Raja Adzrin Raja Ahmad* Khairul Anuar Kamarudin* * Lecturers, MARA University of Technology, Malaysia ABSTRACT This paper investigates the determinants of audit delay in Malaysia. The sample comprises 100 companies listed in the Kuala Lumpur Stock Exchange during the period 1996-2000. Descriptive statistics indicate the audit delay to be more than 100 days for the five years under study with a minimum standard deviation of 36 days. Eight hypotheses relating audit delay to company size, industry classification, sign of income, extraordinary item, audit opinion, auditor, year-end and risk are tested in this study. The results from the t-test of differences, chi-square test of independent and ordinary least square regression (OLS) largely support the alternate hypotheses put forward except for the extraordinary items and the company size. The primary findings are that the audit delay is significantly longer for companies that (1) are non-financial industry, (2) receive other than unqualified audit opinions, (3) have other than 31 December as the financial year end, (4) are audited by non big-five, (5) incur negative earnings and (6) have higher risk. It is hoped that this study, which is conducted in an economically and culturally different context from all existing studies can contribute towards the current literature on audit delay.
INTRODUCTION Timeliness is an important qualitative attribute of financial statement, which requires the information to be made available to the users as rapidly as possible. The increase in the reporting lag reduces the information content and the relevancy of the documents. The recognition that the length of audit may be the single most important determinant affecting the timing of earnings announcement has motivated recent research on audit delay, (Whittred, 1980b; Givoly and Palmon, 1982; and Carslaw and Kaplan, 1991). Abdulla (1996) suggested that the shorter the time between the end of the accounting year and the publication date, the greater the benefits that can be derived from the financial statement. The delay in releasing the financial statement is most likely to boost uncertainty associated with the decisions made based on the information contained in the financial statements. Thus, the decision may not be of superlative quality. Both empirical and analytical evidences found that the timeliness of financial statement has some repercussions on the firms’ value, (Beaver, 1968; Givoly and Palmon, 1982; Chamber and Penman, 1984; and Kross and Schroeder, 1984). For instance, Givoly and Palmon (1982, p. 486) contended that the price reaction to the disclosure of early earnings announcements was significantly more pronounced than the reaction to late announcements. Beaver (1968) asserted that investors may postpone their purchases and sales of securities until the earnings report is released. Likewise, the investors would probably search for alternative source of information. The delayed disclosure may encourage certain unscrupulous investors to acquire costly private pre-disclosure information and exploit their private information at the expense of ‘less informed’ investors, (Bamber, Bamber, and Schoderbek, 1993). Greater concern about the timeliness of the public information disclosure has motivated several investigations on the determinants of audit delay (Ashton, Willingham and Elliot, 1987; Ashton, Graul and Newton, 1989; Newton and Ashton,1989 and Carslaw and Kaplan, 1991). Thus, the purpose of the present study is to provide further evidence on the determinants of audit delay in Malaysia. This study extends the previous studies by focusing on the Malaysian setting with a more recent data. The present study also considers the econometric problems when conducting the Ordinary Least Square Regression (OLS).
PREVIOUS EMPIRICAL EVIDENCE Several studies have been conducted to find ground on...