Auditor Specialization and Its Influence on the Association Between Governance and the Timeliness of Financial Reporting
State-of-the-Art Theories and Empirical Evidence pp 93-106; doi:10.1007/978-981-10-6926-0_6
Abstract: This study examines the association between corporate governance (i.e., CEO–Chairman duality, audit committee size, audit committee independence, and audit committee meeting) and financial reporting timeliness. This research further investigates whether auditor industry specialization reduces/enhances the association between corporate governance and financial reporting timeliness. Our sample comprises of 740 companies listed in the Bursa Malaysia and focuses on the year 2014. The results show that firms with more timely reporting of financial statements are asssociated with larger audit committee, lower proportion of independent non-executive directors in audit committee, less frequent audit committee meeting; and are audited by industry specialist. More importantly, this study finds new evidence on the interaction effect of industry specialist and corporate governance variables. First, the results suggest that firm audited by industry specialist has a significantly longer audit reporting lag in firms with a dual role CEO–Chairman than firms with separate CEO–Chairman roles. Second, firms audited by industry specialist with high number of audit committee were found to take longer time to finish the audit work. Third, we find evidence showing that firms audited by industry specialist with larger audit committee took longer time to finish the audit work. Finally, this study finds that industry specialist firms enhance financial reporting timeliness in firm with more frequent audit committee meeting.
Keywords: Corporate governance / Audit committee / CEO duality / Auditor / Timeliness of financial reporting
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