Do Managers Reappoint Auditor for Related Party Transactions? Evidence from Selected East Asian Countries

Mohd Mohid Rahmat, Siti Hajar Asmah Ali



We study the association between auditor reappointment (initial relationship stage), including recurring auditor appointment over several consecutive years (close relationship stage) and company engagement in related-party transactions (RPTs) for selected listed companies from Hong Kong, Malaysia, Singapore and Thailand. The results show that auditor reappointment has significant and negative associations with company engagement in RPTs. By contrast, the close ACR relationship increases company engagement in RPTs. The evidence also suggests that Big 4 audit firms can reduce company engagement in RPTs, even when they have a close relationship. However, the findings derived from a sub-sample of RPT companies suggest that the close relationship between Big 4 audit firms and their clients substantially encourages companies to engage in RPTs. Overall, these findings are consistent with theories in which higher audit quality is effective at monitoring RPTs, but the established relationship looks likely to create conflicting opinions that impair auditors’ independent judgment. Nevertheless, the likelihood of conflict disappears when clients operate in countries that more effectively implement and enforce regulations and protect minority shareholders.

Keywords: Auditor-client relationship; auditor tenure; auditor reappointment; related party transactions; audit independence


Kami mengkaji hubungan antara pelantikan semula juruaudit (peringkat awal hubungan), termasuk pelantikan semula secara berulang untuk beberapa tahun yang berturutan (peringkat hubungan yang rapat) dan penglibatan syarikat dalam urus niaga pihak berkaitan (UPB) bagi syarikat tersenarai terpilih dari Hong Kong, Malaysia, Singapura dan Thailand. Keputusan menunjukkan bahawa pelantikan semula juruaudit (peringkat awal hubungan) mempunyai hubungan yang negatif dan signifikan dengan penglibatan syarikat dalam UPB. Sebaliknya, pelantikan semula juruaudit di peringkat hubungan yang akrab meningkatkan penglibatan syarikat dalam UPB. Bukti juga mengesyorkan bahawa firma audit “Big 4” boleh mengurangkan penglibatan syarikat dalam UPB, walaupun mempunyai hubungan yang rapat dengan pengurus. Namun, penemuan yang diperoleh daripada sub-sampel syarikat UPB sahaja mencadangkan bahawa firma audit “Big 4” yang mempunyai hubungan rapat dengan pihak pengurusan meningkatkan penglibatan syarikat dalam UPB dengan signifikan. Secara keseluruhan, penemuan kajian ini adalah konsisten dengan teori, kualiti audit yang tinggi efektif dalam memantau UPB. Tetapi, hubungan yang rapat antara juruaudit dan pengurus menyebabkan konflik yang boleh menjejaskan pertimbangan yang bebas. Namun demikian, kemungkinan berlakunya konflik akan lenyap apabila syarikat beroperasi dalam negara yang melaksanakan peraturan dan perlindungan yang efektif kepada pemegang saham minoriti.

Keywords: Hubungan juruaudit-klien; tenur juruaudit; pelantikan semula juruaudit; urusniaga pihak berkaitan; kebebasan audit


Auditor-client relationship; auditor tenure; auditor reappointment; related party transactions; audit independence

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