DOES AUDIT QUALITY MATTERS IN MALAYSIAN PUBLIC SECTOR AUDITING?
Keywords:
Jabatan Audit Negara, Putrajaya Malaysia, auditor’s independence, auditor’s competency, auditor’s workload, public sector auditAbstract
Auditors play a key role in contributing to the credibility of the financial statements on which they are reporting. High-quality audits support financial stability. The responsibility for performing quality audits of financial statements rests with the auditors. However, audit quality is best achieved in an environment where there is support from and appropriate interactions among participants in the financial reporting supply chain. Most prior studies look into audit quality from the perspective of private sector however this study focus on the quality of public sector auditing in Malaysia. There are three independent variables being investigated in this study that are the auditor’s independence, auditor’s competency and auditor’s workload. Data were collected through the distribution of questionnaires to 114 samples of auditors involved in public sector audit in Malaysia. The data were analysed using correlation test and regression test. The findings of this study show that there are positively significant relationship between auditor’s independence and auditor’s competency on audit quality. The results revealed that auditor’s competency is the most significant factor affecting the audit quality in public sector audit. However, results show that auditor’s workload has a negative and insignificant impact on audit quality. Hence, this study recommends that the audit departments to strengthen the audit quality and could improve the quality of the financial reporting in the public sector. In addition, auditor’s competency should be enhanced among the auditors in public sector to ensure high quality of audit work performed. Future studies should explore other variables such as client satisfaction, auditor switching and auditor’s turnover in public sector auditing.
References
ACFE (2016). Report to the Nations on Occupational Fraud and Abuse 2016 Global Fraud Study. Retrieved From https://www.acfe.com/rttn2016/docs/2016-report-to-the-nations.pdf
Adeyemi,S. B.,Okpala, O., & Dabor, E.L. (2012). Factors Affecting Audit Quality in Nigeria. International Journal of Business and Social Science, 3(20), 198-209.
Ahmad, N. H., Othman, R., Othman, R., & Jusoff, K. (2009). The effectiveness of internal audit in Malaysian public sector. Journal of Modern Accounting and Auditing, 5(9), 53-62
Ali, A.M. (2016). 1MDB: The Auditor General Office‘s Questions. Journal of Public Administration and Governance,6(1), 50-72.
Alireza Eskandari, A., Abdul Rasid, S. Z., Basiruddin, R. & Hosseini, M. R. (2014). Review of Empirical Literature on Audit Quality and Cost of Debt Capital. International Journal of Accounting and Taxation December, 2(4), 81-92. doi: 10.15640/ijat.v2n4a5
Al-Khaddash, H., Al-Nawas, R., & Ramadan, A. (2013). Factors affecting the quality of Auditing: The Case of Jordanian Commercial Banks. International Journal of Business and Social Science, 4(11), 206-222.
Amjed K. G., Adnan K. M., Ali M. H., (2019). Factors Affecting the Quality of External Auditor Performance: An Analytical Study of the Opinions of Auditors Working in Iraqi Audit Firms and Companies. Academy of Strategic Management Journal, 18(1).
Asmara, R. Y. (2016). Effect Of Competence And Motivation Of Auditors Of The Quality Of Audit: Survey On The External Auditor Registered Public Accounting Firm In Jakarta In Indonesia. European Journal of Accounting, Auditing and Finance Research, 4(1), 43-76.
Bouhawia, M.S., Irianto, G., & Baridwan, Z. (2015). The Effect of Working Experience, Integrity, Competence, and Organizational Commitment on Audit Quality (Survey State Owned Companies in Libya). Journal of Economics and Finance, 6(4), 60-67.
Brown, R.E. (2005). Enron/Andersen: crisis in U.S. accounting and lessons for government. Retrieved from https://www.researchgate.net/publication/228266414_EnronAndersen_Crisis_in_US_Accounting_and_Lessons_for_Goverment
Carslaw, C., Pippin, S., & Mason, R. (2012). Are public sector auditors more effective than private sector audit firms when auditing governmental entities? Some evidence from United States. Public and Municipal Finance, 1(1), 49-57
Chee, K. L., & Ki, W. O., (2016). A case study on fraudulent financial reporting: evidence from Malaysia. Accounting Research Journal, 29 (1), 4-19
Chia, K.W., Tan, G.M., Ter S. Y., Toh, S.Y., & Yap, Y.M. (2013). The Relationship between Work Stress and Auditors’ Job Performance. Retrieved From http://eprints.utar.edu.my/1017/1/AC-2013-09ABB03183-1.pdf
DeAngelo, L. (1981). Auditor size and audit quality. Journal of Accounting and Economics, 3 (3), 189–199.
Enofe, A.O., Mgbame, C., Aderin, A., & Ehi-Oshio, O.U. (2013). Determinants of Audit Quality in the Nigerian Business Environment. Research Journal of Finance and Accounting, 4(4), 36-43.
Hadisantoso, E., Sudarma, I. M., & YohanisRura (2017). The Influence of Professionalism and Competence of Auditors towards the Performance of Auditors. Scientific Research Journal, V(I),10-14.
Hosseinniakani, S.M., & Mota, H. I. R. (2014). Review on Audit Quality Factors. International Journal of Academic Research in Accounting, Finance and Management Sciences, 4(2), 243–254. doi: 10.6007/Ijarafms/V4-I2/861
Irmawan, Y., Hudaib, M., & Haniffa, R. (2013). Exploring the perceptions of auditor independence in Indonesia. Journal of Islamic Accounting and Business Research, 4(2), 173-202. doi: 10.1108/JIABR-09-2012-0061
Kitata, S. (2016). Factors affecting quality of External Auditing: The case of Ethiopian Commercial Banks. Retrieved From http://etd.aau.edu.et/bitstream/123456789/9866/1/Solomon%20Kitata.pdf
Krishnan, L. (2011). Legal Issues on the Scandals Involving Auditors. Retrieved From https://www.econbiz.de/Record/legal-issues-on-the-scandals-involving-auditors-loganathan-krishnan-author-email-loganathan-utar-edu/10010535911
Lee, S.C., Su, J.M., Tsai S.B., Lu, T.L., & Dong, W.W. (2016). A comprehensive survey of government auditors’ self‑efficacy and professional development for improving audit quality. Retrieved From https://www.researchgate.net/publication/305884415_A_comprehensive_survey_of_government_auditors'_self-efficacy_and_professional_development_for_improving_audit_quality
Lopez, D.M., & Peters, G. F. (2012). The Effect of Workload Compression on Audit Quality. Auditing: A Journal of Practice & Theory, 31(4), 139-165. doi: http://dx.doi.org/10.2308/ajpt-10305
Mahdi,T.M. (2013). Factors Affecting the Quality of the Auditing Work in Public Sector. Indian Journal of Applied Research, 3(6), 1-6.
Marsel Sulanjaku, M. & Ali Shingjergji, A. (2015). An Overview of Factors Affecting Auditing Quality in Albania. Academic Journal of Interdisciplinary Studies, 4(3), 223-228. doi:10.5901/ajis.2015.v4n3s1p223
Massod, A. & Lodhi, R.N. (2015). Factor affecting the success of government audit. Case study of Pakistan. Universal Journal of Management 3(2), 52-62
Masood, A., & Afzal, M. (2016). Determinants of Audit Quality in Pakistan. Journal of Quality and Technology Management, XII(II), 25 – 49.
Mohd Nor, M. (2011). Auditor Stress: Antecedents and relationships to audit quality (Doctorial dissertation). Retrieved From http://ro.ecu.edu.au/theses/403/
Octavia, E., & Widodo, N.R. (2015). The Effect of Competence and Independence of Auditors on the Audit Quality. Research Journal of Finance and Accounting, 6(3), 189-194. Retrieved From http://www.iiste.org/Journals/index.php/RJFA/article/view/19959
Othman,R., Nath,N. & Mahzan, N. (2013). Public Sector Audit: A Century and Beyond- the Case of Malaysia. Retrieved From http://repository.um.edu.my/33955/
Phan, T. H. (2016). The Research of Factors Affecting the Quality of Audit Activities: Empirical Evidence in Vietnam. International Journal of Business and Management, 11(3), 83-94. doi:10.5539/ijbm.v11n3p83
Persellin, J. S., Schmidt, J.J., Vandervelde, S., & Wilkins, M.S. (2017), Survey Evidence on the Relationship between Audit Workloads, Job Satisfaction and Audit Quality. (White paper) Retrieved From https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2534492&rec=1&srcabs=2532494&alg=1&pos=7
Persellin, J. S., Schmidt, J.J., Vandervelde, S., & Wilkins, M.S. (2014). Auditor Perceptions of Audit Workloads, Audit Quality, and the Auditing Profession. Retrieved From http://digitalcommons.trinity.edu/cgi/viewcontent.cgi?article=1040&context=busadmin_faculty
Samelson, D., Lowensohn, S., & Johnson, L. E. (2006). The Determinants of Perceived Audit Quality and Auditee Satisfaction in Local Government. Journal of Public Budgeting, Accounting & Financial Management, 18 (2), 139-166.
Sulaiman, N. A. (2011). Audit Quality in Practice: A Study of Perceptions of Auditors, Audit Committee Members and Quality Inspectors. Retrieved From https://www.escholar.manchester.ac.uk/uk-ac-man-scw:129909
Sulaiman, N.A., Yasin, F. M. & Muhamad R. (2018). Perspective on audit quality: An Analysis. Asian Journal of Accounting Perspective, 11(1),1-27.
Suyono, E. (2012). Determinant Factors Affecting the Audit Quality: An Indonesian Perspective. Global Review of Accounting and Finance, 3(2), 42 – 57.
Titus, M., Muturi, W., & Kabiru, J. (2014). Factors Affecting External Auditors’ Independence in Discharging Their Responsibilities: A Survey of Medium Level Auditing Firms in Nairobi. International Journal of Business & Law Research, 2(4), 22-35.
Uma, S. & Roger,.B (2016).Research Methods for Business Seventh Edition. United Kingdom:John Wiley & Sons Ltd.
Usman, A., Sudarma, M., Habbe, H., & Said, D. (2014). Effect of Competence Factor, Independence and Attitude against Professional Auditor Audit Quality Improve Performance in Inspectorate (Inspectorate Empirical Study in South Sulawesi Province). Journal of Business and Management, 16(1), 1-13.
Downloads
Published
Issue
Section
License
Copyright (c) 2019 Journal of Academia
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
