders who need to
assess municipal nancial stability and performance (Crain & Bean, 1998). This is especially important at the present time
when the nancial condition and performance of public sector entities are under scrutiny in order to accomplish efciency,
effectiveness and economy goals.
Similar to all activities in public economics, nancial reporting is costly at both state and municipal levels. There are
signicant costs incurred in developing regulatory systems, operating enforcement and judicial mechanisms, conducting
public audits and publishing nancial results using various media exposure. Municipalities devote considerable nancial
resources to installing and running accounting information systems and control mechanisms, employing internal and/or
external expert staff, and appointing external auditors to perform ofcial audits. Considering that timely reporting is costly,

Corresponding author at: School of Economics and Business Administration, International Hellenic University, 14th klm Thessaloniki-Moudania, 57101
Thessaloniki, Greece. Tel.: +30 231 080 7541; fax: +30 231 047 4569.
E-mail address: s.leventis@ihu.edu.gr (S. Leventis).

0155-9982/$ see front matter 2012 Elsevier Ltd. All rights reserved.
http://dx.doi.org/10.1016/j.accfor.2012.04.002
 S. Cohen, S. Leventis / Accounting Forum 37 (2013) 4053 41

we assume that it should be dependent, to some extent, on supply and demand characteristics. Moreover, timeliness crucially
depends on the audit function because nancial statements cannot be issued before the audit is concluded (Johnson, 1998).
As far as auditing is concerned, auditors are expected to perform assurance services without delays, within the constraints
imposed by professional codes and ethics (Carcello, Hermanson, & McGrath, 1992; DeAngelo, 1981).
The timeliness of nancial information has been on the agenda of the Ministry of Finance in Greece for the past few years
in the context of a broader attempt to improve the existing regulatory framework. This is evidenced by the legislation that
has been passed aimed at improving the quality and the timeliness of nancial reporting (Law 3463/2006, Municipal and
Communal Code). However, as with several administrative reforms, the emphasis was placed on legalism and formalism
rather than on the implementation (Spanou, 2008). As OECD (2009, p. 68) notes in its report on Greece, a focal point of
public sector reforms should be to ensure that policies are fully implemented once the legislation has been passed, as the
gap between legislated and implemented reforms is large.1
The current paper is an initial exploration of the factors associated with audit delay in Greek local governments and there-
fore provides useful insights regarding the implementation of legislative reforms. Greece is an interesting setting for several
reasons. Firstly, political polyphony characterises local governments as the members of the council stem from different
political streams not always represented in the national parliament (Yannas & Lappas, 2005) and opposition is fragmented
(Hlepas, 2010). In such a highly politicised environment the inuence of politics on public administration (Spanou, 2008)
and accounting (Ballas & Tsoukas, 2004) are expected to be inuential. Secondly, despite the existence of a rigid regula-
tory environment with strict punishment provisions for those who do not comply with the legislature, the enforcement of
penalties for non-compliers is, in practice, almost nonexistent. Within this environment it is expected that factors associated
with audit delay might be different, to some extent, to those described by prior literature on the public sector. Our study
offers new directions for approaching the audit delay agenda in the public sector by emphasising politically related factors.
The way democracy inuences audit delay has never been tested before. We therefore investigate several previously unex-
amined municipal-related and political characteristics in a continental European context, which differs from Anglo-Saxon
institutional environments.
Prior research on audit delay in the local government domain has only addressed the US context, with the excep-
tion of the comparative study by Giroux and Jones (2002) of the UK and US referring mainly to fund and not accrual
accounting nancial statements (see Dwyer & Wilson, 1989; Payne & Jensen, 2002). Therefore we examine, as an extension
of existing literature, the audit concerning municipalities in a continental European domain. Finally, our study explores
audit delay when municipalities in many European countries are witnessing a transition from cash-based budgetary
accounting to accrual accounting. Even though conformity with the accrual accounting paradigm is not homogeneous
and is inuenced by the different systems within which local governments operate (Pina, Torres, & Yetano, 2009), we
expect our conclusions to shed light on the factors that enable or hinder timely reporting through the lens of audit
delay.
The remainder of this paper is structured as follows: Section 2 provides a discussion of the main characteristics of Greek
municipalities and relevant regulation. Section 3 presents the literature review of the factors affecting audit delay, while
Section 4 describes the development of the hypotheses. Section 5 sets out the research methods and Section 6 presents the
empirical results and analysis. The nal section offers conclusions, limitations and suggestions for further research.

2. Greek municipalities and relevant regulation

Even though Greece is a small country in terms of size and population it has numerous municipalities. The 914 Greek
municipalities are heterogeneous in terms of population, geographical size and support received from central government
through state subsidies (Cohen, 2008).2 In recent years they have assumed not only the traditional local government respon-
sibilities such as the local registry, refuse collection, development and maintenance of local infrastructure (i.e. parks, roads,
playgrounds and squares) and citizens entertainment activities but they also provide primary and secondary education
services, transportation services, and health services. Municipality revenues include taxes and fees, for which they have a
relative exibility in levying, as well as subsidies. As beneciaries of state subsidies, municipalities are subject to several
expenditure control mechanisms.
The mayor, the mayoral committee and the municipal council perform the management of municipalities. The citizens
of the municipality elect the mayor and the members of the municipal council every four years. The mayoral committee
includes, in addition to the mayor, members of the municipal council who belong to the ruling party as well as a minority
representation. The main duties of the mayoral committee deal with the municipalitys nancial management. Decisions to

1
However, judging from the signicant delays evidenced in nancial statement publication, the reluctance of public sector entities to abide by regulatory
requirements and the lack of penalty enforcement on non-compliers, it seems that the goals were not entirely achieved. The fact that public sector entities
were not reporting their nancial condition, performance (mainly cash-based) and debts in a timely manner to reconcile with general government decit
gures intensied the deterioration of the Greek economys condition as evidenced through multiple budget decit revisions as percentage of GDP in 2009
(EU, 2010). This eventually resulted in Greece entering into the nancial support mechanism of the EC and IMF in 2010 (Law 3845/2010).
2
From 1/1/2011 the number of municipalities was decreased to 325 after the application of a local government reform plan called Kallicrates (named
after a famous architect that lived in Athens during the Golden Age). The criteria for municipalities amalgamation were mainly population and the
geographical vicinity of municipalities.
42 S. Cohen, S. Leventis / Accounting Forum 37 (2013) 4053

be taken need majority approval by the municipal council. The municipal council includes all elected parties. Thus, Greek
municipalities are entirely governed by elected ofcials.
The Law enforcing accrual accounting in Greek municipalities is the Presidential Decree 315/99 and it is applicable to
municipalities that have more than 5000 citizens or approximate revenues of more than 1.5 million euro. However, voluntary
adoption is encouraged. In Greece the accrual accounting principles governing local governments are almost exclusively
based on the Greek Accounting Standards used for all private sector companies not listed on the Stock Exchange.3
Municipalities applying accrual accounting should produce and publish a set of accounts every scal year, mainly the
Balance Sheet and the Prot and Loss Account. The auditors report indicates that the audit was conducted in accordance
with Presidential Decree 315/99 and includes an opinion as to whether the nancial statements are presented fairly.4
The audit is performed only by Certied Chartered Accountants as in the private sector. Municipal audits are, by legisla-
tion, conducted by auditors holding professional licenses and belonging to SOEL (Certied Auditors Professional Institute).
Therefore, the reliability of Greek municipal nancial statements is related to audit liability.5 Legislation is very detailed
regarding the necessary time for the performance of the various different phases that precede the publication of nancial
statements, and therefore very specic on audit delay. Law 3463/2006 (art. 163) requires that the responsible municipal-
ity nancial controller submits the nancial statements to the mayoral committee ve months after the year end (i.e. the
end of May) at the latest. The mayoral committee has to review the nancial statements within two months and, within a
maximum of ve days after the lapsing of the two month period, has to submit them to the municipal council for approval.
The nancial statements can be submitted to the municipal council for approval only after having been reviewed by the
elected auditors. Thus, the maximum time for producing an audited set of nancial statements ready for publication is
217 days.

3. Factors affecting audit delay

Audit delay has been subject to considerable prior attention and research in the private sector, particularly for companies
listed on the US and international stock exchanges. Overall, it seems that there are many company-related and audit-related
characteristics that could be associated with audit delay (Owusu-Ansah, 2000).
While there has been extensive research on the private sector, it appears that there is a scarcity of relevant studies on
the public sector, which is, moreover, concentrated on the US context. In a seminal paper, Dwyer and Wilson (1989) inves-
tigated the audit delay of 142 US cities for the scal year 1982. They found signicant associations between audit delay
and the following factors: receipt of a GFOA (certicate of conformance), independence of the auditors, responsibility for
the audit report resting with the auditor and the existence of state regulation on municipal nancial reporting practices.
Rubin (1992) examined cross-sectionally the audit delay of Ohio cities for 1986. He reported signicant associations of
audit delay with the GFOA certicate and type of auditor. Deis and Giroux (1992) reported on the investigation of Texas
independent school districts from 1984 to 1989. Their overall results suggest that timely reports are signicantly associated
with audit quality. McLelland and Giroux (2000) examined audit delay in 164 large US cities. They found that audit delay
is negatively associated with the issuance of a general purpose nancial statement, the disclosure of single audit reports,
and also with the employment of an independent auditor. They also reported a signicant positive association between
audit delay and municipality population and the existence of an additional audit rm. Payne and Jensen (2002) investi-
gated audit delay in South-eastern US municipalities for the scal year of 1992. They examined municipality-related and
audit-related characteristics. They found that management incentives for timely reporting, the presence of a high qual-
ity nancial reporting system, and bonded indebtedness are all negatively associated with audit delay. Audit delay was
found to have a positive association with municipality size, audit performed during the external auditors busy season, the
receipt of a qualied audit opinion, and regulation. The auditors experience and reputation are found to decrease audit
delay. Finally, Johnson, Davies, and Freeman (2002) examined 302 US local governments for 1993. They found that audit
delay is seasonal and dependant on auditor reputation and responsibility, management competence, receipt of GFOA and
audit fees. The only study in Europe referring to audit delay was conducted in the UK. Giroux and Jones (2002) compared
audit delay and local government auditing in 1996 in the UK and US using a sample of 260 municipalities and 165 cities
respectively and they reported signicant differences. The time between the end of the scal year and the date of audit

3
It has to be noted that the introduction of accrual accounting did not signal the abolishment of the traditional budgetary cash accounting system. On
the contrary, the two accounting paradigms (i.e. accrual accounting and cash accounting) operate in parallel in autonomous accounting systems (for more
details see Cohen et al., 2007).
4
While the role of auditing in the public sector has been considerably upgraded and expanded to include several elds over the past years, constituting
what is usually called an audit society (Lapsley, 2008, 2009), Greek municipalities have not yet experienced this audit explosion. Thus, the audit function
is still conned to the conventional nancial audit.
5
Auditing standards aim at ensuring a minimum acceptable nancial reporting quality (Willekens & Simunic, 2007). Failure to comply with auditing
standards constitutes professional negligence which renders the auditor potentially liable for losses. Auditors, according to Hellenic Auditing Standards
(HAS), are legally liable to shareholders and to third party nancial statement users. Additionally, auditors might be liable to penalties imposed by regulatory
committees (e.g. Greek Accounting and Auditing Oversight Board), while they might suffer severe reputational damages. Therefore, there are incentives
for auditors to perform an adequate audit to eliminate potential losses. This, in turn, is expected to enhance the reliability of municipal nancial reporting.
 S. Cohen, S. Leventis / Accounting Forum 37 (2013) 4053 43

opinion in UK local governments was, on average, 290.3 days while in US cities it averaged at 124.7 days (Giroux & Jones,
2002, p. 346).

4. Development of hypotheses

This paper focuses on three dimensions, subject to the availability of data, and examines their association with audit delay.
These three dimensions are: (a) municipality-related factors, (b) politically related factors and (c) audit-related factors. We
develop hypotheses for the new factors suggested by this study while we control for variables suggested as inuential by
prior research. Audit delay and the hypotheses based on the three aforementioned dimensions are explained as follows.

4.1. Audit delay

Audit delay, which is the dependent variable of the model, is measured as the number of days from the end of the
municipalitys nancial year to the date of the audit report. The nancial statements can be published only after the audit
has been completed and they are signed by the auditors. We use the same methodology to measure audit delay as has been
used in both public (Johnson, 1998; McLelland & Giroux, 2000) and private sector studies (Ashton, Willingham, & Elliott,
1987; Leventis et al., 2005).

4.2. Municipality-related factors

4.2.1. Experience in accrual accounting

The rationale for this factor is based on the learning curve theory. Owusu-Ansah (2000) has suggested that a decrease in
reporting time would occur as the number of nancial statements produced is increased. As the organisation continues to
apply accrual accounting concepts and practices, accountants learn more and so the teething problems which would cause
unusual delays are minimised (Owusu-Ansah, 2000). In a similar vein, Ryan, Stanley, and Nelson (2002) found that time
has a benecial effect on compliance with accounting standards while Christiaens and Peteghem (2007) were inconclusive
regarding the effect of experience on compliance in Flemish municipalities. We expect a municipality to become more
procient in dealing with nancial reporting issues, including reporting deadlines, as a result of learning experience. The
preparation of the rst set of nancial statements is a major task for all Greek municipalities. That is because municipal
employees should be trained, accounting information systems should be implemented and tested and the registry of xed
assets should also be prepared. The latter requires a signicant work-load, since municipalities control numerous xed assets
which should be recorded and valued for the rst time. For this reason P.D. 315/99 allows the registry of xed assets to be
completed within 3 years of the rst adoption of accrual accounting. We therefore expect municipalities experienced in
nancial reporting to have overcome obstacles related to rst adoption. Overall, experience is expected to have an adverse
effect on audit delay. Thus we hypothesise that:
H1. Ceteris paribus, audit delay is negatively associated with the experience a municipality has gained in accrual accounting.
We measure this factor by the number of calendar years a municipality has issued accrual accounting nancial statements.

4.2.2. Dependence on governmental grants

Municipalities rely signicantly on governmental grants. State subsidies, earmarked for operating and investment pur-
poses, are allocated to municipalities by the Central Autonomous Resources (i.e. taxes collected by central government to be
transferred to local governments). While there is a specic amount allocated (based on the national budget), the allocation is
decided on a yearly basis by the Ministry of Finance and the Ministry of Interior in a way that aims to smooth out geographical
and nancial inequalities (Ministry of Finance, 2007, p. 146). The more dependent a municipality is on governmental grants
the more it might seek to abide by governmental legislation requirements. As a consequence, it would be keen on reporting
nancial statements on time and shortening audit delay. The motivation would be to minimise any potential penalty or delay
in receiving grants. According to the relevant law (Law 3463/2006, art. 165) lack of compliance would incur a ne ranging
from 5% to 15% of the Central Autonomous Resources amount attributable to the municipality. Thus, we hypothesise that:
H2. Ceteris paribus, audit delay is negatively associated with the dependence of a municipality on governmental grants.
We measure dependence on government grants as the ratio of grants to total operating revenues.

4.2.3. Location
The production of wealth is not evenly distributed in Greece. The prefectures of Attiki (where the capital Athens is
located) and of Thessaloniki (where Thessaloniki, the second largest city of Greece is located) generate the vast majority
of the countrys GDP (Cohen, 2008; almost 58% based on recent statistical data from the Greek National Statistical Ofce).
Therefore, municipalities located in these prefectures have access to skilled employees and additionally have adequate
access to the resources necessary to maintain sophisticated accounting systems and internal administrative operations.
Cohen (2008) provides evidence that Greek municipalities that belong to the prefectures of Attiki and Thessaloniki rank
higher in efciency overall. As a consequence, location is expected to inuence audit delay. Municipalities that belong to the
44 S. Cohen, S. Leventis / Accounting Forum 37 (2013) 4053

prefectures of Attiki and Thessaloniki are expected to score better regarding the internal efciency of operations compared
to other areas. From this point of view, geographical location would facilitate the execution of the audit, thus leading to a
shorter time for audit completion (i.e. shorter audit delay). Thus, we hypothesise that:

H3. Ceteris paribus, audit delay is negatively associated with a municipalitys location in the countrys economic centres.

We measure this variable as a dummy that corresponds to the municipalitys location in the prefectures of Athens or
Thessaloniki or in a location outside of these two large urban areas.

4.3. Politically related factors

4.3.1. Strong opposition

Municipal councils are usually characterised by pluralism, in the sense that they express the views of different political
streams. As a result, it is common for independent candidates or political combinations not supported by the two majority
political parties (which alternate in the governance of Greece) to obtain seats on the council. Consequently, there is a
political polyphony as the members of the council stem from different political bases not always represented in the national
parliament (Yannas & Lappas, 2005), and opposition is fragmented (Hlepas, 2010). Thus, the greater the variety of viewpoints
expressed in the municipality council the more intense the decision-making process would be when nancial issues are
discussed. The more parties there are in the municipal council the more parties will be needed for the ruling majority coalition
or, alternatively, for the formation of minority factions. When power is scattered amongst many parties, the political climate
becomes more competitive (Johansson & Siverbo, 2009). Political competition has been found by prior research to create
ambiguity and make measurement dubious and hard to implement (Johansson & Siverbo, 2009). We assume that there is
strong opposition when there are more than two opposing parties represented, apart from the mayors majority party, in
the municipality council. Under these conditions, auditors would require more time to perform the audit, knowing that their
audit report would be scrutinised by several different constituents during the nancial statements approval session.6 Thus,
we hypothesise that:

H4. Ceteris paribus, audit delay is positively associated with strong opposition in the municipal council.

We measure this variable as a dummy that corresponds to the existence or not in the municipality council of more than
two opposing parties, apart from the mayors majority party.

4.3.2. Re-election
Rarely are mayors professional managers. Accordingly, they are seldom experienced enough with technical accounting
and nancial data. However, when a mayor holds the same position for more than four years (elections take place every four
years) (s)he eventually acquires sufcient familiarity with accounting requirements as well as the necessary preparatory
measures to facilitate the auditing procedure. Thus, with reference to the learning curve theory, re-election is expected
to have a negative effect on audit delay. Re-election corresponds to when the same mayor is elected in two successive
elections.7 Re-elected mayors are expected to possess superior information compared to newly elected mayors, which leads
to improvements in accounting and audit procedures. Furthermore, newly elected mayors might wish to investigate further
into municipal nancial matters in order to reveal any hidden issues concealed in the existing nancial statements, and
would require auditors to work to this end. Both anticipations would suggest a longer preparation of nancial statements
when mayors are newly elected and therefore additional audit delay. Thus, we hypothesise that:

H5. Ceteris paribus, audit delay is negatively associated with mayoral re-election.

We measure this variable as a dummy that corresponds to the existence or not of the same mayor elected in two successive
elections.

4.4. Audit-related factors

4.4.1. External accountant

The transition from cash-based accounting to accrual accounting is not a trivial procedure. Accrual accounting usually
creates the need to train staff to operate the new system (Brusca Alijarde, 1997) and requires costs to be incurred in terms of
increased accounting expertise and support (Pendlebury & Karbhari, 1998). Municipalities could either hire an external or
use an internal group of experts to assist in the abovementioned requirements. In the former case external consultants would
be responsible for the preparation of nancial statements as well. The existence of an external accounting team is expected

6
According to Municipal and Communal Code (Law 3463/2006, art. 165) the auditor should be present at the discussion of the nancial statements in
the municipal council and give explanations when needed.
7
We use a dummy variable for re-election instead of the years of mayoral service since there is not a single case of mayor resignation. Therefore, a mayor
may serve for either four or eight years (if re-elected). In our sample there is no re-election observation for a third successive period since re-election for a
third time is very rare.
 S. Cohen, S. Leventis / Accounting Forum 37 (2013) 4053 45

to increase audit delay for the following two reasons: First, external accountants actually work as part-time freelancers in
the municipalities and therefore they do not spend much time on the municipality premises which may hinder a smooth
cooperation (i.e. promptly responding to auditors queries) between auditors and the accounting staff of the municipality.
Second, as the dates for the preparation of nancial statements in municipalities coincide with those in the private sector,
external accountants with clientele in the private sector would be very busy during the corresponding period, which would
delay the preparation of municipal nancial statements. Thus, we hypothesise that:
H6. Ceteris paribus, audit delay is positively associated with the existence of an external accountant.
We measure this variable as a dummy, regarding the existence or not of an external accountant.

4.4.2. Internal accounting team

Civil servants in continental European countries are usually trained in dealing with public and administrative legislature
but are less familiar with business administration techniques (Pina et al., 2009). As a consequence, most municipalities in
those countries made recourse to staff trained in accrual accounting. In Greece, knowledge of accounting is not a prerequisite
for staff working in the accounting departments of public sector entities (Venieris & Cohen, 2004). As a result, the majority
of employees in the nancial departments of municipalities do not possess professional accounting qualications (Cohen,
Kaimenaki, & Zorgios, 2007). In order to deal with the new accounting requirements, qualied personnel are hired by
municipalities either in order to form or to support a team responsible for the accrual accounting adoption. The existence of
an internal accounting team dedicated to the accounting function is expected to support auditors in their tasks. This would
result in auditors spending less time conducting compliance and substantive tests. Thus we hypothesise that:
H7. Ceteris paribus, audit delay is negatively associated with the existence of an internal accounting team.
We measure this variable as a dummy, regarding the existence or not of an internal accounting team.

4.4.3. Remarks
The presence of remarks in the audit report arises from the requirements of audit regulation. Remarks presented in the
audit opinion refer to material deviations from generally accepted accounting principles and/or relevant legislation. Cohen
and Kaimenakis (2011) report that most qualications in the Greek municipality setting refer to subject to (or except for)
opinions. In our data there are no adverse opinions or disclaimers of opinion. There is evidence in the literature that the
qualication of an audit report will delay the audit (Dodd et al., 1984; Whittred, 1980). Whittred (1980) found that the
time lag increases as the qualications become numerous. It is our expectation that the greater the number of subject to
opinions the longer the audit delay might be. This is partly because auditors are expected to extend tests when they nd or
suspect irregularities, and partly because auditors might wish to take more time to audit transactions as a defence against
any potential future litigation. Furthermore, while negotiations between auditor and client occur on a regular basis (Beattie,
Fearnley, & Brandt, 2000; Gibbins, Salterio, & Webb, 2001) it is likely that negotiations are more intense and last longer when
accounting problems arise. Thus, we hypothesise that:
H8. Ceteris paribus, audit delay is positively associated with the audit remarks.
We measure this variable as the number of remarks in the audit report.

4.4.4. Auditor
Empirical evidence has revealed that multinational and more reputable auditing rms may take less time to conduct
assurance services. Additional resources (Palmrose, 1986), higher quality and better trained staff (Chan, Ezzamel, & Gwilliam,
1993) might be some potential reasons. If audit technology is associated with audit delay in the public sector (Williams
& Dirsmith, 1988), internationally afliated audit rms might take less time to conduct the audit due to superior audit
technology. Moreover, some audit rms might strategically invest in brand name and reputation by providing superior
assurance services (Francis & Wilson, 1988). Considering that Greek municipalities do not employ big-4 audit rms, this
same incentive might be seen in second-tier international audit rms8 when compared to local audit rms. The largest
local audit rm in Greece is SOL (Certied Public Accountants Auditors). SOL was founded in 1993, immediately after the
liberalisation of the audit profession9 (Caramanis, 1997), and its total force numbers about 700 members. SOL holds the
largest percentage of total turnover in the sector of statutory audits in Greece.10 Thus, we hypothesise that:
H9. Ceteris paribus, audit delay is positively associated where the audit rm is a local practice.
We capture the auditor effect through a dummy variable that takes the value of 1 when the audit rm is SOL.

8
They refer to audit rms with an international afliation, but non big-4.
9
Following an intense intra-professional struggle, the Greek auditing profession was liberalised in 1992 by enabling legislation. The majority of auditors
joined together and established SOL SA, a private audit company. A number of SOL members, however, broke away and established various smaller audit
practices, some of which became afliated with second-tier international accounting rms (for more information about the effects of audit liberalisation
and the establishment of individual audit rms see Caramanis, 1997).
10
More information about SOL can be found at http://www.solae.gr/ (accessed on 29.12.11).
46 S. Cohen, S. Leventis / Accounting Forum 37 (2013) 4053

Table 1
Construction of the nal sample.

Number of municipality nancial statements for 2006 153

Number of municipality nancial statements for 2007 142
Number of municipality nancial statements for both successive years 2006 and 2007 129
Number of nancial statements with missing information (i.e. audit report or audit date) in either year 2006 or 2007 13
Final sample (number of municipality nancial statements per year) 116

5. Research methods

5.1. Sample and data collection

Only 577 out of the 914 municipalities in Greece meet the size criteria (i.e. more than 5000 inhabitants) for accrual
accounting adoption. Our sample consists of 116 municipalities for a two year estimation window (20062007). The nancial
statements were retrieved either in hard copy form or as electronic copies from the Hellenic Agency for Local Development
and Local Government (EETAA).11 Our sample corresponds to 20.10% of the actual population.12 The composition of our
sample is presented in Table 1. Municipal nancial statements refer to similar year end (31st December).

5.2. Variables and the regression model

The strength of the association between the audit delay and the independent variables is measured using a linear
regression model. The multiple regression model employed to assess the relevant inferences is described as follows:

AUTIMEj = 0 + 1 (EXP)j + 2 (GRANT)j + 3 (CENTER)j + 4 (OPP)j +5 (ELECT)j + 6 (EXTACC)j +7 (INSACC)j

+ 8 (REMARKS)j + 9 (AUD)j + 10 (SIZE)j + 11 (POP)j + 12 (CUR)j + 13 (LEV)j + 14 (PROFIT)j + uj

where AUTIME is the natural logarithm of the days from the scal year-end to the date of the audit report (nancial
statements13 ), EXP the years of publishing nancial statements (nancial statements), GRANT the governmental grants
divided by turnover (nancial statements), CENTER = 1 if the municipality is located in the prefectures of Attiki or Thessa-
loniki, 0 otherwise (Ministry of Interior), OPP = 1 if there is strong opposition in the municipality (more than two opposition
parties), 0 otherwise (Ministry of Interior), ELECT = 1 if the mayor is re-elected, 0 otherwise (Ministry of Interior), EXTACC = 1
if an external accountant exists, 0 otherwise (nancial statements), INSACC = 1 if an internal committee on accrual account-
ing exists, 0 otherwise (nancial statements), and REMARKS is the number of remarks in a subject to or except for report
relating to specic items or matters whose materiality has affected the picture of the nancial statements attested. An
unqualied opinion has nil remarks (nancial statements).
The model above also includes control variables for size, liquidity, leverage and protability since they have been sug-
gested as inuential by relevant literature. More specically, large organisations are more in the public eye and interested
parties might express stronger demands for timely nancial information. We measure size by total assets expecting a neg-
ative association (see Leventis et al., 2005) and by population (number of citizens) expecting a positive association (see
McLelland & Giroux, 2000). Prior literature has suggested that auditing current assets, particularly inventory, is time con-
suming and therefore auditors might be faced with an additional workload in verifying valuation models and the physical
quantities of inventories (Leventis et al., 2005). Alternatively, a negative association might be related to signalling good
news or a relatively small proportion of current liabilities, again easier to audit. Liquidity is measured by the current ratio.
Leverage has also been suggested to increase audit delay in local governments (Johnson, 2006). Auditors are more cautious
with audit procedures in the presence of a high debt level and additionally auditing debt is usually more time consuming
when compared to equity (Carslaw & Kaplan, 1991). Leverage is measured by the ratio of long term debt to equity. Finally, we
consider protability by initiating a dummy differentiating surplus reporting and decit reporting municipalities (similar
to Ashton, Graul, & Newton, 1989). Surplus-generating mayors might wish to signal managerial competence and superior
performance (Dye & Sridhar, 1995). Alternatively, auditors might take additional time to audit decit making municipalities
as a defence against any potential future litigation.
Table 2 reports descriptive statistics of the dependent and independent variables.
We have tested for potential multicollinearity problems with a correlation matrix (Table 3) and Variance Inator Factor
(VIF Table 4).

11
EETAA is an agency that provides professional and technical support to the public sector, local government agencies and social agencies.
12
According to data published by EETAA in October 2005, only 64% of the municipalities obliged to adopt accrual accounting had published accrual
accounting nancial statements for the year 2003 (EETAA, 2005). Thus, as not all eligible municipalities abided by the legislation requirements, our sample
(i.e. 116 municipalities) actually corresponds to 20.10% (116 out of 577 municipalities) of the actual accrual accounting adopters. Surprisingly enough,
there is not a repository of the nancial statements of Greek municipalities, not even in hard copy form, in the Ministry of Finance or elsewhere. EETAA
 S. Cohen, S. Leventis / Accounting Forum 37 (2013) 4053 47

Table 2
Descriptive statistics.

Panel A: Continuous variables

Variables Mean St. deviation Median Minimum Maximum

AUTIME (days) 228 53.74 214 30 385

EXP (years) 5.18 1.15 5 2 8
GRANT (%) 61.54 15.66 63.50 14.00 98.00
REMARKS (number) 2.63 1.97 2 0 8
SIZE (,000 euros) 37.280 54.280 22.036 3.865 427.873
POP (citizens) 22,892 39,621 10,424 3,284 363,987
CUR (%) 3.25 5.32 1.65 .14 14.81
LEV (%) 7.25 10.00 4.12 .00 70.00

Panel B: Categorical variables

CENTER Major cities 57 Provinces 182

OPP Strong 75 Weak 164
ELECT Re-election 124 New 115
EXTACC Existence 67 Non existence 172
INSACC Existence 50 Non existence 189
AUD Mid-Tier 105 Local (SOL) 134
PROFIT Surplus 116 Decit 123

AUTIME: natural logarithm of number of days from the end of the municipalitys nancial year to the date of the audit report; EXP: years of publishing
nancial statements; GRANT: governmental grants divided by turnover; REMARKS: number of remarks in a subject to or except for report relating to
specic items or matters whose materiality has affected the picture of the nancial statements attested. An unqualied opinion has nil remarks; SIZE:
natural logarithm of total assets as of year-end; POP: natural logarithm of municipality population, measured by the number of citizens; CUR: current
ratio. Current assets divided by current liabilities; LEV: long term debt to equity; CENTER: 1 if the municipality is located in the prefecture of Attiki or
Thessaloniki: 0 otherwise; OPP: 1 if there is strong opposition in the municipality (more than two opposition parties), 0 otherwise; ELECT: 1 if the mayor
is re-elected, 0 otherwise; EXTACC: 1 if an external accountant exists, 0 otherwise; INSACC: 1 if there an internal committee on accrual accounting exists,
0 otherwise; AUD: 1 if the audit rm is SOL, 0 if it is a mid tier audit rm; PROFIT, 1 if surplus is reported, 0 if decit is reported.

Table 3
Pearson correlation matrix for continuous independent variables.

EXP GRANT REMARKS SIZE CUR LEV POP

EXP 1.000

GRANT .197** 1.000
.004
REMARKS .071 .064 1.000
.301 .336
SIZE .234** .329** .045 1.000
.001 .000 .493
CUR .050 .183** .031 .122 1.000
.469 .005 .641 .064
LEV .127 .184** .232** .013 .231** 1.000
.062 .005 .000 .843 .000
POP .144* .221** .149* .579** .110 .173** 1.000
.034 .001 .024 .000 .094 .008

EXP: years of publishing nancial statements; GRANT: governmental grants divided by turnover; REMARKS: number of remarks in a subject to or except
for report relating to specic items or matters whose materiality has affected the picture of the nancial statements attested. An unqualied opinion has
nil remarks; SIZE: natural logarithm of total assets as of year-end; CUR: current ratio. Current assets divided by current liabilities; LEV: long term debt to
equity; POP: natural logarithm of municipality population, measured by the number of citizens.
*
5% level of signicance.
**
1% level of signicance.

For sensitivity reasons we also ran the regression equation using rank regression and using normal scores (Cooke, 1998)
similar to prior studies (see Leventis & Weetman, 2004; Leventis et al., 2005).14 Actual observations are transformed to
normal distribution by the van der Warden method. This transformation is achieved by dividing the normal distribution

requires that all municipalities obliged to implement accrual accounting should submit their nancial statements and we have been given access to all the
nancial statements that were submitted to EETAA.
13
Data source is reported in brackets.
14
Cooke (1998) has proposed the use of normal scores as an alternative to rank regression, both being methods of dealing with data that is not normally
distributed. Both have the advantage of being distribution free and both mitigate the impact of measurement errors, outliers and heteroscedasticity.
48 S. Cohen, S. Leventis / Accounting Forum 37 (2013) 4053

Table 4
Results of OLS regression analysis on audit delay.

Variables in the model

Variable Expected sign t-Value t-Sig. VIF

(Constant) 6.017 10.913 .000

EXP .021 .979 .164 1.535
GRANT .005 1.123 .131 1.235
CENTER .018 .306 .380 1.543
OPP + .114 2.460 .007 1.112
ELECT .097 2.185 .015 1.283
EXTACC + .027 .523 .301 1.198
INSACC .333 2.174 .015 1.546
REMARKS + .020 1.914 .029 1.181
AUD + .038 .824 .205 1.142
SIZE .080 1.834 .034 3.530
POP + .082 2.102 .018 3.420
CUR +/ .109 1.814 .072 1.217
LEV + .147 .685 .247 1.585
PROFIT .007 .158 .437 1.176
Year dummies Included

adj R2 0.199
F 3.641
F-Signicance 0.000

Statistical signicance is based on one-tailed tests except CUR.

EXP: years of publishing nancial statements; GRANT: governmental grants divided by turnover; CENTER: 1 if the municipality is located in the prefecture
of Attiki or Thessaloniki, 0 otherwise; OPP: 1 if there is strong opposition in the municipality (more than two opposition parties), 0 otherwise; ELECT:
1 if the mayor is re-elected, 0 otherwise; EXTACC: 1 if an external accountant exists, 0 otherwise; INSACC: 1 if there an internal committee on accrual
accounting exists, 0 otherwise; REMARKS: number of remarks in a subject to or except for report relating to specic items or matters whose materiality
has affected the picture of the nancial statements attested. An unqualied opinion has nil remarks; AUD: 1 if the audit rm is SOL, 0 if it is a mid tier audit
rm; SIZE: natural logarithm of total assets as of year-end; POP: natural logarithm of municipality population, measured by the number of citizens; CUR:
current ratio. Current assets divided by current liabilities; LEV: long term debt to equity; PROFIT: 1 if surplus is reported, 0 if decit is reported.

into the number of observations plus one segment, on the basis that each segment has equal probability.15 Results remain
qualitatively similar.

6. Empirical results and analysis

The mean audit delay of 228 days (see Table 2) suggests that Greek municipality audits are considerably delayed when
compared with US municipalities (see McLelland & Giroux, 2000) or Greek listed rms (see Leventis et al., 2005). Never-
theless, the average audit delay is less than that evidenced in the UK (mean 290.3 days) as reported in Giroux and Jones
(2002). As previously mentioned, the existing regulation allows for a maximum audit report period of 217 days. Conse-
quently, Greek municipalities are divided into those keeping the regulatory deadline and those that deviate. Apart from this
dichotomous categorisation between municipalities that comply with the audit report deadline and those that do not, there
is a considerable variation in audit delay.
The range of audit delay is 355 days. Several municipalities fail to meet the regulatory deadline. However, a signicant
number of municipalities meet the regulatory deadline or report relatively promptly, so they follow good practice. As seen
in Tables 3 and 4, there is no evidence of high collinearity between independent variables and therefore they are all included
in the model. The association between population and total assets, although within acceptable ranges, concerned us, so we
tested the relevant associations by running separate models and including one measure each time. The results remained
similar.
Table 4 reports the results of the regression analysis.
The results indicate that the model has signicant explanatory power. The adjusted R2 suggests that 19.9% of the overall
variation in audit delay is explained by the included independent variables. The overall explanatory power of the model is
not very high but higher than, or similar to, many prior studies in this area.16 The coefcients of strong opposition (OPP),
re-election (ELECT), insider accounting team (INSACC), population (POP), remarks (REM) and size (SIZE) are statistically
signicant. All coefcients have the expected sign. All other independent variables are not signicant.
Strong opposition (OPP) is signicant at 1% with the expected positive sign. This suggests that when many (more than
two except for the ruling party) political parties are represented in the municipal council this is associated with increased

15
Data have been examined by box-plots, QQ plots, histograms, stem-and-leaf plots and the Kolmogorov test with Lilliefors signicance K-S (Lilliefors).
K-S with signicance of >.05 indicates normality. A small signicance value indicates a reason to doubt the normality assumption (Norusis, 1995, p. 247).
It was found that data were not normally distributed. The K-S test was .000 for the dependent variable which clearly indicates non-normality.
16
McLelland and Giroux (2000) report 31% and Johnson et al. (2002) 21.5%.
 S. Cohen, S. Leventis / Accounting Forum 37 (2013) 4053 49

audit delay. A plausible explanation to this nding is that when competitive political structures exist, the ruling party faces
signicant political debate stemming from different political perspectives. As nancial issues are of the utmost importance
in municipal governance, the mayor would spend more time negotiating the content of the auditor report and auditors
would extend audit effort in order to back a potential lawsuit.
Mayor re-election (ELECT) is also signicant at 5% with the expected negative sign. This suggests that auditors deal with
a considerably lower workload in performing the relevant processes when mayors are re-elected. This is related to the
experience acquired in nancial reporting issues, the establishment of adequate mechanisms and performance controls.
Alternatively, or probably additionally, our results might indicate that the election of a new mayor is related to additional
checks on accounts for reasons related to the verication of delivered assets and liabilities. Opposing parties usually suspect
or even accuse the ruling party of dishonesty in municipal economics. When they become the ruling party they typically
perform additional audits of several areas to conrm their suspicions or accusations and for reasons related to pre-election
promises or commitments.
The existence of an internal accounting team (INSACC) is signicant at 5% with the expected negative sign. Internal
accounting teams have been developed only recently in municipalities to handle the transition to the accrual accounting
system. They have been recruited by expert staff and our results suggest that they provide added value to municipal nancial
reporting, at least in terms of timely proceedings. The existence of an internal accounting team might also indicate a strong
commitment by relevant municipalities to the efcient implementation of accrual accounting. It might therefore additionally
indicate sufcient internal audit and control.
Population (POP) is signicant at 5% with the expected positive sign. Large municipalities are more complex organisations
with increased tasks and bureaucracy when compared to smaller municipalities. Similar to prior research (McLelland &
Giroux, 2000), we attribute this nding to the lengthy accounting procedures and increased audit complexity associated with
large municipalities. Remarks (REM) are signicant at the 5% level. Auditors might extend tests when they nd irregularities
or they might wish to take more time to audit transactions as a defence against any potential future litigation. Municipality
size measured by total assets (SIZE) is signicant at 5% with a negative sign. Size therefore seems to inuence relevant
accounting and auditing procedures, as suggested by prior studies (Leventis et al., 2005).
None of the other independent variables are signicant. Considering that the dependent variable is a logarithm transfor-
mation, some of the estimated coefcients, particularly the log transformations of independent variables, imply that they
can be interpreted as elasticities. As such, it appears that if the municipalitys population is increased by 1% then the audit
delay will increase by around 0.082%. This suggests that the statistical signicance of population cannot be interpreted as
signicant in economic terms.
Considering that an appreciable number of Greek municipalities do not comply with the existing legislation on timely
reporting, we investigated the determinants of non-compliance through logistic regression. We assigned the value of one
to complying municipalities while the non-complying municipalities were given the value of zero. We tested the same
independent variables as described in Section 5.2. The results are reported in Table 5. Overall, our logistic regression has
a reasonable t. The Wald Chi-square statistic is 28.23, and the area under the ROC curve is about 81%. The statistically
signicant variables are those of size (SIZE) at 1% with a positive sign; re-election (ELECT) at 1% with a positive sign; strong
opposition (OPP) at 1% with a negative sign; number of auditor remarks (REM) at 5% with a negative sign; insider accounting
team (INSACC) at 5% with a positive sign; location (CENTER) at 5% with a positive sign; and reliance on government subsidies
(GRANT) at 5% with a positive sign. Consistent with the previous results, the existence of a strong opposition (OPP) in
a municipality lengthens the reporting period beyond the regulatory deadline, while mayoral re-election (ELECT) works
towards compliance. The signicance of the number of remarks (REM) suggests that municipalities which ignore accounting
regulation (as evidenced from audit qualications) tend to follow similar patterns in implementing the regulation of timely
reporting. It also appears that the existence of an insider accounting team (INSACC) assists municipalities in achieving
compliance. Finally, a municipalitys location in the countrys economic centres and reliance on government subsidies seem
to work towards compliance.

6.1. Sensitivity analyses

We performed a number of tests to validate our results. Firstly, we tested whether there is a systematic relation-
ship between the type of auditor performing the audit and the mayors re-election. Therefore we investigated the
interaction effect between mayoral re-election (ELECT) and type of auditor (AUD) [if x1 = ELECT and x2 = AUD; Audit
delay = 1 x1 + 2 x2 + 3 x1 x2 = (1 + 3 x2 )x1 + 2 x2 ]. The analysis revealed that the interaction effect is not signicant with
a negative sign while other variables remain qualitatively similar. Secondly, we analysed the determinants of audit delay
for the group of non-compliers. The results are shown in Table 6 and indicate that the model has signicant explanatory
power. The statistically signicant variables are those of strong opposition (OPP), re-election (ELECT) and leverage (LEV).
The strong opposition (OPP) variable is statistically signicant at 1% and has a positive sign. This is an indication that the
existence of political tensions in municipality governance results in a prolongation of audit delay. Additionally, the mayoral
re-election (ELECT) coefcient has the same statistical signicance (i.e. 1% signicance level) but a negative sign. This reveals
a benecial effect in the sense that re-election contributes to reducing audit delay. The variable of debt reliance (LEV) is
statistically signicant at 1% with a positive sign. The more reliant a municipality is on debt the longer the audit delay.
50 S. Cohen, S. Leventis / Accounting Forum 37 (2013) 4053

Table 5
Results of Logistic regression analysis on compliance.

Variables in the model

Variable Expected sign z P > |z| Odds ratio

(Constant) 16.769 2.84 .004

EXP + .300 1.42 .077 .74
GRANT + 2.324 1.72 .042 10.21
CENTER + .153 1.69 .045 1.16
OPP 1.243 2.38 .008 .28
ELECT + 1.225 2.68 .003 3.40
EXTACC .504 0.96 .169 .60
INSACC + 1.353 2.09 .018 3.86
REMARKS .251 2.23 .013 .77
AUD .108 0.28 .391 1.11
SIZE + 1.336 2.79 .002 3.80
POP .587 1.55 .061 .55
CUR +/ .531 0.81 .420 1.70
LEV 1.317 0.60 .273 .26
PROFIT + .211 0.51 .305 .80
Year dummies Included

Wald 2 28.23
Pseudo 2 23.02
Area under the ROC curve 80.98

Statistical signicance is based on one-tailed tests except CUR.

EXP: years of publishing nancial statements; GRANT: governmental grants divided by turnover; CENTER: 1 if the municipality is located in the prefecture
of Attiki or Thessaloniki, 0 otherwise; OPP: 1 if there is strong opposition in the municipality (more than two opposition parties), 0 otherwise; ELECT:
1 if the mayor is re-elected, 0 otherwise; EXTACC: 1 if an external accountant exists, 0 otherwise; INSACC: 1 if there an internal committee on accrual
accounting exists, 0 otherwise; REMARKS: number of remarks in a subject to or except for report relating to specic items or matters whose materiality
has affected the picture of the nancial statements attested. An unqualied opinion has nil remarks; AUD: 1 if the audit rm is SOL, 0 if it is a mid tier audit
rm; SIZE: natural logarithm of total assets as of year-end; POP: natural logarithm of municipality population, measured by the number of citizens; CUR:
current ratio. Current assets divided by current liabilities; LEV: long term debt to equity; PROFIT: 1 if surplus is reported, 0 if decit is reported.

Table 6
Results of OLS regression analysis on audit delay non-compliers only.

Variables in the model

Variable Expected sign t-Value t-Sig. VIF

(Constant) 4.969 9.295 .000

EXP .023 1.438 .077 1.723
GRANT .014 .111 .456 1.452
CENTER .038 .910 .183 1.618
OPP + .085 2.405 .009 1.309
ELECT .091 2.566 .006 1.329
EXTACC + .044 1.083 .141 1.338
INSACC .080 1.583 .059 1.374
REMARKS + .000 .087 .465 1.463
AUD + .002 .062 .475 1.392
SIZE .027 .879 .191 3.163
POP + .000 .869 .194 2.876
CUR +/ .003 .444 .658 1.376
LEV + .483 2.899 .002 1.667
PROFIT .021 .609 .272 1.343
Year dummies Included

adj R2 0.239
F 2.861
F-Signicance 0.001

Statistical signicance is based on one-tailed tests except CUR.

EXP: years of publishing nancial statements; GRANT: governmental grants divided by turnover; CENTER: 1 if the municipality is located in the prefecture
of Attiki or Thessaloniki, 0 otherwise; OPP: 1 if there is strong opposition in the municipality (more than two opposition parties), 0 otherwise; ELECT:
1 if the mayor is re-elected, 0 otherwise; EXTACC: 1 if an external accountant exists, 0 otherwise; INSACC: 1 if there an internal committee on accrual
accounting exists, 0 otherwise; REMARKS: number of remarks in a subject to or except for report relating to specic items or matters whose materiality
has affected the picture of the nancial statements attested. An unqualied opinion has nil remarks; AUD: 1 if the audit rm is SOL, 0 if it is a mid tier audit
rm; SIZE: natural logarithm of total assets as of year-end; POP: natural logarithm of municipality population, measured by the number of citizens; CUR:
current ratio. Current assets divided by current liabilities; LEV: long term debt to equity; PROFIT: 1 if surplus is reported, 0 if decit is reported.
 S. Cohen, S. Leventis / Accounting Forum 37 (2013) 4053 51

Therefore, our results in relation to the non-compliers sub-sample reinforce our conclusions related to the signicance of
the political parameters on audit delay.

7. Conclusions

Local governments in Europe have been steadily adopting accrual accounting techniques. The publication of accrual
accounting statements at the local government level raises the question of who their actual users are as well as their users
needs. Several recent papers report that multiple stakeholders need timely information (e.g. Brusca Alijarde, 1997; Brusca &
Montesinos, 2006; Christiaens & Peteghem, 2007; Steccolini, 2004). Therefore, the issue of timeliness in nancial reporting
constitutes a signicant aspect of the research agenda.
This study provides empirical evidence relating to the audit delay of Greek municipalities for the years 20062007. The
descriptive statistics indicate that there is a considerable delay from several municipalities. Regression analysis indicates
that strong political opposition to the mayor, mayoral re-election, population, the existence of internal accounting teams for
accrual accounting, audit remarks and municipality size are all statistically signicant factors in explaining variations in audit
delay. Moreover, by analysing the group of non-complying municipalities separately, the effects of strong opposition to the
mayor and mayoral re-election remain statistically signicant in explaining the prolongation of audit delay. Furthermore,
these effects are strong enough to distinguish complying from non-complying municipalities. Our results suggest that any
attempt to more strictly enforce time regulations might not be particularly effective since the main factors contributing to
audit delay are driven by the political process under which municipalities operate and make decisions. The only signicant
factor that lies within the control of the mayor is the appointment of an internal accounting team. Therefore, our ndings
indicate that any attempt to decrease audit delay and abide by the regulatory deadlines should be directed towards strength-
ening municipal internal control efciency. Political factors, as proxied by strong opposition in the municipal council and
mayoral re-election, were found to inuence both audit delay and compliance. Factors related to politics may also affect
compliance from another perspective, namely the lack of enforcement of penalties for non-compliers. National politicians
may intervene in order for penalties not to be imposed since they depend upon the support of local networks. This context
is important in order to understand the kind of backstage localism that characterises Greek politics (Hlepas, 2003). Strong
local leaders maintain bonds and channels of easy access to decision-makers at the central state level (Hlepas, 2010). In
the same vein, the IMF (2006, p. 14) emphasises the instances of politically pressured bail-outs in cases of nancial mis-
management in local governments. However, the Greek government has recently announced, as a response to the severe
nancial problems that it has faced since 2010, the exercise of strict measures on local governments that do not comply
with legislation and do not provide accounting information on time (Decision 17838/2010). Thus, our study could provide
valuable input regarding how this agenda could be furthered.
Moreover, our study offers new directions for approaching the audit delay agenda by emphasising politically related
factors. The way democracy inuences audit delay has never been tested before. We provide evidence suggesting that
municipalities are complex organisations where additional agendas might inuence accounting and audit-related phenom-
ena. Our results indicate that the factors affecting audit delay which are well documented in private sector literature do
not hold the same power in the public sector. In the case of Greek municipalities we have observed no big-4 inuence, nor
a particular reliance on the biggest local audit rm (SOL), probably for cost-related reasons. Prior audit studies in the pri-
vate sector have suggested that auditor selection might be subject to self-selection biases (see Chaney, Jeter, & Shivakumar,
2004). To an extent, auditor selection might be mayor-driven in our study. Nevertheless, due to restrictions imposed by
Greek public sector legislation, auditors are selected based on the lowest bidder of a public call. Such calls pre-specify the
audit contract with particular reference to minimum audit effort and maximum audit fee. Therefore, mayors have no discre-
tion in de-selecting the lowest bidder. This further suggests that our study bears unique characteristics and consequently
limitations suggested elsewhere might not necessarily hold here.
The current study should be considered in relation to a number of limitations. First, the years under study (20062007)
correspond to the rst implementation of the new municipal and communal code enforcement (Law 3463/2006). The previ-
ous legislation was less detailed in terms of audit delay requirements. This might have exerted an inuence on audit delay,
and hence results might be duration specic. Second, our data refer to a sample of Greek municipalities, and they are biased
towards the large municipalities. Therefore, our results might not be easily extended to the entire population. Third, the
explanatory power of the model, although higher than in many prior research studies, might be enhanced by including
additional variables. Audit fees, non-audit fees, audit effort and audit tenure are some examples. Finally, incorporating cor-
porate governance characteristics into the analysis (specialised for the case of municipalities) might enhance the power of
the model.
Considering that audit delay in local governments is rather under-researched in Europe (with the exception of Giroux
& Jones, 2002) and elsewhere (except the US) there is scope for further study through other research approaches in
different contexts. One alternative would be a behavioural model, including preparers, municipality management and
auditors professional characteristics (e.g. experience, education). Finally, factors that are related to the achievement of
budgetary goals might also inuence relevant decisions and therefore are to be encouraged as a subject for further
research.
52 S. Cohen, S. Leventis / Accounting Forum 37 (2013) 4053

Acknowledgements

We acknowledge helpful comments by two anonymous reviewers, Gary Giroux, Costas Caramanis and George Venieris.
George Alifantis (Ernst & Young, Greece), Abraham Loutridis (KPMG, Greece), Elias Grougios (Deputy Mayor Ampelokipi,
Thessaloniki) and Tassos Sapounakis (Local Government Consultant) were most helpful in responding to our inquires. We
are grateful to the Hellenic Agency for Local Development and Local Government (EETAA) for the data provision. The paper
has also beneted from the comments of the participants in the 33rd EAA Annual Congress in Istanbul.

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