The Effect of Audit Quality on Goodwill Disclosure among Malaysian Listed Firms under the MFRS 136

Accounting for goodwill is again controversial as International Accounting Standard Board adopts the impairment regime in 2004. Indeed, the adoption of impairment regime regarding Goodwill in accordance with IFRS makes the annual reports of companies more credible and transparent. However, the new treatment continues to receive criticism from the academics and practitioners, because they see the impairment regime is based on the discretion of management, and there is subjectivity inherent in the application of the impairment regime besides the conceptual move toward fair-value accounting. Hence, there is non-compliance with this standard in many companies around the world. However, the problem of agency and information asymmetry, which happen between companies‟ management and shareholders, can be decreased by external audit. This paper investigates the factors that may affect companies‟ compliance with the MFRS 136 Impairment of Assets among the Malaysian listed companies. Based on a review of the prior literature, this paper proposes a conceptual framework to investigate the impact of audit quality (audit firm size, audit tenure and audit fees) on the level of goodwill disclosure compliance with the MFRS 136 among Malaysian listed companies. Evidence from previous studies suggested that the audit quality proxy namely audit firm size, audit tenure and audit fees positively impact the companies‟ compliance with the MFRS 136.