Audit Committee and Auditor Independence: Some Evidence from Malaysia

Abstract

This paper investigate the impact of five issues on audit committee such as active audit committee, compulsory audit committee reports, audit committee approves audit fees, audit committee reviews audit fees, audit committee comprised of majority independent and non-executive directors, to auditor independence. To achieve the research objective, this study was undertaken in two stages: the first stage involved the use of a postal questionnaire survey and the second stage employed interview survey. The population selected for this study consists of auditors, loan officers and senior managers of Malaysian public listed companies. The questionnaire survey revealed that the majority of the respondents agreed that auditor independence would be safeguarded by the presence of an active audit committee, if it was compulsory to include an audit committee report in the annual report, if the audit committee was responsible for approving and reviewing audit fees, and if the majority of audit committee members were independent and non-executive. It is found that the interview survey confirmed the questionnaire survey's findings. This indicates that the respondents have faith in the existence of audit committees in the Malaysian capital market, which would enhance communication between auditors and management.