Internal and External Audit Attributes, Audit Committee Characteristics, Ownership Concentration and Earnings Quality: Evidence from Malaysia

Ahmed Hussein Al-Rassas, Hasnah Kamardin


The objective of the study is to examine the association between internal and external audit attributes, audit committee characteristics, ownership concentration and discretionary accruals (as a proxy of earnings quality) based on the agency and resource dependence theories. The final sample of the study is 508 firms listed on the Malaysia Main Market from 2009 to 2012. Two measures of discretionary accruals are used, Modified Jones model by Dechow et al. (1995); and extended Modified Jones Model by Yoon et al. (2006). Results of the study suggest that outsourcing internal audit function, investment in internal audit function and external audit fees are related to higher earnings quality. However, large audit committee size, more frequent audit committee meetings, having a senior or former audit partner as audit committee chairman and ownership concentration are associated with lower earnings quality. This study extends the prior related literature by apply extended modified Jones model by Yoon, et al.’s (2006) of discretionary accruals to measure earnings quality in Malaysia Main Market listed companies and introduce new variables, namely audit committee chairman who is a senior or former audit partner in the audit firm.

DOI: 10.5901/mjss.2015.v6n3p458

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Mediterranean Journal of Social Sciences ISSN 2039-9340(Print) ISSN 2039-2117(Online)

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