Browsing by Author "Noor Suhaila Shaharuddin"

Though interim reports may provide more timely and adequate information for shareholders regarding a firm, several studies have highlighted that interim reports are not normally audited (see, for example, Shrives, 1989 and Tan, 2000). They argued that the requirement of a full audit would be too costly particularly for a small listed companies and take too long to issue the report. However, it is interesting to note that there were few companies that voluntarily audit their interim report even though they are not required to do so. This study, therefore, attempts to investigate why some companies choose to have their interim report audited whilst others not to. The study incorporates the four characteristics of a firm which are expected to increase the likelihood of a company’s voluntarily audit of their interim reports. They are firm size, financial leverage, audit firm size and managerial share ownership. The sample was made up of 120 main board companies listed on Bursa Malaysia. No particular industry from the main board was excluded as an interim report is applicable for all industries. The study is based on the annual statements (i.e., annual and interim reports) for the year 2004 that were available on the Bursa Malaysia website. The statistical tests employed in this study are descriptive and univariate tests. The univariate test was a simple Chi-square test to examine whether the above characteristics had an influence on the decision whether interim reports would be audited or not. The result shows that the financial leverage, audit firm size and managerial share ownership hypotheses are supported but the firm size is not. The study also reveals that there is a significant difference between financial and non-financial companies in that financial companies are more likely to audit their interim reports than non-financial companies. Finally, the study also runs a logistic regression in order to consider the influence of the independent variables in a multivariate setting. Only one variable, i.e., industry type (financial and nonfinancial companies) significantly explains the decision of companies to audit their interim reports or not. In conclusion, it is argued that the study makes a positive contribution to enhancing the knowledge of interim reporting practices by Malaysian public listed companies and provides a useful basis to conduct future research.