Abstract
Purpose – This study investigates the impact of the two main issues of the fortification of the Board Audit Committee which includes the effectiveness and independence factors practiced within the Audit Committee compared between the MCCG 2012 and the MCCG 2017 era.Design/methodology/approach –In order to review the performance of active and distinct Board Audit Committees, purposeful sampling approach is used, accompanied with regression analysis, content analysis, and systematic prior research, which evaluates the Annual Reports, Sustainability Reports and Integrated Reports.Originality/value – This study is a systematic review of recent research developments in MCCG 2012 and MCCG 2017. The Effective Board Audit Committee and the Independent Board Audit Committee scoring indices designed could also be applied to other PLCs other than the Malaysian oil and gas industry.
Highlights
The top management and the board are highly pressured to produce high earnings for the shareholders which in turn could lead to the activities of earnings management in order to benefit the board and the top management team as they believed that they should be highly rewarded rather than the shareholders
Purpose – This study investigates the impact of the two main issues of the fortification of the Board Audit Committee which includes the effectiveness and independence factors practiced within the Audit Committee compared between the era of MCCG 2012 and MCCG 2017
The ultimate responsibility of the financial reporting process lies within the full board of directors; the Board Audit Committee despite being only a sub-committee of the Board of Directors has a pivotal role in the overall company governance structure and should take the lead to rigorously challenge and probe on the organisation’s financial reporting process, internal controls and the risk management procedures
Summary
Bursa Malaysia (formerly known as the Kuala Lumpur Stock Exchange) has been mandated since 1 August 1994 to set up an audit committee within Malaysia's publicly listed firms. Felo et al (2003) observed that the audit committee members with accounting and financial management expertise were positively correlated with the quality of financial reporting. The Audit Committee should have policies and procedures as per Recommendation 5.2 to assess the suitability and independence of external auditors. The independent Audit Committee will further examine and present detailed probing questions about the company's financial reporting, internal controls, risk management and governance processes. The Audit Committee shall provide policies and procedures for evaluating the suitability, objectivity and discretion of the independent external auditor. A step-up recommendation within MCCG 2017 would be Practice Note 8.4 where only Independent Directors are allowed to join the Audit Committee (Securities Commission, 2017). Members of the Audit Committee must undertake continuing professional development (CPD) to keep abreast of new changes in accounting and auditing standards, practices and legislation (Securities Commission, 2017)
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