Political Connection, Internal Audit and Audit Fees in Malaysia
Abby Ashraff Saprudin

Multimedia University

Abstract

Accounting firms are increasingly under a great deal of pressure to minimize audit costs and deliver services in more efficient ways while improving the quality of their audit services. This study examines the association between political connection (POLCON), internal audit (IA) investment and arrangement with audit fees in Malaysia. Multiple regression was used to test the models and different tests were employed to enhance the rigor of the results produced. The sample comprised of 2209 firms observations listed in the Main Board of Bursa Malaysia, encompassing three years of data from 2011 to 2013. Overall across all the models, the results show that the majority of the variables exhibit significant association with audit fees. For independent variables, POLCON displays positive significant association with audit fees while both IAs have negative significant association with audit fees. From the firms- and auditors- perspective, the result of this study contributes to the industry and existing literature by suggesting that the agency problems in POLCON firms can be minimized through effective internal control mechanisms. Higher IA investment is associated with higher audit fees in POLCON firms and their external audit fees can be reduced when the IA function is outsourced.

Keywords: political connection, internal audit, audit fees

Topic: Strategic Management & Ecosystem Business

Link: https://ifory.id/abstract-plain/b2P38h9AwcVR

Web Format | Corresponding Author (Abby Ashraff bin Saprudin)