Audit committee characteristics and audit report lag in Malaysia

Timeliness of the financial statements is one of the important aspects that concerns the users of information. The delay in publication of corporate financial statements may affect the usefulness of the information. This paper aims to investigate the relationship between the characteristics of audit...

Full description

Saved in:
Bibliographic Details
Main Author: Al-Qublani, Ayad Ahmed Mohammed
Format: Thesis
Language:eng
eng
Published: 2016
Subjects:
Online Access:https://etd.uum.edu.my/6706/1/s817316_01.pdf
https://etd.uum.edu.my/6706/2/s817316_02.pdf
Tags: Add Tag
No Tags, Be the first to tag this record!
id my-uum-etd.6706
record_format uketd_dc
institution Universiti Utara Malaysia
collection UUM ETD
language eng
eng
advisor Kamardin, Hasnah
topic HF5667 Professional Ethics
Auditors.
spellingShingle HF5667 Professional Ethics
Auditors.
Al-Qublani, Ayad Ahmed Mohammed
Audit committee characteristics and audit report lag in Malaysia
description Timeliness of the financial statements is one of the important aspects that concerns the users of information. The delay in publication of corporate financial statements may affect the usefulness of the information. This paper aims to investigate the relationship between the characteristics of audit committee: audit committee independence, audit committee overlap, tenure of chairman of audit committee, expertise of chairman of audit committee, and audit report lag of firms listed on Bursa Malaysia. Data were collected from 139 companies in the financial year 2015. Descriptive analysis was used to provide insight into the time taken by external auditors to complete the audit work. The results show that on average, the companies took about 95 days to complete their audit report with a maximum and minimum day of 122 days and 45 days respectively. In addition, regression analysis was used to provide empirical evidence on which variables had significant relationship with audit report lag. The results show that chairman of audit committee with accounting expertise, audit committee size, frequency of meetings of audit committee, firm size, leverage, and profitability are significantly associated with audit report lag. However, the other five variables: audit committee independence, audit committee overlap, tenure of chairman of audit committee, auditor type and industry type were insignificantly related with audit report lag. This study contributes to the body of knowledge by providing a good indicator of the extent of the application of the proposed law from Securities Commission of Malaysia (The proposed draft code of corporate governance 2016) which suggests that the chair of audit committee should be a person with accounting expertise.
format Thesis
qualification_name masters
qualification_level Master's degree
author Al-Qublani, Ayad Ahmed Mohammed
author_facet Al-Qublani, Ayad Ahmed Mohammed
author_sort Al-Qublani, Ayad Ahmed Mohammed
title Audit committee characteristics and audit report lag in Malaysia
title_short Audit committee characteristics and audit report lag in Malaysia
title_full Audit committee characteristics and audit report lag in Malaysia
title_fullStr Audit committee characteristics and audit report lag in Malaysia
title_full_unstemmed Audit committee characteristics and audit report lag in Malaysia
title_sort audit committee characteristics and audit report lag in malaysia
granting_institution Universiti Utara Malaysia
granting_department Tunku Puteri Intan Safinaz School of Accountancy (TISSA)
publishDate 2016
url https://etd.uum.edu.my/6706/1/s817316_01.pdf
https://etd.uum.edu.my/6706/2/s817316_02.pdf
_version_ 1747828106268246016
spelling my-uum-etd.67062021-04-05T01:48:50Z Audit committee characteristics and audit report lag in Malaysia 2016 Al-Qublani, Ayad Ahmed Mohammed Kamardin, Hasnah Tunku Puteri Intan Safinaz School of Accountancy (TISSA) Tunku Puteri Intan Safinaz School of Accountancy (TISSA) HF5667 Professional Ethics. Auditors. Timeliness of the financial statements is one of the important aspects that concerns the users of information. The delay in publication of corporate financial statements may affect the usefulness of the information. This paper aims to investigate the relationship between the characteristics of audit committee: audit committee independence, audit committee overlap, tenure of chairman of audit committee, expertise of chairman of audit committee, and audit report lag of firms listed on Bursa Malaysia. Data were collected from 139 companies in the financial year 2015. Descriptive analysis was used to provide insight into the time taken by external auditors to complete the audit work. The results show that on average, the companies took about 95 days to complete their audit report with a maximum and minimum day of 122 days and 45 days respectively. In addition, regression analysis was used to provide empirical evidence on which variables had significant relationship with audit report lag. The results show that chairman of audit committee with accounting expertise, audit committee size, frequency of meetings of audit committee, firm size, leverage, and profitability are significantly associated with audit report lag. However, the other five variables: audit committee independence, audit committee overlap, tenure of chairman of audit committee, auditor type and industry type were insignificantly related with audit report lag. This study contributes to the body of knowledge by providing a good indicator of the extent of the application of the proposed law from Securities Commission of Malaysia (The proposed draft code of corporate governance 2016) which suggests that the chair of audit committee should be a person with accounting expertise. 2016 Thesis https://etd.uum.edu.my/6706/ https://etd.uum.edu.my/6706/1/s817316_01.pdf text eng public https://etd.uum.edu.my/6706/2/s817316_02.pdf text eng public masters masters Universiti Utara Malaysia Abbott, L. J., Parker, S., & Peters, G. F. (2004). Audit Committee Characteristics and Restatements. A Journal of Practice & Theory, 23(1), 69–87. Afify, H. a. E. (2009). Determinants of audit report lag. Journal of Applied Accounting Research, 10(1), 56–86. Al-Ajmi, J. (2008). Audit and reporting delays: Evidence from an emerging market. Advances in Accounting, 24(2), 217–226. Al-baidhani, A. M. (2014). Review of Corporate Governance Bundle. Available at SSRN 2462863., 11(4). Alfraih, M. M. (2016). Corporate governance mechanisms and audit delay in a joint audit regulation. Journal of Financial Regulation and Compliance, 24(3), 292–316. Alshetwi, M. (2016). The Association between Audit Committee Members’ Multiple Directorship, Ownership and Earnings Management in Saudi Arabia. International Business Research, 9(10), 33. Apadore, K., & Mohd Noor, M. (2013). Determinants of Audit Report Lag and Corporate Governance in Malaysia. International Journal of Business & Management, 8(15), 151–163. Archambeault, D. S., Dezoort, F. T., & Hermanson, D. R. (2008). Audit Committee Incentive Compensation and Accounting Restatements. Contemporary Accounting Research, 25(4), 965–992. Ashton, R. H., Graul, P. R., & Washington, E. (1989). Audit delay and the timeliness of corporate reporting. Contemporary Accounting Research, 5(2), 657–673. Ashton, R. H., Willingham, J. J., & Elliott, R. K. (1987). An Empirical Analysis of Audit Delay. Journal of Accounting Research, 25(2), 275–292. Baatwah, S., Ahmad, N., & Salleh, Z. (2013). Whether audit committee financial expertise is the only relevant expertise: A review of audit committee expertise and timeliness of financial reporting. Issues in Social & Environmental Accounting, 7(3), 86–101. Baatwah, S. R., Salleh, Z., & Ahmad, N. (2015). "CEO characteristics and audit report timeliness: do CEO tenure and financial expertise matter? Managerial Auditing Journal, 30(1), 998–1022. Barua, A., Rama, D. V., & Sharma, V. (2010). Audit committee characteristics and investment in internal auditing. Journal of Accounting and Public Policy, 29(5), 503–513. Basuony, M. A. K., Mohamed, E. K. A., Hussain, M. M., & Marie, O. K. (2016). Board characteristics, ownership structure and audit report lag in the Middle East. International Journal of Corporate Governance, 7(2), 180–205. Bell, T. B., Causholli, M., & Knechel, W. R. (2015). Audit Firm Tenure, Non‐Audit Services, and Internal Assessments of Audit Quality. Journal of Accounting Research, 53(3), 461–509. Bromilow, C. (2010). Congratulations, you're the audit committee chair. Now what? Available at: http://www.directorship.com/catherine-bromilow-audit-committeechair. Buchanan, B. (1974). Building Organizational Commitment: The Socialization of Managers in Work Organizations. Administrative Science Quarterly, 19(4), 533–546. Carcello, J. V., Hermanson, D. R., & Zhongxia Ye. (2011). Corporate Governance Research in Accounting and Auditing: Insights, Practice Implications, and Future Research Directions. A Journal of Practice & Theory, 30(3), 1–31. Carcello, J. V, Hollingsworth, C. W., Klein, A., & Neal, T. L. (2006). Audit Committee Financial Expertise, Competing Corporate Governance Mechanisms, and Earnings Managemen. Competing Corporate Governance Mechanisms, and Earnings Management, (February). Carslaw, C. a. P. N., & Kaplan, S. E. (1991). An Examination of Audit Delay: Further Evidence from New Zealand. Accounting and Business Research, 22(85), 21–32. Cassell, C. A., Hansen, J. C., Myers, L. A., & Seidel, T. A. (2016). Does the Timing of Auditor Changes Affect Audit Quality? Evidence from the Initial Year of the Audit Engagement. Chan, K. H., Luo, V. W., & Mo, P. L. L. (2015). Determinants and implications of long audit reporting lags: evidence from China. Accounting and Business Research, 46(2), 145–166. Chandar, N., Chang, H., & Zheng, X. (2012). Does overlapping membership on audit and compensation committees improve a firm’s financial reporting quality? Review of Accounting and Finance, 11(2), 141–165. Dao, M., & Pham, T. (2014). Audit tenure, auditor specialization and audit report lag. Managerial Auditing Journal, 29(6), 490–512. Defond, M. L., Hann, R. N., Xuesong, H. U., & Engel, E. (2005). Does the market value financial expertise on audit committees of boards of directors? Journal of Accounting Research, 43(2), 153–204. DeZoort, F. T., Hermanson, D. R., Archambeault, D. S., & Reed, S. A. (2002). Audit committee effectiveness: a synthesis of the empirical audit committee literature. Journal of Accounting Literature, 21, 38–75. Dhaliwal, D. A. N., Naiker, V. I. C., & Navissi, F. (2010). The Association Between Accruals Quality and the Characteristics of Accounting Experts and Mix of Expertise on Audit Committees. Contemporary Accounting Research, 27(3), 787–827. Fama, E. F. (1980). Agency Problems and the Theory of the Firm. Journal of Political Economy, 88(2), 288–307. Financial Accounting Standards Board (FASB). 2010. Conceptual Framework for Financial Reporting; Chapter 1. Ghazali, Z., & Manab, N. (2013). The Effect of Malaysian Code of Corporate Governance (MCCG) Implementation to Companies’ Performances. Journal of Accounting, Finance and Economics, 3(2), 43–52. Ghosh, A., & Moon, D. (2004). Auditor Tenure and Perceptions of Audit Quality. The Accounting Review, 80(2), 1–44. Gilling, D. M. (1977). Timeliness in corporate reporting: some further comment. Accounting and Business Research, 8(29), 34-36. Habib, A. (2015). The New Chinese Accounting Standards and Audit Report Lag. International Journal of Auditing Int., 19(1), 1–14. Habib, A., Bhuiyan, M., & Uddin, B. (2015). Overlapping membership on audit and compensation committees, equity holdings, and financial reporting quality. Australian Accounting Review, 1(26), 1–37. Hashim, U. J. B., & Rahman, R. B. A. (2011). Audit Report Lag and the Effectiveness of Audit Committee Among Malaysian Listed Companies. International Bulletin of Business Administration, 10(1), 50–61. Hassan, Y. M. (2016). "Determinants of audit report lag: evidence from Palestine. Journal of Accounting in Emerging Economies, 6(1), 13–32. Hazarika, S., Karpoff, J. M., & Nahata, R. (2012). Internal corporate governance, CEO turnover, and earnings management. Journal of Financial Economics, 104 (1), 44–69. Ika, S. R., & Ghazali, N. A. M. (2012). Audit committee effectiveness and timeliness of reporting: Indonesian evidence. Managerial Auditing Journal, 27(4), 403–424. Ilaboya, O. J., & Christian, I. (2014). Corporate governance and audit report lag. International Journal of Humanities and Social Science, 4(13), 172–180. Karim, K., Robin, A., & Suh, S. (2015). Board Structure and Audit Committee Monitoring: Effects of Audit Committee Monitoring Incentives and Board Entrenchment on Audit Fees. Journal of Accounting, Auditing & Finance, 1(28), 1–87. Kiel, G. C., Nicholson, G. J., Tunny, J. A., & Beck, J. (2012). Directors at Work: A practical guide for Boards. Sydney: Thomson Reuters, Australia. Khasharmeh, H. A., & Aljifri, K. (2010). The timeliness of annual reports in Bahrain and the United Arab Emirates: An empirical comparative study. The International Journal of Business and Finance Research, 4(1), 51–71. Khlif, H., & Samaha, K. (2014). Internal control quality, Egyptian standards on auditing and external audit delays: Evidence from the Egyptian stock exchange. International Journal of Auditing, 18(2), 139–154. Khondkar, K., Robin, A., & Suh, S. (2016). Board Structure and Audit Committee Monitoring: Effects of Audit Committee Monitoring Incentives and Board Entrenchment on Audit Fees. Journal of Accounting, Auditing & Finance, 31(2), Krishnan, G. V., & Visvanathan, G. (2008). Does the SOX Definition of an Accounting Expert Matter? The Association between Audit Committee Directors’ Accounting Expertise and Accounting Conservatism*. Contemporary Accounting Research, 25(3), 827–858. Kusnadi, Y., Leong, K. S., Suwardy, T., & Wang, J. (2015). Audit Committees and Financial Reporting Quality in Singapore. Journal of Business Ethics, 3(2), 1–18. Lee, H.-Y., Mande, V., & Son, M. (2009). Do Lengthy Auditor Tenure and the Provision of Non-Audit Services by the External Auditor Reduce Audit Report Lags? International Journal of Auditing, 13(2), 87–104. Leventis, S., Weetman, P., & Caramanis, C. (2005). Determinants of Audit Report Lag: Some Evidence from the Athens Stock Exchange. International Journal of Auditing, 9(1), 45–58. Liao, C. H., & Hsu, A. W. H. (2013). Common Membership and Effective Corporate Governance: Evidence from Audit and Compensation Committees. Corporate Governance (Oxford), 21(1), 79–92. Liu, G., & Sun, J. (2010). Director tenure and independent audit committee effectiveness. International Research Journal of Finance and Economics, (51), 177–189. MarhaYaacob, N., & Che-Ahmad, A. (2012). Adoption of FRS 138 and Audit Delay in Malaysia. International Journal of Economics and Finance, 4(1), 167–176. Mohamad-Nor, M. N., Shafie, R., & Wan-Hussin, W. N. (2010). Corporate governance and audit report lag. Asian Academy of Management Journal of Accounting and Finance, 6(2), 57–84. Munsif, V., Raghunandan, K., & Rama, D. V. (2012). Internal Control Reporting and Audit Report Lags: Further Evidence. A Journal of Practice & Theory, 31(3), Nelson, S. P., & Shukeri, S. N. (2011). Corporate governance and audit report timeliness: evidence from Malaysia. IResearch in Accounting in Emerging Economies (Vol. 11). Othman, R., Farhana, I., Maznah, S., Arif, M., & Abdul, N. (2014). Influence of audit committee characteristics on voluntary ethics disclosure. Procedia - Social and Behavioral Sciences, 145, 330–342. Persons, O. S. (2005). The Relation Between the New Corporate Governance Rules and the Likelihood of Financial Statement Fraud. Review of Accounting and Finance, 4(2), 125–148. PricewaterhouseCoopers L.L.P. (2003). Audit committees: Good practices for meeting market expectations (2nd ed.) (Available at: http://www.pwc.com/gx/en/ifrsreporting/ corporate-governance-publicationsaudit-committees.jhtml) Puasa, S., Salleh, M. F. M., & Ahmad, A. (2014). Audit Committee and Timeliness of Financial Reporting: Malaysian Public Listed Companies. Middle-East Journal of Scientific Research, 22(2), 162–175. Rickling, M. (2014). Audit Committee Characteristics and Repeatedly Meeting- Beating Analyst Forecasts. International Journal of Business, 19(2), 174-. Securities and Exchange Commission (SEC). 2005. Revisions to Accelerated Filer Definition and Accelerated Deadlines for Filing Periodic Reports. Release No. 33-8644. Washington, DC: Government Printing Office. Sekaran, U. & Bougie, R. (2010). Research Methods for Business: A Skill Building Approach, 5th ed., Chichester: John Willey & Sons Ltd. Securities Commission. (2000). Malaysian Code on Corporate Governance. Kuala Lumpur: Securities Commission. Securities Commission. (2007). Malaysian Code on Corporate Governance (Revised 2007). Kuala Lumpur: Securities Commission. Securities Commission. (2012). Malaysian Code on Corporate Governance. Kuala Lumpur: Securities Commission. Securities Commission. (2016). Proposed Draft of the Malaysian Code on Corporate Governance 2016. Kuala Lumpur: Securities Commission. Schmidt, J., & Wilkins, M. S. (2013). Bringing darkness to light: The influence of auditor quality and audit committee expertise on the timeliness of financial statement restatement disclosures. A Journal of Practice & Theory, 32(1), 221–244. Shafie, R., Hussin, W. N. W., Yusof, M. ‘Atef M., & Hussain, M. H. M. (2009). Audit Firm Tenure and Auditor Reporting Quality: Evidence in Malaysia. International Business Research, 2(99), 99–109. Sharma, V. D., & Iselin, E. R. (2012). The association between audit committee multiple-directorships, tenure, and financial misstatements. A Journal of Practice & Theory, 31(3), 149–175. Sharma, V. D., & Kuang, C. (2013). Voluntary audit committee characteristics, incentives, and aggressive earnings management: Evidence from New Zealand. International Journal of Auditing, 18(1), 76–89. Sharma, V., Naiker, V., & Lee, B. (2009). Determinants of Audit Committee Meeting Frequency: Evidence from a Voluntary Governance System. Accounting Horizons, 23(3), 245–263. Singam, K. (2003). Corporate Governance in Malaysia. Bond Law Review, 15(1), 314–344. Sultana, N., Singh, H., & Van der Zahn, J. L. W. M. (2015). Audit Committee Characteristics and Audit Report Lag. International Journal of Auditing, 19(2), 72–87. Tanyi, P. N., & Smith, D. B. (2015). Busyness, Expertise, and Financial Reporting Quality of Audit Committee Chairs and Financial Experts. A Journal of Practice & Theory, 34(2), 59–89. Thoopsamut, W., & Jaikengkit, A. (2009). Audit committee characteristics, audit firm size and quaterly earnings management in Thailand. In Emerging Issues and Challenges in Business & Economics: Selected Contributions from the 8th Global Conference, 8(1), 3–12. Trompeter, G., Myers, J., Mcqueen, R. L., & Myers, L. (2016). Does Auditor Tenure Impact the Effectiveness of Auditors’ Response to Fraud Risk? Available at SSRN 2448680. Turley, S., & Zaman, M. (2004). The corporate governance effects of audit committees. Journal of Management and Governance, 8(3), 305–332. Udueni, H. (1999). Power Dimensions in the Board and Outside Director Independence: Evidence from large industrial UK firms. An International Review, 7(1), 62–72. Vafeas, N. (2003). Length of board tenure and outside director independence. Journal of Business Finance and Accounting, 30(7–8), 1043–1064. Wan-Hussin, W. N., & Bamahros, H. M. (2013). Do investment in and the sourcing arrangement of the internal audit function affect audit delay? Journal of Contemporary Accounting and Economics, 9(1), 19–32. Yang, J. S., & Krishnan, J. (2005). Audit Committees and Quarterly Earnings Management. International Journal of Auditing, 9(3), 201–219. Zheng, X. (2008). An empirical analysis of the relationship between audit committee multiple directorships and financial reporting quality, (May). Retrieved from ProQuest Dissertations and Theses database. Zheng, X., & Cullinan, C. P. (2010). Compensation / audit committee overlap and the design of compensation systems. International Journal of Disclosure and Governance, 7(2), 136–152.