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Non-Audit Services, Audit Firm Tenure and Earnings Management in Malaysia

Author

Listed:
  • Â Hasan Mohammed Bamahros

    (School of Accountancy, Universiti Utara Malaysia, 06010 Sintok, Kedah, Malaysia)

  • Â Wan Nordin Wan-Hussin

    (Faculty of Administrative Sciences, University of Aden, Yemen)

  • Â Othman Yeop Abdullah

    (Graduate School of Business, Universiti Utara Malaysia,06010 Sintok, Kedah, Malaysia)

Abstract

The main objective of this study is to investigate the association of auditor-provided non-audit services and audit firm tenure with earnings management in Malaysian public listed firms. Two measurements, namely, discretionary current accruals based on the performance-adjusted model developed by Ashbaugh, LaFond and Mayhew (2003) and discretionary total accruals based on the modified Jones model (1991), are employed to estimate the level of earnings management. Our sample consists of 525 companies for financial year 2009. The results suggest that longer audit firm tenure reduces earnings management. However, the magnitude of non-audit fees exacerbates earnings management. Based on the empirical evidence, any attempt to legislate audit firm rotation in Malaysia is unwarranted. Further research is required to move toward a policy resolution on the restriction of non-audit services in Malaysia.

Suggested Citation

  •  Hasan Mohammed Bamahros &  Wan Nordin Wan-Hussin &  Othman Yeop Abdullah, 2015. "Non-Audit Services, Audit Firm Tenure and Earnings Management in Malaysia," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 11(1), pages 145–168-1.
    • Handle: RePEc:usm:journl:aamjaf01101_145-168
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    Cited by:

    1. Filipović Ivica & Šušak Toni & Lijić Andrea, 2021. "The Effect of Auditor Rotation on the Relationship between Financial Manipulation and Auditor’s Opinion," Business Systems Research, Sciendo, vol. 12(1), pages 96-108, May.
    2. Hasan Mohammed Bamahros & Dhiaa Shamki, 2016. "Industry Type and Accounting Numbers Relevance: The Case of Jordan," Asian Journal of Social Sciences and Management Studies, Asian Online Journal Publishing Group, vol. 3(3), pages 191-197.

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