THE IMPACT OF AUDIT COMMITTEE ON AUDIT FEES IN MALAYSIAN PUBLIC-LISTED COMPANIES

Abstract

This study extends the literature on the quality of corporate governance and audit by examining the influence of audit committee on audit fees. The sampling frame consists of Malaysian non-financial public-listed companies from 2003 to 2012. The sample consists of 4,570 observations. The study applies pooled ordinary least square (OLS) to test the hypotheses and model. We use audit committee independence, audit committee expertise, number of audit committee meetings, and audit committee size as proxies for the quality of corporate governance and audit fees as proxy for audit quality. The findings show that the audit committee attributes are not significantly related to audit fees, which suggests that audit committee attributes have no influence on the audit fees. To extend this research, we recommend the inclusion of other attributes, such as communication between audit committee and the board, communication among the audit committee, and the extent of their understanding of the company’s risk and control systems. These additional variables complement the quantitative approach of this study using a qualitative research method. These variables can provide insights into the functions of audit committee to verify its efficacy as an internal governance mechanism. Keywords: audit committees, audit fees, proxy for audit quality, internal governancemechanism, Malaysian public-listed companies