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Article
Publication date: 9 July 2021

Mohd Mohid Rahmat, Siti Hajar Asmah Ali and Norman Mohd Saleh

This study aims to examine the effect of the auditor-client relationship (ACR) on related party transaction (RPT) types of disclosure, either RPT-efficient or…

Abstract

Purpose

This study aims to examine the effect of the auditor-client relationship (ACR) on related party transaction (RPT) types of disclosure, either RPT-efficient or RPT-conflict. This study also examines whether family controlling shareholders (FCS) negatively affect the ACR in RPT types of disclosure.

Design/methodology/approach

This study uses multivariate regression on 2,203 year-observations of companies listed in Malaysia during the period 2014–2017.

Findings

This study finds weak evidence that auditors can mitigate companies’ RPT type (RPT-efficient and RPT-conflict) disclosure while maintaining a close ACR. However, an interaction between FCS and ACR reduces the RPT-conflict disclosure. Additionally, the Big 4 auditors slightly increase the RPT-conflict disclosure, however, the relationships are inversed if the close ACR involves the FCS. The Big 4 auditors also increase RPT-efficient disclosure although in a close ACR with FCS. Meanwhile, an interaction between non-Big 4 auditors and FCS in close ACR reduces both types of RPT disclosures.

Research limitations/implications

The findings suggest that a close relationship between auditors and clients in firms with significant family control could compromise auditor’s skepticism. The FCS can easily influence the auditors to agree with the ways they treat the RPT disclosure. Therefore, policymakers may have to revisit auditors’ rotation policies in Malaysia, especially those involving FCS.

Originality/value

Trust, familiarity and future fee dependency are significant threats to auditor independence in a close ACR. This study contributes to the literature by examining the effect of a close ACR on RPT types of disclosure from a network theory perspective.

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Article
Publication date: 28 January 2020

Mohd Mohid Rahmat, Balachandran Muniandy and Kamran Ahmed

The purpose of this paper is to examine the effect of related party transactions (RPTs) and types of RPTs (complex, simple and loan) on earnings quality in four East Asian…

Abstract

Purpose

The purpose of this paper is to examine the effect of related party transactions (RPTs) and types of RPTs (complex, simple and loan) on earnings quality in four East Asian countries: Hong Kong, Malaysia, Singapore and Thailand.

Design/methodology/approach

RPTs and types of RPTs are measured using two approaches, magnitude and abnormal (magnitude change). Earnings quality is measured using proxies for accrual earnings management and identified as discretionary accruals (DAC) and performance matched discretional accruals (PMDAC).

Findings

The results suggest that firms in these countries experience poor earnings quality when they are engaged in RPT. The effect of RPT-simple on earnings quality is more severe than RPT-complex. However, the presence of higher investor protection and stricter enforcement of regulations in countries like Singapore and Hong Kong reduce the negative impact of RPTs on earnings quality.

Research limitations/implications

The results support the argument that the presence of controlling shareholders in East Asia is likely to lead to engagement with RPTs, which will increase the likelihood of firms’ earnings manipulation via DAC. This study has two limitations. It only focuses on Hong Kong, Malaysia, Singapore and Thailand, and the results may not be generalizable to other countries. Second, this study only measures the magnitude and abnormal RPTs based on the disclosures available in annual reports.

Originality/value

This paper contributes to the literature by examining the effect of RPTs and types of RPTs on earnings quality in four selected East Asian countries. 

Details

International Journal of Accounting & Information Management, vol. 28 no. 1
Type: Research Article
ISSN: 1834-7649

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Article
Publication date: 12 July 2021

Muhammad Iqmal Hisham Kamaruddin, Sofiah Md Auzair, Mohd Mohid Rahmat and Nurul Aini Muhamed

The purpose of this study is to examine the role of financial governance practices in influencing both financial management and Islamic work ethic practices to affect…

Abstract

Purpose

The purpose of this study is to examine the role of financial governance practices in influencing both financial management and Islamic work ethic practices to affect Islamic social enterprises (ISEs) accountability.

Design/methodology/approach

Questionnaires were administered to financial officers of 102 Malaysian ISEs. Data was analysed using Smart-PLS to examine the relationships between financial management, Islamic work ethic, financial governance and accountability.

Findings

Results of this study indicate direct relationship only exist between Islamic work ethic and accountability. The relationship between financial management and accountability are indirect through financial governance. Hence, the data proves that financial governance has a mediating role on both the relationships between financial management and Islamic work ethic with the accountability of the ISEs.

Research limitations/implications

The study has highlighted the greater role of financial management, Islamic work ethic and financial governance practices over accountability to achieve public trust, especially for Malaysian ISEs.

Practical implications

ISEs need to have good financial governance practices besides financial management and Islamic work ethic practices to achieve good accountability.

Originality/value

The study contributes to the field of management and social accounting by providing empirical evidence on the ISEs practices specifically on financial management, Islamic work ethic, financial governance and accountability. This framework thus presents amongst the first attempts in studying accountability issues in ISEs.

Details

Social Enterprise Journal, vol. 17 no. 3
Type: Research Article
ISSN: 1750-8614

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Article
Publication date: 1 December 2007

Mara Ridhuan Che Abdul Rahman, Tengku Akbar Tengku Abdullah, Arawati Agus and Mohd Mohid Rahmat

Borderless transactions have resulted in changes to the competitive and technological environments. As a result, accounting profession faces challenges in meeting these…

Abstract

Borderless transactions have resulted in changes to the competitive and technological environments. As a result, accounting profession faces challenges in meeting these changes. Previous studies have indicated that accounting education had failed to develop students’ competencies critically required by market. This paper mainly focuses on competencies in the workplace in relation to its levels of importance; as well as the level of emphasis of the competencies during university learning. In this study, 1,300 questionnaires were distributed to accountants graduated from seven state‐run universities namely Universiti Malaya, Universiti Kebangsaan Malaysia, Universiti Putra Malaysia, Universiti Islam Antarabangsa Malaysia, Universiti Teknologi Mara, Universiti Utara Malaysia and Universiti Sains Malaysia. The respondents were asked to rank the level of importance and emphasis of thirteen competencies; namely communication skills, decision‐making skills, leadership development, continuous improvement skills, professionalism, information development and distribution skills, knowledge in planning and budgetary, management control system, interpreting and analyzing financial statements, knowledge in accounting, knowledge in auditing and knowledge in taxation. The study found that there were large gaps between the level of importance of competencies in workplace and the level of emphasis of competencies in workplace. In addition, the study also found positive correlation between the personality traits and the level of competencies. In general, these findings are consistent with the findings from other studies conducted. The findings should provide empirical and relevant input for assessing the content of the existing accounting programs.

Details

Journal of Financial Reporting and Accounting, vol. 5 no. 1
Type: Research Article
ISSN: 1985-2517

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Article
Publication date: 24 July 2009

Mohd Mohid Rahmat, Takiah Mohd Iskandar and Norman Mohd Saleh

The purpose of this paper is to investigate whether there is any difference in the characteristics of an audit committee between financially distressed and non‐distressed…

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Abstract

Purpose

The purpose of this paper is to investigate whether there is any difference in the characteristics of an audit committee between financially distressed and non‐distressed companies listed on the Bursa Malaysia (formerly known as the Kuala Lumpur Stock Exchange). Financial distress among big companies is a sign of weak corporate governance, of which the audit committee is one of elements. Four characteristics of the audit committee being examined are size, independence, activity, and accounting knowledge.

Design/methodology/approach

The sample comprises 73 financially distressed and the matched pair of 73 financially non‐distressed listed companies. The financially distressed companies have been suspended from the listing under the provision of the practice note 4 (PN4) of the listing requirements.

Findings

Results show that financial distress of companies has a significant negative association with financial literacy of the audit committee and the quality of external audit.

Research limitations/implications

The finding is limited to PN4 companies and the selected match of the non‐PN4. Results may not be generalized to other companies that are faced with financial difficulties but are not classified as financially distressed under the PN4 provision.

Practical implications

The paper does not examine other qualitative factors such as the culture and dynamics of audit committee meetings which may have effect on the audit committee performance. An examination on the issue requires a different research design. Hence, further research is needed to address the issue.

Originality/value

The evidence suggests that financial literacy of audit committee members is a significant factor which helps the audit committee enhance the financial performance of the company. It also suggests that a quality external audit, in addition to an effective audit committee, enhances company financial performance.

Details

Managerial Auditing Journal, vol. 24 no. 7
Type: Research Article
ISSN: 0268-6902

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Article
Publication date: 1 February 2004

Mohd Mohid Rahmat and Takiah Mohd Iskandar

This study examines audit fee premiums from brand name, industry specialization, and industry leadership after the merger of two Big 6 audit firms, creating the Big 5 in…

Abstract

This study examines audit fee premiums from brand name, industry specialization, and industry leadership after the merger of two Big 6 audit firms, creating the Big 5 in 1998 in the Malaysian audit market. A sample of 679 companies listed at the main and second boards of Kuala Lumpur Stock Exchange (KLSE) are investigated for audit fee premiums. Industry specialization is determined on the basis of 20 per cent share of audit market calculated by the number of audited companies in the industry. Audit fee premiums are calculated based on the Simunic (1980) model of audit fees. Results show: that Big 5 audit firms obtain 65.4 per cent audit market share for all KLSE listed companies; that Big 5 audit firms earn higher audit fees than non‐Big 5; and that industry specialization does not generate audit fee premiums. The study finds evidence for audit fee premiums derived from industry market leadership. Results also reflect the competitiveness among Big 5 audit firms in the audit market especially following the merger of Big 6 audit firms.

Details

Asian Review of Accounting, vol. 12 no. 2
Type: Research Article
ISSN: 1321-7348

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Article
Publication date: 3 April 2007

Norman Mohd Saleh, Takiah Mohd Iskandar and Mohd Mohid Rahmat

Conflicts between managers and outside auditors may exist in choosing alternative accounting procedures. Since auditors are appointed by the firm, they are subject to…

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5359

Abstract

Purpose

Conflicts between managers and outside auditors may exist in choosing alternative accounting procedures. Since auditors are appointed by the firm, they are subject to dismissal if divergent opinions cannot be resolved. To a lesser extent, financial reports are often negotiated. In order to produce unbiased financial reports, audit committee members are appointed to act independently in order to resolve conflicts between the managers and outside auditors. This study aims to assess the effectiveness of some audit committee characteristics, i.e. the independence of members, size, frequency of meeting and knowledge of the members, to monitor management behavior with respect to their incentives to manage earnings.

Design/methodology/approach

This paper uses discretionary accruals obtained from the established model as a signal of the presence of earnings management.

Findings

The evidence shows that the presence of a fully independent audit committee reduces earnings management practices. It was also found that firms which had more knowledgeable audit committee members and held more audit committee meetings recorded fewer earnings management practices compared with other firms.

Originality/value

This paper is different from prior studies, in that it makes a significant contribution towards enhancing one's knowledge in the interacting role of audit committee characteristics.

Details

Asian Review of Accounting, vol. 15 no. 2
Type: Research Article
ISSN: 1321-7348

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Article
Publication date: 30 October 2018

Murad Abdulsalam Qamhan, Mohd Hassan Che Haat, Hafiza Aishah Hashim and Zalailah Salleh

This paper aims to examine the association between new audit committee characteristics – attendance of audit committee members at meetings and changes of members through…

Abstract

Purpose

This paper aims to examine the association between new audit committee characteristics – attendance of audit committee members at meetings and changes of members through the demission or appointment of members of the audit committee during the year – and earnings management. Its objective is to contribute new evidence that extends studies on audit committee characteristics in reducing earnings management.

Design/methodology/approach

The sample comprises 370 observations obtained from the annual reports of 74 companies listed on the Muscat Securities Market for the years 2008-2012. The panel data are analysed using a fixed effects model to validate the hypotheses and model.

Findings

This study finds a negative association between earnings management and members’ attendance at the audit committee meetings. Additionally, there is a positive significant relationship between earnings management and changes to members through demission or appointment.

Originality/value

This study broadens the scope of audit committee characteristics by providing empirical evidence of the relationship between new audit committee characteristics and earnings management and may assist policymakers and regulators in determining ways to enhance audit committee characteristics and improve financial reporting quality.

Details

Managerial Auditing Journal, vol. 33 no. 8/9
Type: Research Article
ISSN: 0268-6902

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Article
Publication date: 15 August 2017

Yousef Hassan, Rafiq Hijazi and Kamal Naser

The purpose of this paper is to examine the relation between audit committee (AC) and a set of other corporate governance mechanisms in one of the emerging economies…

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1518

Abstract

Purpose

The purpose of this paper is to examine the relation between audit committee (AC) and a set of other corporate governance mechanisms in one of the emerging economies, United Arab of Emirates (UAE). In particular, the current study examines whether an effective AC can serve as a substitute or as a complement mechanism to board characteristics and ownership structure of Emirati listed non-financial companies.

Design/methodology/approach

Using substitution and complementary theories, a panel data from 48 nonfinancial companies listed on the UAE Stock Exchanges [Abu Dhabi Stock Exchange and Dubai Financial Market] during the period between 2011 and 2013 were used in the current study. A composite measure of four proxies has been used to measure the AC effectiveness, namely, AC size, independence, financial expertise and diligence. To test the hypotheses formulated for the study, a logistic regression model was used to identify the influence of a set of board characteristics and ownership structure variables on the effectiveness of the AC after controlling for firm size, auditor type, industry type and profitability.

Findings

While AC effectiveness appeared to be positively associated with board size and board independence, it is negatively associated with CEO duality. This points to a complementary governance relation. On the other hand, the negative relationship between AC effectiveness and each of institutional and government ownership suggests substitutive relations.

Research limitations/implications

The main shortcoming of the current study is that it examines the influence of a certain set of corporate governance factors on the effectiveness of AC. Other corporate governance mechanisms may, however, contribute to the effectiveness of AC. The findings of the study can be used by companies’ managements and regulators in the UAE to improve the corporate governance system.

Originality/value

To the best of researchers’ knowledge, this study provides the first evidence about the interaction among multiple governance mechanisms required by the code of corporate governance issued by the UAE Ministry of Economy in 2009. The current paper is expected to add to the limited AC literature in Middle East and North African countries in general and Arab World in particular.

Details

Managerial Auditing Journal, vol. 32 no. 7
Type: Research Article
ISSN: 0268-6902

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Article
Publication date: 1 June 2020

Satish Kumar, Riya Sureka and Nitesh Pandey

Asian Review of Accounting (ARA), a leading journal in the field of accounting, completed its 29 years of active publishing in the year 2019. The primary objective of this…

Abstract

Purpose

Asian Review of Accounting (ARA), a leading journal in the field of accounting, completed its 29 years of active publishing in the year 2019. The primary objective of this study is to provide a comprehensive overview of the journal's publishing activities over these years.

Design/methodology/approach

The authors use the bibliometric analysis and graphical visualization of bibliographic data to ascertain the publication pattern of ARA. Annual publication and citation structure, leading trends in authorship, institutional affiliation, country affiliation, most cited papers in ARA, documents most cited by ARA and frequency of keyword occurrence are also studied to provide a comprehensive overview of the journal between 1992 and 2019.

Findings

Major findings show that ARA has a progressive trend, in terms of both productivity and stature. The journal is highly influenced by Australia and Malaysia in respect of productivity. Major themes published include auditing, financial accounting, governmental and nonprofit accounting, corporate social responsibility, accounting education and financial reporting.

Originality/value

This study offers the first of its kind comprehensive summary of the research work published in ARA.

Details

Asian Review of Accounting, vol. 28 no. 3
Type: Research Article
ISSN: 1321-7348

Keywords

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