An analysis of non audit service determinants in Malaysian public listed companies / Rahayu Abdull Razak

This study investigates whether size, complexity and restructuring affect Malaysian public listed companies’ decision to purchase non-audit services from their auditors. In addition, this study also investigates whether the decision to purchase non-audit services impairs independence or instead it is economically efficient by examining the relative importance of proxies for economic efficiency and managerial opportunism as determinants of non-audit services. A total of 330 data were collected as sample from 110 companies listed on the main board of Bursa Malaysia for the three years period: 2003, 2004 and 2005. Basically, this study’s finding indicates that a company’s size and restructuring activities are significant in explaining the reason for purchasing non-audit services. Furthermore, the existence of the auditor from a Big 4 audit firms and the longer audit-client tenure also significantly explains why companies purchase non-audit services from their own auditors. However, the managerial opportunism variables results are mixed. Thus, the main finding of the study is that non-audit services are purchased by Malaysian PLC for reason of economic efficiency rather than managerial opportunism.