Audit report lag in Malaysia: determinants and moderating role of audit committee chairman

Given the importance of timely financial reporting and its impact on capital markets, the need for timely audited accounting information is undeniably critical to shareholders and investors. Among the principles and guidelines is that Bursa Malaysia has reduced the time-frame for annual reporting from six months to four months. Thus, this study is motivated by the new requirement and the demand for studies on the efficacy of corporate governance practices in audit report lags. This study examined the relationship between the characteristics of the board of directors, audit committee, audit committee chairman, separate risk management committee, ownership structure, audit partner tenure, and financial restatements. It also examined the moderating effect of the audit committee chairman’s accounting expertise on the relationship between financial restatements and audit report lag. Robust Ordinary Least Squares was used to analyse a total of 2,006 firm-year observations collected from non-financial firms listed on the Bursa Malaysia from 2013 to 2016. Results showed a significant negative relationship between the board independence, the board of directors’ financial expertise, audit committee size, audit committee chairman characteristics, foreign ownership, and audit partner tenure and audit report lag. In contrast, audit committee meetings, separate risk management committee, family ownership, and financial restatements have a positive relationship with audit report lag. The audit committee chairman’s accounting expertise shows a moderate effect on audit report lag and significantly improves timeliness of audit reports. The results have implications for policymakers, such as the Securities Commission, investors, and other market participants in improving the timeliness of the audit report. Policymakers may use these findings to recognise the critical role of corporate governance mechanisms in enhancing timeliness of audit reports among Malaysian public listed firms.