The impact of financial restatement on auditor changes in Malaysia

• Main Author: Ooi, Juan Tung
• Format: Thesis
• Language: English; English
• Published: 2024
• Subjects: HD2709-2930.7 Corporations; HF5667 Professional Ethics. Auditors.
• Online Access: https://etd.uum.edu.my/11407/1/s830097_01.pdf; https://etd.uum.edu.my/11407/2/s830097_02.pdf; https://etd.uum.edu.my/11407/

Nowadays, restatement cases in Malaysia have increased over time, leading the restating companies and their auditors to lose public trust. Therefore, most of the restating companies and auditors will take some action in order to restore trust with the public. Auditor changes could be one of the actions chosen by auditors and restating companies. However, the decision for auditor changes of restating companies might also be affected by the corporate governance level and auditor’s size. This topic has raised enormous public concerns in Malaysia. Thus, due to the lack of Malaysian studies on this topic, this research aims to examine the impact of the financial restatements, as well as the corporate governance levels and incumbent audit’s firm size of the restating companies, on auditor changes in Malaysia. This study used a sample size of 144 non-financial companies listed in Bursa Malaysia and hand-collected the relevant data from corporate governance and annual reports for the fiscal years 2020 and 2021. The Statistical Package for Social Science (SPSS) software was employed to perform the statistical analyses based on the collected data. By interpreting the results of the analysis, it indicates that the financial restatement, including the corporate governance levels and the size of the audit firm, did not have a significant impact on the auditor changes in Malaysia. Consequently, this study shows that the occurrence of restatements was not a significant factor in the decision to change the auditor in Malaysia. The findings also evince that the level of corporate governance and the size of the audit firm used by the restating companies had no bearing on the decision to make auditor changes. Therefore, it provides insights to Malaysian regulators and financial stakeholders so they can make decisions and develop policies without assuming the auditor will change following the restatement.