Audit Committee Compliance with Kuala Lumpur Stock Exchange Listing Requirements

14 Pages Posted: 5 Jan 2006

See all articles by Hasnah Haron

Hasnah Haron

Universiti Sains Malaysia (USM) - School of Management

Muhamad Jantan

Universiti Sains Malaysia (USM) - Centre for Policy Research

Eow Gaik Pheng

affiliation not provided to SSRN

Abstract

This research investigated the extent of companies' compliance with the Kuala Lumpur Stock Exchange (KLSE) listing requirements in relation to audit committees. Additionally, the research set out to identify any significant differences in compliance between PN4 companies, that is companies that fall under Practice Notes 4 of KLSE's revamped listing requirements and are required to regularize their financial condition in a timely manner, and non-PN4 companies. One hundred and twenty companies were selected from 852 public listed companies on the KLSE. Year 2002 annual reports were the source of data for this study. The study investigated the ten listing criteria related to the five core KLSE disclosures to be complied with, which are with respect to: (1) audit committee composition, (2) written terms of reference, (3) audit committee meetings and attendance, (4) audit committee activities and (5)internal audit activities. Only 45% of the sample population complied with all ten listing criteria. This comprised 40.3% for companies listed on the main board, 57.1% for those listed on the second board and 38.5% for PN4 companies. The percentage of independent directors present at meetings ranged from 0% to 100%, with an average attendance of 78%. This indicated a deviation in practice from the KLSE listing requirement that requires 100% of all the meetings to have a majority of independent directors present. No significant difference between PN4 companies and non-PN4 companies with regard to audit committee compliance was found.

Suggested Citation

Haron, Hasnah and Jantan, Muhamad and Pheng, Eow Gaik, Audit Committee Compliance with Kuala Lumpur Stock Exchange Listing Requirements. International Journal of Auditing, Vol. 9, No. 3, pp. 187-200, November 2005, Available at SSRN: https://ssrn.com/abstract=870619 or http://dx.doi.org/10.1111/j.1099-1123.2005.00256.x

Hasnah Haron (Contact Author)

Universiti Sains Malaysia (USM) - School of Management ( email )

Jalan Sungai Dua
Minden, Penang 11800
Malaysia

Muhamad Jantan

Universiti Sains Malaysia (USM) - Centre for Policy Research

Jalan Sungai Dua
Minden, Penang 11800
Malaysia

Eow Gaik Pheng

affiliation not provided to SSRN

No Address Available

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