Internal Governance Structure, Audit Quality And Earnings Management: Pre And Post Malaysian Code On Corporate Governance 2012

Abstract

The global financial crises in 2007-2008 has badly affected the Malaysian economy as evidenced by the 670 points fall in the Bursa Malaysia index which was 45% of its total value and the biggest decline after the Asian Financial Crisis 1997. The Asian Round Table on Corporate Governance advised to improve the governance structure and overcome the weaknesses exposed by the crisis in Asian countries including Malaysia. The Securities Commission Malaysia issued Corporate Governance Blueprint document in July 2011 for improving governance structure of the country which facilitated the introduction of the new code of the Malaysian Code on Corporate Governance (MCCG) in March 2012. A weak governance structure may provide an opportunity for managers to engage in activities that would result in a lower quality of reported earnings.