THE SOUTHERN AFRICAN JOURNAL OF ACCOUNTABILITY AND AUDITING RESEARCH VOLUME 7: 2007 CONTENTS The audit expectation gap: an empirical study in Malaysia An analysis of audit opinions of Malysian public listed companies (1999-2003) Internal audit in the state and local governments of Malaysia Perspectives on environmental management accounting (EMA) in South Africa ABSTRACTS The audit expectation gap: an empirical study in Malaysia (TH Lee, JD Gloeck & AK Palaniappan) The auditing profession believes the increase in litigation against, and criticism of auditors can be traced to an audit expectation gap. This paper reports the findings of a questionnaire survey on the audit expectation gap conducted in Malaysia. The aims of the study are two-fold. Firstly, it examines whether an expectation gap exists in Malaysia among the auditors, auditees and audit beneficiaries in relation to the auditors’ duties. Secondly, since such an expectation gap was shown to exist, this study analyzes the nature of the gap using Porter’s (1993) framework. The results proved the existence of an audit expectation gap in Malaysia. The study shows that the auditees and audit beneficiaries placed much higher expectations on the auditors’ duties when compared with what auditors have perceived their duties to be. The analysis of the expectation gap indicated the existence of unreasonable expectations of the part of users; deficient standards of auditing in Malaysia; and deficient performance of auditors. An analysis of audit opinions of Malysian public listed companies (1999-2003) (A Md Ali, NZ Mohamad Yusof, D Abdul Kadir & TH Lee) The annual reports of companies provide useful information for investment decisions. An audit opinion expressed by an independent auditor should enhance the credibility and reliability of this information.  In this study, a total of 3,254 annual reports of 838 listed companies in Malaysia for a five-year period from 1999 to 2003 were reviewed with the aims to identify the types of audit opinion issued; the incidences that lead to modified unqualified audit reports; and whether companies switch their auditors after receiving audit qualifications. The study found the percentage of companies receiving audit qualifications remained low and decreased during the period 1999 to 2003. A total of 427 modified unqualified and 148 qualified audit reports were issued.  Qualifications were in the form of qualified opinion (81) and disclaimers of opinion (67).  No adverse report was issued during the period covered by the study. The study also found many companies were financially distressed as a result of the economic condition in Malaysia. The large numbers of modified unqualified reports with emphasis of matter paragraph were issued indicate that companies were willing to disclose the existing problems of the companies in the financial statements in order to avoid qualified audit reports. In addition, a modified unqualified report has been a choice of audit opinions by auditors instead of a qualified audit report.  Finally, consistent with the previous study in Malaysia, this study also found that qualifications of audit reports do not always lead to switching of auditors. [ BACK TO THE TOP ] Internal audit in the state and local governments of Malaysia (A Md Ali, JD Gloeck, A Ali, A Ahmi & MH Sahdan) Internal audit is supposed to help members of organizations to improve their entity’s effectiveness and efficiency. But the findings from in-depth interviews conducted with internal auditors from 35 State and Local Governmental Bodies (SLoGBs) located in Peninsular Malaysia in the third quarter of 2003 show that the audit function faces  numerous challenges. This is in addition to the fact that a mere 35 out of the then 202 SLoGBs had an internal audit capacity. The politics of accountability theory, power distance, and a Malaysian social context that is replete with cases that display a lack of transparency and public accountability from its major actors, help to explain these facts and predict a bleak future for internal audit. However, a rosy future may yet be achieved through the involvement of key parties and if specific measures are put in place. This is the crucial role that the federal government in particular should play so that the audit function may fulfill its potential as a tool that improves Malaysia’s economic standing at this time when globalization, accountability and transparency are considered essential issues in just about any worthwhile economic, social or political activity. Perspectives on environmental management accounting (EMA) in South Africa (CM Ambe) Conventional management accounting practices do not provide adequate information for managing the environment in a world where environmental concerns, as well as environment-related costs, revenues, and benefits, are on the rise. Environmental management accounting (EMA) is a tool used for balancing the interaction between the economic, social and technological factors in the development process to achieve conditions for sustainable development. In this study, a survey and case study technique is used to document a South African perspective on EMA. The findings indicate that, while EMA is gaining increasing awareness, its application is still at its infancy. Some of the elements of EMA may be found in practice, but they are not called EMA. Based on the findings, ten steps for implementing EMA are suggested. [ BACK TO THE TOP ]
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