The Effect of International Financial Reporting Standards (IFRS) Adoption on Audit Pricing and Audit Timeless : Evidence from Malaysia

This thesis examines the effects of International Financial Reporting Standards (IFRS) adoption on audit fees and audit timeliness in Malaysia. In particular, there are six (6) objectives of the study: to explore whether there is an increase of audit fees and audit delay pre- and post- adoption of IFRS; to determine the effect of the number of IFRS adopted on audit pricing and audit delay. This study also examines the influence of both the adoption of FRS 138 and the voluntary adoption of FRS 139 on audit fees and audit delay. Finally, the thesis also investigates the influence of audit delay on audit fees, and tests the moderating effect of brand name auditors on the relationship between the number of IFRS adopted, FRS 138 adoption and FRS 139 voluntary adoption on audit pricing and audit timeliness. The sample of this study consists of 3,050 firm-year observations from 2004 to 2008. Panel data analysis is utilized and the panel regression results reveal that audit fees and audit delay increase significantly after IFRS adoption and that companies that adopted a higher number of IFRS are charged higher audit fees and it takes a longer time to complete the audit report. The findings also indicate that adoption of FRS 138, as a complex standard, increases the audit fees and lengthens audit delay. Moreover, the results provide support to the brand name theory in that the Big 4 auditors charge higher audit fees to companies that adopt a higher number of IFRS and FRS 138. This study contributes to the literature on whether the complexity of IFRS has an implication on audit works. Furthermore, the findings provide valuable input for the Malaysian Institute of Accountants (MIA) to consider a revision of the MIA By-Laws