Audit Committee Chair Attributes and Audit Report Lag in an Emerging Market

Ayad Ahmed Mohammed Al-Qublani,Hasnah Kamardin,Rohami Shafie

doi:10.5430/ijfr.v11n4p475

Abstract

This study is motivated by the new listing requirement of Bursa Malaysia (formerly known as Kuala Lumpur Stock Exchange, KLSE) concerning the shorter timeframe of annual report release. Similarly, the call for future research on the efficacy of audit committee chair (ACC) attributes with audit report lag (ARL) has further driven this study. Therefore, this paper aimed to analyse the relationship between the ACC expertise and ACC tenure with the ARL of companies in the Main Market of Bursa Malaysia in 2015 using a sample of 139 companies. Furthermore, other audit committee (AC) attributes such as AC overlap and AC independence were also examined. Results of the study revealed an average of 95 days is required by the companies to conclude their respective audit reports. ACC with accounting expertise enhanced the ARL, whereas AC overlap and AC independence did not reduce the ARL. Concurrently, other control variables like AC size, frequency of AC meetings, firm size, leverage, and profitability depicted significant relationship with the ARL. Hence, this research is relevant to the current ARL literature via the provision of evidence and justification regarding the important role of ACC with accounting expertise towards the AC effectiveness, thus enhancing the timelines of financial reporting.

Highlights

Following the accounting scandals of various companies over the past few years, the quality of financial reporting has emerged as an issue of high importance
The results showed a negative relationship between audit committee chair (ACC) with accounting expertise (ACCEXP) and audit report lag (ARL), which supported the first hypothesis and provided evidence that the ACC with accounting expertise was related to reducing the ARL with significance
The main objective positioned by this work was to assess the relationship linking the accounting expertise in the audit committee (AC) and ARL in Malaysia

Summary

Introduction

Following the accounting scandals of various companies over the past few years, the quality of financial reporting has emerged as an issue of high importance. Similar events occurring in Malaysia included Megan Media Holdings Berhad and Transmile Group Berhad in 2007 (i.e. in Malaysia) (Hasnan & Hussain, 2015) and the recently explosive Felda Global Ventures Holdings Bhd (FGV) scandal of 2017. These collapses have highlighted the need to ameliorate the financial reporting quality (FRQ) and increase the transparency in the action undertakings (Bardos, 2011). One crucial metric of FRQ and transparency is timeliness (Al-Ajmi, 2008; Rusmin & Evans, 2017) in which the timeliness of a financial report is seen as a critical attribute of financial accounting information (Al-Ajmi, 2008). Timely financial reporting will improve the confidence of investors (Leventis, Weetman, & Caramanis, 2005) by reducing any information asymmetry and enhancing the decision-making processes, predominantly in emerging markets including Malaysia (Owusu-Ansah & Leventis, 2006)

Objectives

Methods

Results

Conclusion