OYAGSB faculty, Professor Wan Nordin Wan-Hussin, together with OYAGSB Ph.D. graduate Hadiati Fitri (Universitas YARSI, Jakarta) and UUM TISSA senior lecturer Dr. Basariah Salim, have a forthcoming publication on the role of an audit committee chair and internal auditing practices in Malaysia. It is scheduled to be published in the Journal of International Accounting, Auditing, and Taxation in June 2021.

They scrutinized the disclosure of internal auditing practices in the 2014 annual reports of the Top 100 non-financial firms listed on Bursa Malaysia (based on market cap). The following are highlights of the study:

  • 34% of companies disclose they adopt a recognized internal auditing framework such as IPPF, 44% disclose they have an internal audit charter, and 75% disclose they adopt a risk-based internal audit plan.
  • Audit committee chair shapes the internal auditing practices.
  • Audit committee chair membership in other board monitoring committees is associated with ineffective internal audit oversight.
  • Audit committee chair financial expertise is associated with well-governed internal audit function.
  • The findings are in line with Bursa Malaysia and Institute of Internal Auditors Malaysia (2020) study on “Effectiveness of internal audit function: Thematic review findings and key takeaways" on the unsatisfactory state of internal auditing among listed firms in Malaysia.
  • The findings support the recommendations in Higgs (2003) report* and the proposed Malaysian Code on Corporate Governance (2016) **

“Review of the role and effectiveness of non-executive directors”

They believe their findings can benefit capital market regulators, internal audit practitioners, and audit committee directors. They shared their research with the key stakeholders and received positive feedback from the Securities Commission and the Minority Shareholder Watch Group,

*The Higgs report is titled “Review of the role and effectiveness of non-executive directors” commissioned by the UK government. Higgs advocated, “I consider it undesirable for any one individual to be on all three principal board committees at the same time”.

** The draft MCCG (2016) practice 7.2 recommended that an audit committee chair is a person with accounting expertise. Following public feedback on the proposed draft, the recommendation for the audit committee chair to have accounting expertise was withdrawn in the MCCG 2017.u