Audit committee characteristics and audit report lag post Malaysian code on corporate governance 2017

Timeliness of financial reporting is important to shareholders and investors for investment decision-making. In Malaysia, timeliness of financial reporting is lagging compared to other countries such as Australia, New Zealand, Indonesia, China, and USA. This research examines three audit committee (AC) characteristics to enhance
the timeliness of financial reporting. Timeliness of financial reporting is proxied by audit report lag (ARL). This study investigates the relationship between AC characteristics and audit report lag (ARL) among Malaysian public listed companies after the implementation of the Malaysian Code on Corporate Governance 2017
(MCCG 2017). The AC characteristics examined are AC’s policy on the cooling-off period of at least two years for former auditors before being appointed as AC members (ACPOL), AC comprising solely of independent directors (ACIND), and proportion of AC members with accounting expertise (ACEXP). The sample of this study consists of 411 companies (excluding financial companies) listed on Bursa Malaysia with a year-end closing of 31 December 2017. The regression analysis method is employed to examine if ACPOL, ACIND, and ACEXP have any relationship with ARL. The results of this study showed that AC’s policy on the cooling-off period has a negative relationship with ARL, whereas AC comprising solely of independent directors has a positive relationship with ARL. Meanwhile, AC members with accounting expertise were positively related to ARL. Thus, Bursa Malaysia can enhance the timeliness of financial reporting by introducing ACPOL in the Bursa Malaysia Listing requirements. Besides, this study showed that ACIND and ACEXP did not improve ARL.