Impact of Sharing Auditors with Related Party on the Time-liness of Financial Report

. With the development of sharing economy, shared auditors have become the penetration and embodiment of the shared economic model in the audit market. This paper takes the A-share listed companies in Shanghai and Shenzhen stock markets from 2009 to 2016 as a sample, and empirically examines the impact of shared auditors of related party on the timeliness of ﬁnancial report. The study ﬁnds that the impact of related party sharing auditors on the timeliness of ﬁnancial report is not signiﬁcant in the full sample. The role of shared auditors of related parties is a ﬀ ected by audit ﬁrms size and the nature of companies. The shared auditors from Big-4 audit ﬁrms and shared auditors of private enterprises have a signiﬁcant positive e ﬀ ect on the timeliness of ﬁnancial report. The conclusion provides empirical evidence for the e ﬀ ect of shared au-ditors of related party and policy enlightenment for improving audit quality and corporate governance.


Introduction
With China's economy entering a new normal of development, the market scale of China's sharing economy continues to expand. Shared auditors are undoubtedly the penetration and embodiment of the shared economic model in the audit market. According to the knowledge spillover effect, shared auditors can more clearly learn the specific information about both parties, reduce the information asymmetry of both parties (Dhaliwal et al., 2016;Cai et al., 2022;Lei et al., 2022 ) [1][2][3]. Then auditors can implement more appropriate audit procedures to obtain more reliable and relevant audit evidence   [4]. It is a common phenomenon that related parties share auditors in the audit market. The related party relationships generally exist in the modern business system, and the regulatory authorities of various countries attach great importance to it. China's accounting standards on Business Enterprises No. 36 requires listed companies to disclose all related party relationships and related transactions in their financial reports. As the specific information of listed companies, the related party information is of positive significance for auditors to evaluate the risk of material misstatement and formulate audit procedures. So, can the shared auditors obtain more information from the transactions between the listed company and its related party, and have a positive impact on the timeliness of financial report of listed companies? It remains empirically tested.
Audit firms first need to understand the overall situation of their clients, assess the risk of material misstatement, and then implement further audit procedures according to the assessment results. When audit firms audit the listed company and its related party at the same time, audit firms can fully learn the specific transaction information between related parties, obtain appropriate and sufficient audit evidence (Sun et al., 2021) [5]. Sufficient information can reduce unnecessary audit procedures and disclosure financial reports more timely. The effect of sharing auditors with related party on the timeliness of financial report is influenced by audit firm size and firm's property rights. Compared with small audit firms, large audit firms are more willing to actively use the shared auditor model to increase their understanding of firms and reduce the possibility of the huge property loss and reputation loss caused by audit failure. Compared with non-state-owned enterprises, state-owned enterprises have more restrictions. The preparation and disclosure of annual reports will be interfered in many ways, which restrains the effect of shared auditor. Therefore, the effect of sharing auditors with related party on the timeliness of financial report may be likely salient in big audit firms and non-state-owned enterprises.
So this paper takes the A-share listed companies in Shanghai and Shenzhen from 2009 to 2016 as a sample and examines the impact of the related party sharing auditors on the timeliness of financial report. The study finds that the impact of the behavior of shared auditors of related parties on the timeliness of financial report is not significant in the full sample. The impact of shared auditors on the timeliness of financial report is affected by the size of audit firms and the nature of enterprise property rights. The shared auditors from Big-4 audit firms and shared auditors of private enterprises have a significant positive effect on the timeliness of financial report.
The contributions of this paper mainly include the following three aspects: first, it enriches the related research on shared auditors; Second, it supplements the relevant research on the timeliness of financial report; Third, it provides evidence of the relationship between the shared auditors and the timeliness of financial report, and provides a theoretical basis and decision-making guidance for companies to select and hire auditors.
The paper proceeds as follows. Section 2 reviews prior literature. Section 3 develops our hypotheses. Section 4 describes the sample, variable measurement, and research design. Section 5 presents the empirical results and robustness tests. Section 6 concludes this study.

Literature Review
The research on shared auditors mainly focuses on supply chains and M&A. The sharing of auditors between suppliers and customers plays a positive role. Companies share auditors with major customers, which helps auditors understand the company's information and significantly improves inventory turnover ratios [6]. Sharing auditor with customers will increase relationship-specific investment [7]. Supply chain sharing auditors can also reduce analyst forecast bias [8]. Shared auditors with customers provide informational advantages for suppliers' managers, thus revising their optimistic or pessimistic expectations and influencing suppliers' cost stickiness (Cai et al., 2019) [9]. What's more, sharing auditors between the acquirer and the target can improve the efficiency of M&A. Shared Auditors of M&A can provide high audit quality [10]. Cai et al. (2016) and Chircop et al. (2018) find that shared auditors can reduce uncertainty in the acquisition process, increase the possibility of M&A and improve the efficiency of M&A. [11,12]. Cai et al.(2022) find that the shared auditors between M&A activities and the target company help restrain the M&A premium [2]. You(2022)find that shared auditors can increase the enterprise value of both sides of M&A [13].
Research on the influencing factors of the timeliness of financial reporting is mainly from the perspective of firms' internal governance and external factors. Scholars have find that company size, profitability, ownership structure, internal control board characteristics and executives characteristics affect the timeliness of financial reporting [14][15][16][17][18]. Median exposure, audit quality, social responsibility and auditor locality also influence the timeliness of financial reporting [19][20][21].
Looking at the relevant literature, few scholars study the timeliness of financial reporting from the perspective of related party sharing auditors, which leaves a lot of exploration space for this research.

Theoretical Analysis and Research Hypothesis
In order to design effective audit procedures, audit firms not only need to have the professional ability but also need to master the specific information of the auditee. The related party transactions are a form of specific information. According to the knowledge spillover effect, by sharing information of related parties auditors can have a fuller and more comprehensive understanding of the auditee, which is conducive to assessing the audit firm's risk and designing efficient audit procedures to reduce audit risk(Zheng and Zhu, 2021) [6]. There is obvious economic dependence between related parties. Shared auditors can fully understand the specific transaction information between related parties, design effective audit procedures, reasonably allocate audit resources, and issue audit reports faster, which makes the financial report faster. In addition, when audit firms provide audit services for listed companies and their related party at the same time, audit firms can use their advantages to obtain relevant information and form related party knowledge(Hu et al., 2022) [7]. The overall situation of both parties is mastered by the same audit firm, which is conducive to audit firms saving the cost of understanding the auditee and speeding up the audit process. Thus, we put forward the following hypothesis: Hypothesis1. Shared auditors of the related party can improve the timeliness of financial reporting.
The scale of audit firms often has a "brand" effect on the audit market. The scale of audit firms represents its service quality, independence and reputation. The system setting of large-scale audit firms is more reasonable, customer management is more effective, and communication between auditors is closer. When the auditors shared by related parties are from large-scale audit firms, they can complete the audit business more efficiently and improve the timeliness of financial reporting. Besides, compared with small-scale audit firms, large-scale audit firms have a more obvious "deep pocket" effect. Once the audit fails and is prosecuted, they will face huge property losses and reputation losses. This leads to strong motivation for large-scale audit firms to communicate and cooperate closely with their audited companies. Large-scale audit firms are willing to actively use the shared auditor model to increase their understanding of audited companies, accelerate audit efficiency. Thus, we put forward the following hypothesis: Hypothesis2.
In contrast with small-scale audit firms, large-scale audit firms can increase the timeliness of financial reporting of the audited company.
Compared with private enterprises, the management of state-owned enterprises is more complicated and inflexible. The huge management system of state-owned enterprises will inhibit the positive effect of the shared auditor model on the timeliness of financial reporting. The behavior of sharing auditors may have no obvious negative impact on the financial reporting delay of state-owned companies. At the same time, the preparation and disclosure of the annual report will be interfered with by many personnel, and the shared auditor will be restrained. The shared auditor model may lose its effectiveness in state-owned companies, and the impact on the timeliness of financial reporting is not significant. The flexibility of non-state-owned enterprise management systems can ensure that the shared auditor model can have a positive effect and provide the timeliness of financial reporting. Thus, we put forward the following hypothesis: Hypothesis3. In contrast with state-owned enterprises, shared auditors of non-stateowned enterprises can improve the timeliness of financial reporting.

Sample Selection and Data Source
The initial research sample of this paper is the A-share listed companies in Shanghai and Shenzhen stock markets from 2009 to 2016. The screening procedures for the initial sample are as follows: (1) eliminate the sample data of related parties that are not listed companies; (2) Excluding the samples of financial companies and ST companies; (3) Eliminate listed companies with missing data. In order to eliminate the influence of outliers, this paper shrinks the tail of continuous variables at the levels of 1% and 99%. The research data used in this paper comes from CSMAR database and is sorted manually.

Main Variables Definition
Common auditor with related party: This paper uses the variable SAUDIT to measure whether related parties share auditors. If a listed company and its related enterprises hire the same accounting firm to audit the annual report, SAUDIT will be assigned as 1, otherwise it will be 0.
The Timeliness of Annual Reports: referring to the existing research, this paper uses the calendar days between the financial reporting date and the end date of the accounting year to measure the financial reporting delay, and uses variable RLAG to represent it. The smaller the RLAG, the shorter the financial reporting delay.

Research Model Design
In order to test whether the shared auditors of related parties will affect the timeliness of financial reporting, this paper uses the following regression model to test the research hypothesis: According to the existing research on the factors affecting the timeliness of annual report and shared auditors, the control variables are selected as follows: Company size (SIZE), return on total assets (ROA), asset liability ratio (LEV), annual loss (loss), shareholding ratio of the largest shareholder (SHARE1), Proportion of independent directors (ID), Audit opinion (OPINION), change of accounting firm (SWITCH), year (YEAR) and industry (IND). The definition of variables is in table 1.

Descriptive Statistical Analysis and Correlation Analysis
The table 2 is the descriptive statistical results of the main variables in this paper. The statistical results show that the average time lag of financial reporting of the sample companies is about 91.2 days, the minimum is 33 days and the maximum is 120 days. The sample size of auditors shared by related parties accounts for 49.5% of the sample, indicating that the phenomenon of auditors shared by listed companies and their related enterprises is very common. The Pearson correlation analysis results of the main variables in table 3 show that the correlation coefficients between the variables in the table are less than 0.5, indicating that there is no serious multicollinearity problem.  Note: *, **, and *** indicate p <0.1, p <0.05, p <0.01, respectively.

Regression Result
The regression results are shown in table 4. According to the regression results, although the regression coefficients of related party shared auditor SAUDIT and financial reporting delay RLAG are negative, the negative correlation is not significant in the whole sample, indicating that the impact of sharing auditors with related party on the timeliness of financial report is not significant, and the full sample regression results do not support H1. Further analysis, the sample is divided according to whether audited by the Big Four audit firms, and then conduct a regression analysis. The results show that when the audit firms are the "Big Four", the regression coefficient of related party shared auditor SAUDIT is significantly negatively correlated at the level of 10%, indicating that the shared auditor comes from The "Big Four" can significantly shorten the time lag of financial reporting. When the audit firms are not the "Big Four" The negative correlation between the related party shared auditor SAUDIT and the financial reporting delay RLAG is not significant, indicating that the timeliness of financial reporting can be provided when the shared auditor is from a large accounting firm. The regression results support H2.
According to the nature of ownership, the samples are divided into state-owned enterprises and non-state-owned enterprises for regression analysis. The results show that when the listed companies are non-state-owned enterprises, the regression coefficient of related party shared auditor SAUDIT is significantly negatively correlated at the level of 10%, indicating that the shared auditor of non-state-owned enterprises has a significant impact on the timeliness of financial report. When the listed company are state-owned enterprises, the negative correlation between SAUDIT and RLAG is not significant. The regression results support H3.

Robustness Tests
In order to improve the reliability of the research conclusion, this paper tests the robustness of the empirical results from the following three aspects. First, increase and expand the number of samples. Increase related parties in NEEQ as samples. The second is to add the proportion of accounts receivable and inventory in total assets, the growth rate of operating income and EPS as control variables. The third is to change the measurement method of the scale of audit firms. Based on the asset scale of the client companies of audit firms, audit firms are divided into "Big Eight" and non-big eight. All the robustness test results support the above conclusions. The results of robustness tests show in

Conclusion
Taking the A-share listed companies in Shanghai and Shenzhen stock markets from 2009 to 2016 as a sample, this paper studies the impact of related party sharing auditors on the timeliness of financial report in China. It is found that the behavior of related parties sharing auditors in the full sample has no significant impact on the timeliness of financial report. The reason may be that audit firms lack the corresponding sharing mechanism and do not make full use of the obvious advantage of sharing auditors to obtain relevant information, which hinders the positive impact of sharing auditors on the timeliness of financial reporting. Moreover, auditors may be restrained and intervened by listed companies, resulting in the sharing auditor model cannot give full play to its positive utility. When the audit firm is a large-scale audit firm, the behavior of shared auditor can significantly shorten the time lag of financial reporting; When the listed company is a non-state-owned company, the shared auditor can significantly shorten the time lag of financial reporting. The research conclusion of this paper provides a theoretical basis for improving the audit quality and the governance level of companies.