Bamahros, Hasan Mohammed and Wan Hussin, Wan Nordin
(2015)
Non-audit Services, Audit Firm Tenure And
Earnings Management In Malaysia.
Asian Academy of Management Journal of Accounting and Finance, 11 (1).
pp. 1-24.
ISSN 1823-4992
Abstract
The main objective of this study is to investigate the association of auditor-provided nonaudit services and audit firm tenure with earnings management in Malaysian public
listed firms. Two measurements, namely, discretionary current accruals based on the
performance-adjusted model developed by Ashbaugh, LaFond and Mayhew (2003) and
discretionary total accruals based on the modified Jones model (1991), are employed to
estimate the level of earnings management. Our sample consists of 525 companies for
financial year 2009. The results suggest that longer audit firm tenure reduces earnings
management. However, the magnitude of non-audit fees exacerbates earnings
management. Based on the empirical evidence, any attempt to legislate audit firm
rotation in Malaysia is unwarranted. Further research is required to move toward a
policy resolution on the restriction of non-audit services in Malaysia.
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