The Effect of Risk Management Committee on Audit Fees: Malaysian Evidence

Authors

Masturah Malik, Universiti Utara Malaysia, 06100 UUM Sintok, Kedah MalaysiaFollow
Rohami Shafie, Universiti Utara Malaysia, 06100 UUM Sintok, Kedah Malaysia

JEL Classification System

G30, M41, M42

Abstract

The global financial crises that have occurred in the past have caused a growing number of firms to establish a risk management committee (RMC) at their board level. By adopting 208 nonfinancial listed firms in Bursa Malaysia for the year end 2014, our study explores whether the establishment of an RMC and its attributes (having independent members, experts and female members) affect the audit fees charged towards the firms. Apart from the demand perspective of an audit, the study reports that independent members of the RMC are associated with higher audit fees. The result is derived from the basis that independent RMC members usually appeal for high audit engagement, which leads to increased audit fees. However, the study fails to prove the significant effect of separate RMC, expertise, and female members of RMC on the audit fees. This result has implications for regulators as well as policy makers by suggesting that the formation of RMC as a new mechanism in corporate governance may influence the audit quality proxied by audit fees. The results therefore provide initial indications of the association between the establishment of RMC on the audit fees in the economic environment of Malaysia.

Recommended Citation

Malik, Masturah and Shafie, Rohami (2021) "The Effect of Risk Management Committee on Audit Fees: Malaysian Evidence," DLSU Business & Economics Review: Vol. 31: No. 1, Article 8.
DOI: https://doi.org/10.59588/2243-786X.1099
Available at: https://animorepository.dlsu.edu.ph/ber/vol31/iss1/8