The purpose of this paper is to contemplate the degree to which technical expertise in Malaysian Big 4 auditing practice survives periods of material regulatory inflexion sufficiently to underpin quality financial reporting outcomes.
The adoption of IAS in Malaysia in 2006 introduced a highly technical standard (financial reporting standards – FRS 136) which impacted not only preparers but also auditors of financial statements. This transition period represents a unique opportunity to interrogate the content of financial statements drawn up under new and complex standards, with a view to gaining insight into the quality of oversight offered by the audit profession.
Contrary to the view within the extant literature that there is homogeneity in audit quality among Big 4 firms, this paper reports substantial cross‐sectional variation among the sample of Big 4 Malaysian audit firms and reports on distinctly poor compliance levels.
The research focuses on compliance with various requirements under FRS 136 – Impairment of Assets among a sample of first‐time adaptors drawn from the FTSE Bursa Malaysia Index whose 2006 financial accounts have been audited by a Big 4 auditor.
The results raise questions about audit quality among the sample firms and the robustness of regulatory oversight institutions operating within Malaysia.
This research illustrates a novel approach to examining the issue of audit quality by introducing a compliance quality approach focusing on note‐form disclosures.
