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TopMotivation For Undertaking The Study
Hay et al., (2006) argue that audit fees determinants, the significance of certain variables, change according to the characteristics of each country. They suggest that these models be periodically revisited and revised. In recent years, there have been significant changes in the economic variables, especially in the context of accounting and auditing scenario in Malaysia, therefore, research into audit fees determinants warrants further investigation. Audit services serve as a monitoring mechanism because of the potential conflicts of interests between owners, managers, and other different classes of security holders (DeAngelo, 1981). Auditors play key role in enhancing the credibility of financial statements and increasing the quality of audit, therefore, the determinants of audit fees remains an important issue. Niemi (2005) argues that the extant research on audit fees determinants has focused primarily on markets where buyers are assumed to have a sufficiently homogeneous ownership structure, resulting in the lack of research on client ownership as a determinant of audit effort and fees. Apart from other determinants of audit fees, research in divergence in ownership structure and audit fees may be of interest in developing countries such as Malaysia due to the limited number of studies focusing on audit markets.
This study extends a few studies conducted on the audit fees in Malaysia such as Yatim et al., (2006), Bliss et al., (2007), Wahab et al., (2009), and Aswadi et al., (2011). Most of these studies focused on the impact of audit fees in the early implementation of Malaysian Code on Corporate Governance (MCCG) in 2001, except for Yaacob and Che-Ahmad (2012) who report that IFRS adoption resulted in a significant increase in audit fees in Malaysia. The present study focuses on the impact of audit fees after the revised MCCG 2007. Therefore, the study of the determinants of audit fees in Malaysia is motivated by two factors. First, corporate governance practices as practiced by Malaysian listed firms are considered different from those practiced in developed markets and Malaysian corporate governance mechanisms are still evolving. Second, Malaysian Accounting Standards Board (MASB) requires full convergence with the International Financial Reporting Standards (IFRS) on January 1, 2012, which significantly affects auditors’ responsibilities and audit work. Thus, the present study contributes to the existing base of knowledge by investigating determinants of the audit fees after the revision of MCCG 2007.