Corporate governance and auditor quality – Malaysian evidence

Abstract

Purpose The purpose of this paper is to conduct an investigation into the relationship between a firm’s corporate governance mechanisms (audit committee composition and operation, block shareholder, CEO duality, financial state, ownership dominance, political connection, share price, and family control) and auditor quality selection in Malaysia, for periods before and after the introduction of Malaysian Code of Corporate Governance in 2007 (MCCG 2007). Design/methodology/approach 300 companies listed on the Malaysian Stock Exchange from 2006 to 2008 were selected. A Binary regression method was used to analyse the data collected from both annual reports and financial databases. Findings The study has found that in general, MCCG 2007 influenced auditor selection through restructuring of corporate governance tools, such as audit committees and internal audit functions. Research limitations/implications Results have provided evidence that the restructuring of corporate governance may contribute and drive company to enhance the quality of the audit performed by selecting better quality auditor and/or improvising the audit related functions within the company such as formalising internal audit function. This study, however, employed an archival method of study and only used three years (2006, 2007 and 2008) of data analysis. Future research should analyse data from a longer period and utilize a field survey to understand reasons for auditor selection from the company perspective. Originality/value Building on previous studies, this study contributes to the current body of knowledge as it also considers the objective from the perspective of the revised MCCG 2007. It examines whether the introduction of new or revised corporate governance guidelines may immediately impact company auditor selection. Therefore, it compares the auditor quality of the company from pre-MCCG 2007 (2006) and post-MCCG 2007 (2008).

Book‐Tax Differences, Corporate Governance Effectiveness and Audit Quality: An Interactive Effects

“…Husnin, Nawawi, and Salin () found that in general corporate governance practices influence auditor selection through restructuring of corporate governance tools, such as audit committee and internal audit functions.…”

“…In addition, the study provides supporting evidence for the complementary association between a company's governance and audit fees. Husnin, Nawawi, and Salin (2016) found that in general corporate governance practices influence auditor selection through restructuring of corporate governance tools, such as audit committee and internal audit functions.…”

تأثیر خصائص مجلس الإدارة علی الإفصاح عن المعلومات المستقبلیة دلیل من بورصة الأوراق المالیة المصریة (باللغة الانجلیزیة)

“…Transparency must be visible, which should take the form of consistent records and reports on income. Husnin et al, (2016) demonstrated that expropriation, potentialconflicts of interests and unfair of minority shareholders can result because of poor CG. It only serves the individuals involved but-do notaffect the value of other stakeholders.…”

“…Both monitoring and advising were the most powerful activities; where advising means assisting the top management team in creating and keeping strategies for achieving the goals of the company (Ali, 2018). Husnin et al, (2016) agreed that the implementation of CG is a crucial factor that helps companies to secure and attain their sustainability and competitiveness within the business environment. The practices of different mechanisms of CG did not only serve the business internal process, but also create external support to stockholders, creditors, and other stakeholders.…”

Corporate Governance and Auditor Choice in Kuwait

“…Researchers (e.g., Fan and Wong, 2005;Eshleman and Guo, 2014;Asthana et al 2015;Knechel, 2016) have typically viewed 'Big' audit firms to provide higher quality audit than 'non-Big' firms as a result of their competitive advantages in terms of scale of operations, technical competencies, and market reputation. Accordingly, several audit studies (e.g., Firth and Smith, 1992;Beasley and Petroni, 2001;Lin and Liu, 2009;Hsu et al 2015;Husnin et al 2016;Lai et al 2017) were carried out to investigate factors related to audit client's choice to hire "Big 4" vs. "non-Big 4" external audit firm. Although audit research has investigated auditor choice for quite some time, a relatively recent stream of this research has focused on the effect of CG factors on this choice (Hay et al 2006).…”