Do Managers Reappoint Auditor for Related Party Transactions? Evidence from Selected East Asian Countries
Adakah Pengurus Melantik Semula Juruaudit untuk Urusniaga Pihak Berkaitan? Bukti dari Negara-negara yang Dipilih dalam Asia Timur

School of Accounting
Faculty of Economics and Management
Universiti Kebangsaan Malaysia
43600 UKM Bangi, Selangor, MALAYSIA

mohead@ukm.edu.my

School of Accounting
Faculty of Economics and Management
Universiti Kebangsaan Malaysia
43600 UKM Bangi, Selangor, MALAYSIA

maya.ayunnie@gmail.com

Abstract

We study the association between auditor reappointment (initial relationship stage), including recurring auditor appointment over several consecutive years (close relationship stage) and company engagement in related-party transactions (RPTs) for selected listed companies from Hong Kong, Malaysia, Singapore and Thailand. The results show that auditor reappointment has significant and negative associations with company engagement in RPTs. By contrast, the close ACR relationship increases company engagement in RPTs. The evidence also suggests that Big 4 audit firms can reduce company engagement in RPTs, even when they have a close relationship. However, the findings derived from a sub-sample of RPT companies suggest that the close relationship between Big 4 audit firms and their clients substantially encourages companies to engage in RPTs. Overall, these findings are consistent with theories in which higher audit quality is effective at monitoring RPTs, but the established relationship looks likely to create conflicting opinions that impair auditors’ independent judgment. Nevertheless, the likelihood of conflict disappears when clients operate in countries that more effectively implement and enforce regulations and protect minority shareholders

Keywords

audit independence; auditor reappointment; auditor tenure; Auditor-client relationship; related party transactions
http://dx.doi.org/10.17576/pengurusan-2016-48-04

Citation

Rahmat, M. M., & Ali, S. H. A. (2016). Do Managers Reappoint Auditor for Related Party Transactions? Evidence from Selected East Asian Countries. Jurnal Pengurusan, 48, 47–60. http://dx.doi.org/10.17576/pengurusan-2016-48-04

@article{rahmat2016do,
  title={Do Managers Reappoint Auditor for Related Party Transactions? Evidence from Selected East Asian Countries},
  author={Rahmat, Mohd Mohid and Ali, Siti Hajar Asmah},
  journal={Jurnal Pengurusan},
 

volume={48},
  number={},
  pages={47—60},
  year={2016},
  doi={http://dx.doi.org/10.17576/pengurusan-2016-48-04},
  publisher={Penerbit UKM},
}

Export Bibliography:

No. of views: 212

   

Article received:  
Accepted for publication:  
Available online: 

Issue logo

48 (2016) 47 – 60

Download PDF

Share via:

Similar Articles

  1. Development of Tunneling Detection Model: A New Corporate Performance Improvement
  2. The Moderating Effects of Independent Directors’ Human Capital on the Relationship between Related Party Transactions and Firm Performance: Evidence from Malaysia

Receive updates when new articles are published