Audit Delay

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International Bulletin of Business Administration
ISSN: 1451-243X Issue 10 (2011)
EuroJournals, Inc. 2011
http://www.eurojournals.com

Audit Report Lag and the Effectiveness of Audit Committee Among Malaysian Listed Companies

Ummi Junaidda Binti Hashim
Universiti Sultan Zainal Abidin
E-mail: junaidda@udm.edu.my
Tel: 609-6653760; Fax: 609-6669220

Rashidah Binti Abdul Rahman
Accounting Research Institute, Universiti Teknologi Mara Shah Alam E-mail: shidah@salam.uitm.edu.my
Tel: 603 55444745; Fax: 603 55444921

Abstract
The purpose of this study is to examine the link between audit committee characteristics and audit report lag among 288 companies listed at Bursa Malaysia for a three year period from 2007 to 2009. The characteristics of audit committee examined are audit committee independence, audit committee diligence and audit committee expertise. In this study, audit report lag refers to the number of days from the company’?s year end (financial year) to the date of auditor’?s report. The results of this study show that audit report lag for the listed companies in Malaysia ranges from 36 days to 184 days for the three year period. The results of this study also show that audit committee independence and audit committee expertise could assist in reducing audit report lag among companies in Malaysia. This study however could not provide any evidence on the link between audit committee diligence on audit report lag. Overall, the findings in this study provide some evidence supporting the resource based theory, whereby characteristics of the audit committee as the resources and capabilities could improve companies’? performance as well as corporate reporting.

Keywords: Audit Committee, Audit Report Lag
1. Introduction
Financial reporting in general will provide useful information and assist users in decision making as capacity of capital providers in companies. Particularly users rely on the audited financial reports in their assessment and evaluation of companies’? performance. The audited financial reports will increase its reliability and users will feel affirm on the reports verified by the auditors and would be able to make decision wisely (FASB, Concepts Statement 2). Timeliness itself will enhance the usefulness of the information. There are many ways to define timeliness. Commonly known that timeliness is the reporting delay from the company’?s accounting year end to the date of the audit report completed (Chambers and Penman, 1984). Audit report lag would lead the shareholders and potential shareholders to postpone their transaction on shares (Ng and Tai, 1994). This in turn, would provide negative effect to the company.

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Bursa Malaysia1 has demanded for timely financial reporting through the provision of Chapter 2 and Chapter 9 of the Listing Requirements (2009), Bursa Malaysia Securities Berhad. Bursa Malaysia listing requirement under chapter 9.23 (a) provides that a public listed companies must submit its annual report to Bursa Malaysia within six months after the company’?s year end. To prevent companies from late submission of their audited financial reports, Bursa Malaysia in consultation with Securities Commission has imposed penalty to public listed companies for failure to disclose the material facts such as the annual report within the time frame. However, despite the penalty being imposed, there are companies that could not meet the submission deadline. This current scenario as reported in Bursa Malaysia website 2010...
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