Investigating audit quality among Big 4 Malaysian firms
Tyrone M. Carlin
Nur Hidayah Laili
Purpose – The purpose of this paper is to contemplate the degree to which technical expertise in Malaysian Big 4 auditing practice survives periods of material regulatory inflexion sufficiently to underpin quality financial reporting outcomes. Design/methodology/approach – The adoption of IAS in Malaysia in 2006 introduced a highly technical standard (financial reporting standards – FRS 136) which impacted not only preparers but also auditors of financial statements. This transition period represents a unique opportunity to interrogate the content of financial statements drawn up under new and complex standards, with a view to gaining insight into the quality of oversight offered by the audit profession. Findings – Contrary to the view within the extant literature that there is homogeneity in audit quality among Big 4 firms, this paper reports substantial cross-sectional variation among the sample of Big 4 Malaysian audit firms and reports on distinctly poor compliance levels. Research limitations/implications – The research focuses on compliance with various requirements under FRS 136 – Impairment of Assets among a sample of first-time adaptors drawn from the FTSE Bursa Malaysia Index whose 2006 financial accounts have been audited by a Big 4 auditor. Practical implications – The results raise questions about audit quality among the sample firms and the robustness of regulatory oversight institutions operating within Malaysia. Originality/value – This research illustrates a novel approach to examining the issue of audit quality by introducing a compliance quality approach focusing on note-form disclosures.
Auditing, Auditing standards, Goodwill accounting, Malaysia, Professional standards
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