Audit Committee Financial Expertise and Audit Report Lag: Malaysia Further Insights

Friday, 3 July 2015: 10:15 AM-11:45 AM
TW1.1.02 (Tower One)
Zalailah Salleh, Universiti Malaysia Terengganu, Kuala Terengganu, Malaysia
Saeed Rabea Ali Baatwah, Hadhramout University, Tarīm, Hadhramout, Yemen
Norsiah Ahmad, Universiti Sultan Zainal Abidin, Kuala Terengganu, Malaysia
Recent audit and financial reporting quality research suggest that audit committee financial expertise is a crucial ingredient for high quality reports. However, unexpectedly, Malaysian literature reported no association between audit committee financial expertise and audit report timeliness. Using audit report lag, we examine whether Malaysian audit committee financial expertise is relevant for financial reporting timeliness. Using data from 2005 to 2011 for the top 100 Malaysian companies and the fixed effects panel data approach, we find that audit committee financial expertise is not significantly associated with audit report lag. We further examine this issue with the basic premise that audit committee independence enhances the role of audit committee financial expertise. However, the interaction between these mechanisms shows an insignificant association. Additional investigation reveals that these results are driven by the lack of independence on Malaysian boards. We also find evidence suggesting that neither a large number of subsidiaries nor the quality of financial reporting sufficiently justify the recent Malaysian reforms relating to the financial reporting timeframe.