Audit Qualification and Corporate Governance Characteristics of Private Companies in Malaysia

This study investigates the prevalence of audit qualification amongst private companies in Malaysia and examines the relationship between audit qualification and corporate governance characteristics. The study focuses on corporate governance characteristics that are distinctive to private companies including ethnicity, board size, family directorship, managerial ownership, institutional ownership and audit quality. Data was obtained from database of Companies Commission of Malaysia. Results of the study reveal that the average rate of audit qualification received by private companies is low at 2.55%. However, the rate is higher for smaller companies when compared with the larger private companies. In addition, the study finds board size to be significantly related to audit qualification. Findings from the study suggest that financial reporting quality of private companies can be monitored through board members.