Audit committees and internal auditors: Using LMX for relationship analysis

The purpose of this paper is to provide a theoretically-informed meaning for the ‘quality of the audit committee-internal auditor relationship’ construct and to provide a new instrument for its measure. Leader-Member Exchange Theory (LMX theory) is widely accepted in the management communication and management literature as one which can be used to explain the development of a leader-member relationship and the quality of such a relationship. The analysis will be grounded in the LMX literature, and in understanding of the relationship between the audit committee and internal auditors. This paper is a contribution to the literature as such application of LMX is a newly theorised initiative to enable researchers to improve our understandings of this important corporate relationship. The output of this analysis can be used for research which evaluates the quality of the audit committee-internal auditor relationship (AC-IA relationship)

Understanding and assessing governance agents relationships: the contribution of leader-member exchange theory

It is a textbook truism that many corporate relationships among governance agents could be theoretically informed by the established agency paradigm. The economic based principal-agent theorization is however falling short of allowing researchers to evaluate the quality of such relationships. In this paper, we depart from the mainstream principal-agent theoretical argumentation by attending to “Leader-Member Exchange” theory (LMX theory), a commonly applied theorization in organizational psychology and communication management literature repertoire. We delineate relevant governance relationships among various governance agents across contexts and subsequently, theoretically argue the applicability of LMX theory in explaining their dyadic relationships. Interfacing LMX theory with corporate governance, we further provide the necessary instruments for measuring governance agents’ relationships quality. Despite the theoretical and argumentative nature of our research endeavour, this paper presents a novel attempt to theoretically demonstrate in light of the subtlety in governance scholarship with respect to the quality of corporate relationships prevailing in any established governance arrangements, that the LMX theory provides an applicable and useful framework through which the dynamics of corporate relationships within the context of corporate governance could be appropriately analyzed and evaluated

An analysis of audit fee premiums of the merged audit firm in Malaysia

After the Big 6 merger exercise in 1998, PriceWaterhouseCoopers (PWC) has become the industry market leader that provides high quality audit services. Consequently, it has acquired a greater capacity to develop expertise and provide better quality audit services. It is expected that PWC charges fee premiums in return on investment for the capacity building. This study investigates how audit fee (AF) premiums and how it relates to auditors' industry specialisation and reputation. The study utilises data of 679 Bursa Malaysia listed companies in 2001 and 796 in 2005. AF premiums are calculated using the Simunic (1980) AF model. Industry specialisation is determined based on the number of audit clients at 20% threshold. Results indicate PWC obtains highest average AFs, hence, maintains its industry leadership. Results show that PWC does not charge AF premiums over and above the amount charged by the Big 5/4 regardless of whether they are industry specialists or not, except on smaller clients

Accounting students perception on Online Homework Software (OHS)

Recent technologies provide variety of tools for educators in all field including accounting. One of these tools is Online Homework Software (OHS). This study collects survey data from accounting students at Universiti Putra Malaysia to explore their perception of OHS in accounting courses. Analysis of the survey data indicated several differences between OHS users and nonusers. There are a positive correlation between shorterm performance and the hours spent of revision to the use of OHS. The ANOVA analysis show no significant difference in current CGPA (long term performance) between OHS users and nonusers. The users of OHS have reveal that the educators using OHS for assigned graded homework and the quizzes but not using OHS for formal exam. The user of OHS agree that OHS will give benefit in accounting course and able to reduce time spent in revision. Respondents also belief that OHS is a cost effective learning tool. However, the strongest concern express by the respondents is whether the use of OHS really improves their learning. The data collected is important in promoting dialog concerning OHS usage and developing recommendations for continued improvements in the software

Audited quarterly accounts and earnings response coefficients

The production of quarterly accounts has become a mandatory requirement for listed companies in many countries. However, these accounts are not required to be audited in many jurisdictions, which expose these accounts to the risk of errors and manipulations. The purpose of this study is to examine the investors’ response towards auditor’s involvement in quarterly accounts. Analysis is based on matched pair sample of 60 listed companies in Bursa Malaysia in the year 2012. The result of the OLS regression shows that the earnings response coefficients of quarterly accounts that have been audited are statistically higher than those not audited. The result provides support for the contention that investors place greater reliability on quarterly accounts that have auditor’s involvement. The finding provides support for the need of auditor’s involvement in the quarterly accounts. However, additional costs associated with auditing the quarterly accounts should also be considered

Ownership structure and corporate voluntary disclosures in transition economy

The study aims to investigate the impact of ownership structure on corporate voluntary disclosure in the listed companies of Bangladesh. While many studies on the impact of ownership structure on voluntary disclosure have looked at developed and developing countries, few studies have been carried out in a transition economy. Using a three-step relative voluntary disclosure index, the study applies a multivariate analysis on the cross-sectional data for the year 2018. The findings indicate that the quality of voluntary disclosure in transition economy is still below average but has improved compared to findings from the previous literature. We found a significant inverse relationship between corporate voluntary disclosure and public ownership, while no significant relationships between voluntary disclosure and institutional ownership, director ownership, and foreign ownership have been found. The empirical findings of the study will provide evidence to promote the voluntary disclosure characterized by the ownership structures. The findings have important implications for both local and foreign investors as they make their investment decisions especially related to a transition economy. Besides, the findings will assist, not only the corporate executives in rearranging their reporting paradigm, but also the regulators and governments in similar transition economy in adopting and formulating their corporate policies and strategies

Voluntary reporting, sustainable reporting and transition economy

This concept paper aims at exploring the interrelationship among the corporate voluntary reporting, the corporate sustainable reporting and the transition economy from the literatures and frameworks. At this juncture, transition economy refers the economy especially, the transformation of least developing economy to the developing economy as per the criteria of United Nations. Thus, the context of Bangladesh has been used as a ground for the study. The study explores the affiliation among corporate voluntary reporting, corporate sustainable reporting and transition economy from their respective literature and frameworks. From the literature of the corporate voluntary reporting, various dimensions of corporate disclosures have been considered, while the dimensions of sustainability reporting have been considered as per the consolidated set of global reporting index, published by Global Sustainability Standards Boards. In addition, components of transition economy have been considered on the basis of the guideline of the United Nations Economic and Social Council. The similitudes of these three concepts and their consequences are determined on the basis of the literature and frameworks. It is found that the core concepts of corporate voluntary reporting, corporate sustainable reporting and the transition economy are similar, and they are intermingled to each other. We have found that the dimensions of corporate voluntary reporting are the initiation of sustainability reporting that leads a transition economy to gain its status of being a developing economy. The findings of the study imply that the transition economy like Bangladesh has to put more focus on corporate engagement in transforming its economy to the developing economy. As the developing economy is based on trade rather than aid, the government of the country should design their corporate strategies and policies in such a way that leads the country to have a sustainable development. In addition, the findings may also encourage the corporate people to disclose more information regarding sustainability issues. Moreover, the findings may assist the United Nation to consider and reconsider their criteria of graduating any country from one level of economy to another. Finally, the findings can also open the avenue to the academicians to explore the extent of corporate reporting on transition economy.peer-reviewe

POSSIBLE IMPACT OF THE LATEST INTERNATIONAL STANDARD OF AUDITING 570 ON THE RATE OF GOING CONCERN OPINION ISSUANCE IN MALAYSIA

The problem that Malaysian auditors do not issue going concern opinion (GC opinion) to seriously financially distressed companies is still a pressing issue. The latest International Standards on Auditing 570 Going Concern (ISA 570) has been released and made effective in Malaysia starting from 15th December 2016. It is reasonable to expect that the new ISA 570 (2016) could at least reduce the incidence of Malaysian auditors do not want to issue GC opinion to financially distress companies. Overall, we are in the opinion that there is no strong ground to expect the new ISA (2016) can reduce the problem of Malaysian auditor do not issue GC opinion to a very large percentage of seriously financially distress companies. This is because there is no new stricter measure has been introduced in the latest ISA 570 (2016). However, Malaysian policy makers and standard setters still have at least four measures if they want to improve the rate and practice of GC opinion issuance in this country. Researchers on the other hand should examine the effectiveness of the new ISA 570 (2016), at least

Possible impact of the latest international standard of auditing 570 on the rate of going concern opinion issuance in Malaysia

The problem that Malaysian auditors do not issue going concern opinion (GC opinion) to seriously financially distressed companies is still a pressing issue. The latest International Standards on Auditing 570 Going Concern (ISA 570) has been released and made effective in Malaysia starting from 15th December 2016. It is reasonable to expect that the new ISA 570 (2016) could at least reduce the incidence of Malaysian auditors do not want to issue GC opinion to financially distress companies. Overall, we are in the opinion that there is no strong ground to expect the new ISA (2016) can reduce the problem of Malaysian auditor do not issue GC opinion to a very large percentage of seriously financially distress companies. This is because there is no new stricter measure has been introduced in the latest ISA 570 (2016). However, Malaysian policy makers and standard setters still have at least four measures if they want to improve the rate and practice of GC opinion issuance in this country. Researchers on the other hand should examine the effectiveness of the new ISA 570 (2016), at least