Haron, Hasnah and Ismail, Ishak and Ganesan, Yuvaraj and Hamzah, Zulhawati
(2016)
Audit Exemption For Small And
Medium Enterprises: Perceptions Of
Malaysian Auditors.
Asian Academy of Management Journal (AAMJ), 21 (2).
pp. 1-30.
ISSN 1394-2603
Abstract
The objective of the study is to examine audit frm size, the provision of non-audit services
(NAS) and audit tenure as factors that influence the likelihood that an auditor agrees with
allowing audit exemption. This study employs a 2 × 2 × 2 within-subject experimental
design. Respondent auditors were required to evaluate 8 case scenarios. A total of 79
questionnaires were returned and used for data analysis. General Linear Measurement
(Repeat Measure) was used to analyse the data. The study found that an audit frm size has
a signifcant impact on the likelihood that an auditor agrees with offering audit exemption.
The larger the size of the frm, the greater is the likelihood of agreeing with allowing audit
exemption. Therefore, it is suggested that small audit frms (with 5 or fewer employees)
merge and focus on activities that contribute more added value such as consultancy. In
so doing, auditors from these frms would be required to improve their knowledge and
capacity by offering these services and not merely focusing on traditional audit work
for SMEs. This is because SMEs are known to have limited resources and capacity and thus
would be expected to have poor internal control. The requirement of a mandatory audit for
such frms might lead auditors to compromise their independence. Thus, the government
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