The determinants of audit timeliness: Evidence from Malaysia

Abstract

Timeliness of corporate annual financial reports is considered to be a critical and important factor affecting the usefulness of information that is made available to external users. The length of the audit process highly affects the timeliness of corporate financial reporting as documented by prior literature. The purpose of this study is to examine the determinants of audit report timeliness particularly the effect of audit committee functions in Malaysian audit market. The audit committee is one important component of corporate governance mechanism and they comprise of audit committee size, audit committee qualifications and audit committee meetings. Consequently, the study applied the agency theory and formulated eight hypotheses that guided the analysis. The study sample comprised 491 Malaysian listed companies from Bursa Malaysia, which complied with the regulatory requirements and subjected to supervision of the Central Bank of Malaysia. Regression analysis was performed to examine the audit report timeliness determinants. The results show that audit report lag is influenced by audit committee size, audit committee meetings, auditor type, audit opinion, total assets and firm profitability. However, no evidence was found to support the effects of board independence and audit committee qualifications on audit report timeliness. Apart from contributing to the literature on corporate governance and audit report timeliness, this study also falls under the strand of literature that examines the consequences of regulatory changes. Detail explanations of the findings of the study along with its implications, limitations and future research suggestions are highlighted.