International Journal of Social Science & Economic Research
Submit Paper


Muqaddam Oyetunji Ali and Wuri Handayani

|| ||

Muqaddam Oyetunji Ali and Wuri Handayani
School of Business Innovation and Technopreneurship, University Malaysia Perlis, Perlis, Malaysia

Ali, Muqaddam O., and Wuri Handayani. "AUDIT COMMITTEE CHARACTERISTICS AND INVESTMENT IN INTERNAL AUDIT FUNCTION: EVIDENCE FROM MALAYSIA LISTED COMPANIES." Int. j. of Social Science and Economic Research, vol. 3, no. 2, Feb. 2018, pp. 618-629, Accessed 2018.
Ali, M. O., & Handayani, W. (2018, February). AUDIT COMMITTEE CHARACTERISTICS AND INVESTMENT IN INTERNAL AUDIT FUNCTION: EVIDENCE FROM MALAYSIA LISTED COMPANIES. Int. j. of Social Science and Economic Research, 3(2), 618-629. Retrieved from
Ali, Muqaddam O., and Wuri Handayani. "AUDIT COMMITTEE CHARACTERISTICS AND INVESTMENT IN INTERNAL AUDIT FUNCTION: EVIDENCE FROM MALAYSIA LISTED COMPANIES." Int. j. of Social Science and Economic Research3, no. 2 (February 2018), 618-629. Accessed , 2018.

[1]. Abbott, L. J., Parker, S., & Peters, G. F. (2004). Audit committee characteristics and restatements. Auditing: A Journal of Practice & Theory, 23(1), 69-87.
[2]. Abdul Rahman, R., & Haneem Mohamed Ali, F. (2006). Board, audit committee, culture and earnings management: Malaysian evidence. Managerial Auditing Journal, 21(7), 783- 804.
[3]. Al-Rassas, A. H., & Kamardin, H. (2015). Directors' Independence, Internal Audit Function, Ownership Concentration and Earnings Quality in Malaysia. Mediterranean Journal of Social Sciences, 6(3), 458-470.
[4]. Anderson, U. L., Christ, M. H., Johnstone, K. M., & Rittenberg, L. E. (2012). A post-SOX examination of factors associated with the size of internal audit functions. Accounting Horizons, 26(2), 167-191.
[5]. Bedard, J., Chtourou, S. M., & Courteau, L. (2004). The effect of audit committee expertise, independence, and activity on aggressive earnings management. Auditing: A Journal of Practice & Theory, 23(2), 13-35.
[6]. Boone, J. P., Khurana, I. K., & Raman, K. K. (2008). Audit firm tenure and the equity risk premium. Journal of Accounting, Auditing & Finance, 23(1), 115-140.
[7]. Bradbury, M., Mak, Y. T., & Tan, S. M. (2006). Board characteristics, audit committee characteristics and abnormal accruals. Pacific Accounting Review, 18(2), 47-68.
[8]. Cadbury, S. A. (1997). Board Focus, the Governance Debate. Egon Zehnder International.
[9]. Carcello, J. V., Hermanson, D. R., Neal, T. L., & Riley Jr., R. a. (2002). Board Characteristics and Audit Fees. Contemporary Accounting Research, 19(3), 365-384.
[10]. Carcello, J.V., Hermanson, D.R. and Raghunandan, K. (2005b), "Factors associated with US public companies' investment in internal auditing", Accounting Horizons, Vol. 19 No. 2, pp. 69- 84.
[11]. DeZoort, F. T., Hermanson, D. R., Archambeault, D. S., & Reed, S. A. (2002). Audit committee effectiveness: A synthesis of the empirical audit committee literature. Journal of accounting literature, 21, 38.
[12]. Fadzil, F., Haron, H., & Jantan, M. (2005). Internal auditing practices and internal control system. Managerial Auditing Journal, 20(8), 844-866.
[13]. Ghafran, C. M. (2013). Audit Committees and Fraudulent Reporting Quality.
[14]. Gramling, A. A., & Hermanson, D. R. (2006). What role is your internal audit function playing in corporate governance? Internal Auditing-Boston-Warren Gorham And Lamont Incorporated-, 21(6), 37.
[15]. Hermanson, D. R., & Rittenberg, L. E. (2003). Internal audit and organizational governance. Research opportunities in internal auditing, 1, 25-71.
[16]. Hoitash, U., Hoitash, R., & Bedard, J. C. (2009). Corporate governance and internal control over financial reporting: A comparison of regulatory regimes. The accounting review, 84(3), 839- 867.
[17]. Hrichi, Y. (2009). The efficiency of the audit committee in enhancing the financial reporting quality: study of 20 Tunisian firms listed in Tunis Stock exchange. Working Paper.
[18]. Klein, A. (2002). Audit committee, board of director characteristics, and earnings management. Journal of accounting and economics, 33(3), 375-400.
[19]. Malaysian Code of Corporate Governance (2012). Securities Commission. Kuala Lumpur.
[20]. Malaysian Code on Corporate Governance. (September 2007). Kuala Lumpur: Securities Commission
[21]. Mohamed, Z., Mat Zain, M., Subramaniam, N., Yusoff, W., & Fadzilah, W. (2012). Internal audit attributes and external audit's reliance on internal audit: implications for audit fees. International Journal of Auditing, 16(3), 268-285.
[22]. Prawitt, D. F., Smith, J. L., & Wood, D. A. (2009). Internal audit quality and earnings management. The Accounting Review, 84(4), 1255-1280.
[23]. Salleh, N. M. Z. N., & Haat, M. H. C. (2014). Audit Committee and Earnings Management: Pre and Post MCCG. International Review of Management and Business Research, 3(1), 307- 318.
[24]. Shafie, R., Hussin, W. N. W., Yusof, M. A. M., & Hussain, M. H. M. (2009). Audit firm tenure and auditor reporting quality: Evidence in Malaysia. International business research, 2(2), 99.
[25]. Smith, R. (2003). Audit Committees Combined Code Guidance.
[26]. Soh, D. S., & Martinov-Bennie, N. (2011). The internal audit function: Perceptions of internal audit roles, effectiveness and evaluation. Managerial Auditing Journal, 26(7), 605-622.
[27]. Spira, L. F., & Page, M. (2003). Risk management: The reinvention of internal control and the changing role of internal audit. Accounting, Auditing & Accountability Journal, 16(4), 640-661.
[28]. Vafeas, N., & Waegelein, J. F. (2007). The association between audit committees, compensation incentives, and corporate audit fees. Review of Quantitative Finance and Accounting, 28(3), 241- 255.
[29]. Xie, B., Davidson, W. N., & DaDalt, P. J. (2003). Earnings management and corporate governance: the role of the board and the audit committee. Journal of corporate finance, 9(3), 295-316.
[30]. Yasin, F. M., & Nelson, S. P. (2013). Audit Committee and Internal Audit: Implications on Audit Quality. International Journal of Economics, Management and Accounting 20(122), 187- 218.
[31]. Zain, M. M., & Subramaniam, N. (2007). Internal auditor perceptions on audit committee interactions: A qualitative study in Malaysian public corporations. Corporate Governance: An International Review, 15(5), 894-908.
[32]. Zain, M. M., Subramaniam, N., & Stewart, J. (2006). Internal auditors' assessment of their contribution to financial statement audits: The relation with audit committee and internal audit function characteristics. International Journal of Auditing, 10(1), 1-18
[33]. Zhang, Y., Zhou, J., and Zhou, N., (2007). Audit committee quality, auditor independence, and internal control weaknesses. Journal of Accounting and Public Policy, Vol.26, pp.300.

As one of the corporate governance mechanisms, audit committee is viewed as an essential selfregulatory internal governance instrument and is expected to provide an overseeing role over the entire process of financial reporting, particularly the working of the internal control system and the work of the auditors. However, there is limitation on the relationship between the audit committee characteristics and the level of investment in internal audit function. This study examines the relationship between audit committee characteristics and investment in internal audit function. The current study used a sample of top 100 listed companies in Bursa Malaysia based on 2017 market capitalisation. Data were collected from the annual report of the listed companies for a period of three years (2014 - 2016). Using Stata software, multiple regression analyses was used to test the hypotheses. The results indicate that, there is a significant relationship between audit committee characteristics (independence, tenure and size) and investment in internal audit function.