Auditor Appointment, Rotation and Independence: Some Evidence from Malaysia

24 Pages Posted: 20 Dec 2005

See all articles by Zulkarnain Muhamad Sori

Zulkarnain Muhamad Sori

INCEIF, The Global University of Islamic Finance

Yusuf Karbhari

Cardiff Business School

Date Written: December 2005

Abstract

The aim of this paper is to examine the impact to auditor independence if the mandate to appoint auditor to regulatory body and exist auditor rotation scheme. This study sampled Malaysian auditors, loan officers and senior managers of public listed companies, and questionnaire and interview surveys were used to seek the respondent's perceptions. The majority of the respondents indicated that allocation of audit clients by a regulatory authority would threaten auditor independence. On the other hand, it is found that the majority of the loan officers and senior managers of public listed companies indicated that rotation of audit firms for a specified period of time would safeguard auditor independence, while the majority of auditors disagreed with both of these respondent groups and indicated that such an initiative would threaten independence. However, the respondents in all groups agreed that rotation of audit partners would safeguard auditor independence. This might suggest that the type of rotation is not the main concern to the loan officers and senior managers of public listed companies. The significant shift in auditors' perceptions, from rejecting the rotation of audit firms to accepting the rotation of audit partners indicates their preference of the rotation of audit partners scheme.

Keywords: Appointment, Rotation of Firms, and Rotation of Partners, Independence, Malaysia, and Conflict of Interest

JEL Classification: M40, M49, M47

Suggested Citation

Muhamad Sori, Zulkarnain and Karbhari, Yusuf, Auditor Appointment, Rotation and Independence: Some Evidence from Malaysia (December 2005). Available at SSRN: https://ssrn.com/abstract=871140 or http://dx.doi.org/10.2139/ssrn.871140

Zulkarnain Muhamad Sori (Contact Author)

INCEIF, The Global University of Islamic Finance ( email )

Lorong Universiti A
Kuala Lumpur, Kuala Lumpur 59100
Malaysia
+60376514173 (Phone)
8 (Fax)

HOME PAGE: http://www.inceif.org/

Yusuf Karbhari

Cardiff Business School ( email )

Aberconway Building
Colum Drive
Cardiff, CF1 3EU
United Kingdom
+ 44 0 29 2087 6057 (Phone)
+ 44 0 29 2087 4419 (Fax)

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