Institutional directors, central bank-approved directors, partner-client tenure and audit reporting timeliness

Abstract Following the lead of recent literature showing the vital role played by institutional directors in influencing organizational outcomes, this study contributes to the body of research on auditing delays by examining the question of if and to what extent institutional directors have any connection to the on-time completion of audit reports. The study also looks into how having directors who have been approved by the central bank can speed up audit reporting. In addition, the research article goes on to explore concerns regarding the potential negative effects that changing partners could have on auditing results due to the impairment of client-specific knowledge. Our study provides pioneering empirical evidence supporting the idea that institutional directors and financial institution directors significantly improve audit timeliness in emerging audit economies. Furthermore, this study finds little evidence to support the contention that a long-tenured audit partner improves financial reporting timeliness. Therefore, being scared of mandatory partner rotation leads to an impairment of knowledge and understanding specific to customers, and the postponement of declarations of audited financial results is unwarranted and unnecessary.


Introduction
The audit report lag (ARL) refers to the amount of time that elapses between the end of an organization's financial year and the publication of the report issued by the auditor on the company's financials.A large amount of attention from stakeholders who have a vested interest in accurate financial reporting has been focused on this time span.The ability of stakeholders to improve the effectiveness of global audits is facilitated by the identification of the elements that lead to audit delays.This has been an issue throughout the financial reporting chain for a very long time, and for stakeholders seeking to enhance auditing processes on an international level, a complete understanding of the reasons driving audit delays is essential (Abernathy et al., 2017).The interest in audit delays among auditing scholars continues unabated (Cullinan & Zheng, 2017;Meckfessel & Sellers, 2017;Mohammad Rezaei & Mohd-Saleh, 2018;Rusmin & Evans, 2017;Sharma et al., 2017;Shin et al., 2017).Audit delay is particularly severe in Malaysia, and CG Watch 2016 acknowledges this unsatisfactory state of affairs when it reports that "Malaysia is slightly behind on providing audited annual statements Malaysian listed companies have four months to produce their audited annual financials (published in an annual report), rather than the standard three months in other markets" (CLSA & ACGA, 2016).The authority in charge of regulating the stock market in Malaysia has recognized the problem of delayed audit reporting in the nation's capital market.Empirical evidence of adverse consequences associated with firms that postpone their financial reporting abounds in Malaysia.For instance, lengthy audit report lags are frequently related to dishonest financial reporting among other economic consequences, as evidenced by the experiences of both the Transmile Group and the Silver Bird Group.Given the importance of timely reporting of audited accounting information in order for it to remain relevant as well as have economic value for potential users (Rusmin & Evans, 2017), and following an increasing amount of recent literature demonstrating the essential function played by directors who are the representatives of institutional investors, i.e., institutional directorships, in influencing the outcomes of organizations, the first purpose of this study is to investigate whether or not the presence of institutional directors on boards has any bearing on the timely submission of audit reports Apart from examining the monitoring role of institutional directors, our study also focused on the corporate directors who sit on the boards of financial institutions, which has rarely been examined before.The appointment as a director of a financial institution in Malaysia requires stringent "fit and proper" person assessments and written approval from the Central Bank, Bank Negara Malaysia (BNM).In addition, unlike other listed companies, financial institutions licensed under BNM are subject to accelerated financial reporting, i.e., the audited financial statements are required to be filed within 3 months following the fiscal year end (Bank Negara Malaysia, 2013).Thus, this research contends that financial institution directors are endowed with impeccable reputations and track records and are concerned about undue delays in audit reporting.Thus there is an association between directors who sit on the boards of financial institutions and audit report timeliness.Furthermore, while taking into consideration the ongoing debate regarding the advantages and disadvantages of mandatory audit partner rotation (Fukukawa & Kim, 2017), this research also investigates whether the length of time that a partner has worked is relevant in delayed audit report, which may affect audit reporting timeliness.
Evidence of association among corporate board features, partner tenure and audit reporting timeliness has been confirmed in several jurisdictions (Blankley et al., 2015;Chan et al., 2016); Pucheta-Martinez and Garcia-Meca (2014); López-Iturriaga et al. (2015); Abernathy et al. (2014); Harjoto et al. (2015); Sultana et al. (2015); Sharma et al. (2017) and Wan-Hussin et al. (2018).This paper builds on some of these studies, particularly Pucheta-Martinez and Garcia-Meca (2014) and López-Iturriaga et al. (2015), but this time focused on two key corporate board classes of directors: Institutional directors (ID) and central bank appointed financial institution directors considered as internal governance monitoring mechanisms.Our model also included auditor tenure a feature of independent (external) auditors as external governance mechanism.Specifically the study seeks to examine the impact of institutional directors, financial institution directors, and partner-client tenure on audit reporting timeliness in listed companies of Malaysia, a developing economy.
For a variety of reasons, this study chose to conduct its research in Malaysia.To begin, much like in Spain, institutional investors maintain a significant presence in the corporate sector of Malaysia, and they are now considered a key player in the nation's economy as a significant facilitator for influencing market behavior and practices in their investee companies, as well as generating longterm sustainable value on behalf of their ultimate beneficiaries through good stewardship (Institutional Investors Council Malaysia, 2016).
Secondly, since 2011, Malaysia has mandated the rotation of audit partners.Our study of the auditing outcomes for the period before its implementation allows us to evaluate the potential detrimental effect in terms of loss of audit timeliness, if any, arising from this regulatory change.Chi and Huang (2005) contend that the evidence obtained without mandatory auditor rotation can still provide useful insights for policymakers.
This research provides a number of important contributions to the body of knowledge that exists regarding auditing and corporate governance.First of all, this study begins by extending the research done by Pucheta-Martinez and Garcia-Meca (2014) and López-Iturriaga et al. (2015).More specifically, this study looks not just at the role that institutional investors play on boards; however, this research work additionally looks at the role that financial institution directors play, especially in a developing market.Second, our study is also one of the first to investigate whether the participation of institutional investors and directors of financial institutions add anything worth mentioning to the board's management of the financial reporting process, which is evident in the timelier issue of audited financial statements as a direct result of this value addition.Third, the research explores how much of an effect the number of years of expertise that audit partners have had on how quickly audit reports may be produced.Previous studies on the length of time spent as an audit partner have, for the most part, concentrated on the impact that changing partners have on audit quality or earnings quality.The impact that partner-client tenure has on the timeliness of audit reports is a particular topic where empirical research is noticeably lacking, and our study bridges this gap.As urged by Moroney (2016), who indicated that more study is required to understand how rotation and tenure affect various measures of the quality of audit and to examine means of compensating for any difficulties that compromise quality, especially the loss of client knowledge.
The remaining sections of the article have the following structure of arrangement: Following this section comes a presentation of corporate governance regulations' development and audit reporting in Malaysia, then the literature review and research hypotheses, then the data, and the methods of analysis that were used to test the postulated variables.Followed by the implications and limitations of the study after discussing the findings from the empirical investigation.

Corporate governance regulations' development and audit reporting timeliness in Malaysia
The Malaysian corporate governance environment has undergone several developmental changes over the years with the introduction of the Malaysian code of corporate governance 2000/2007 and amended, the Companies' ACT, the Banking and Financial Institutions ACT 1989 and amended (BAFIA), The Financial Services Act 2013 (FSA) and the Malaysian Code for Institutional Investors among other regulatory agencies and pronouncements.There are several regulatory objectives of these acts and codes, but our paper considers the controls that directly relate to the country's accounting, auditing, financial reporting, and particularly audit reporting timeliness.
The Malaysian Code on Corporate Governance (Code) of 2000 was the first formal corporate governance reform in Malaysia that defined principles and best practices of good corporate governance structures and internal processes.The Guidelines contain broad principles dealing with: (i) Board matters; (ii) Management oversight; (iii) Accountability and audit; and, finally (iv) Transparency: The last two guidelines; audit and transparency of the financial statement and reporting entails audit reporting timeliness that ensures the credibility, reliability, and economic usefulness of the report for potential users (Rusmin & Evans, 2017).Specifically, part 1, sections DI and DII talked about financial reporting and relationship with the company's auditors, respectively.While part 2 of the code discussed the BOD and their principal responsibilities especially their reviewing the adequacy and the integrity of the company's internal control systems, and went further to state relationship with external auditors, and of course keeping in view the adverse consequences associated with delayed audit reporting on the nation's capital market.
Another ACT of the Malaysian authorities is the Companies Act 1965/2019 and amended that indirectly regulates audit reporting timeliness.The relevant section of this ACT in the context of this study is part IV: Accounts and audit.Specifically, section 174 specified the powers and duties of auditors as to report on accounts.The Malaysian Banking and Financial Institutions ACT 1989 and amended (BAFIA), is also an instrument for regulating licensed institutions' accounts and audit to ensure compliance with financial statement auditing reporting.Part X of the BAFIA specified the powers of supervision and also the provisions in relation to directors' or officers' appointment in institutions licensed under the BAFIA.In conformity with the provisions of Section 57(2) of the BAFIA, appointments of directors of licensed institutions must be subject to the prior written permission of the BNM, which serves as the Central Bank.Meanwhile, the Financial Services Act 2013 (FSA) is the key statute, governing the conventional finance industry as it relates to accounts and audit reporting among others.
Finally, this research is a useful supplement to the findings of Tee et al. (2017), who demonstrated that institutional investors in Malaysia have an impact on auditing operations by requiring more extensive audits and, consequently, higher audit costs.There is no proof, nevertheless, that having an audit partner with an extensive track record of service helps with timely financial reporting.Thus, the fear that mandatory partner rotation leads to a loss of audit timeliness is unwarranted.The fact that institutional investors have a significant role to play in the process of producing financial statements is reflected in the Malaysian Code for Institutional Investors (Securities Commission, 2014).
Countries in several jurisdictions have made laws to regulate timely rendition of final accounts (Shin et al., 2017).Malaysia has made attempt to reduce the time frame to publish annual financial reports from 6 to 4 months.This is an attempt by the Malaysian regulatory authority to reduce average audit lag or improve audit reporting timeliness.The timely submission of financial reporting has been considered a priority for the Malaysian stock market regulator; this point is also highlighted in the 2012 assessment on the Observance of Standards and Codes, Accounting, and Auditing for Malaysia, which stated as follows: "The deadline for submitting audited financial statements is currently four months after the end of the financial year."(The World Bank, 2012, page 31, item 86).Bursa Malaysia seeks to get this shortened to 2 months and is currently undergoing a consultation process with other investors.
The Malaysian corporate governance environment may not be compared with those of the developed Western countries, but the introduction of these codes, legislature ACTS, and pronouncements may have at least created awareness among regulatory authorities, owners, and management of corporations of their institutional responsibilities in the financial accounting and audit reporting process especially in the area of audit reporting timeliness.

Literature review and hypotheses development
One of the significant aspects of corporate governance (CG) is the ownership structure.Research findings indicate that the ownership structure of a firm may have an impact on the audit report lag (ART) (Mohammad Rezaei & Mohd-Saleh, 2018;Rusmin & Evans, 2017).The composition of most corporate board of directors is a reflection of the company ownership structure, hence the choice of the nature or the characteristics of directors.

Institutional directors (INSDIR) and audit reporting timeliness (AUDITLAG)
Institutional investors are a type of professional investor who typically works on behalf of beneficiaries, which include individual savers or members of retirement savings plans.The institutional investors are a heterogeneous group with a variation of attributes, legal structures, and requirements.The pension funds and insurance companies manage and invest a bulk of their beneficiaries' funds in the equity markets.Other forms of institutional investors include mutual funds and unit trust schemes.Malaysian ownership of corporations has special characteristics due to the fact that a total of seven governmentlinked investment companies (GLICs), including the Employees Provident Fund (EPF), Khazanah Nasional Berhad, Permodalan Nasional Berhad (PNB), Kumpulan Wang Persaraan (KWAP), Lembaga Tabung Angkatan Tentera (LTAT), Lembaga Tabung Haji (LTH).Minister of Finance Inc., own substantial stakes in many Bursa Malaysia-listed companies.GLCs, frequently referred to as government-linked companies, are establishments that are dedicated to a primary focus on business and in which the government of Malaysia continues to hold a direct controlling interest.As explained by the International Monetary Fund (2013), the term "controlling stake" refers to the government's ability (not just "percent ownership") to appoint senior management and board members and make important decisions for GLCs either directly or through GLICs (including, but not limited to, decisions about contract awards, strategy, reorganization and finance, acquisitions and divestitures, and other business-related decisions).
A survey conducted by the Institutional Investor Council Malaysia shows that as of 31 December 2015, EPF, PNB, KWP, LTH, and approximately 30% of the total RM1.69 trillion market capitalization on Bursa Malaysia are handled by Khazanah Nasional Berhad's domestic equity fund (Institutional Investors Council Malaysia, 2016).
The survey also reveals that each of the institutional investors, EPF, PNB, KWP, and LTH, is actively monitoring around 100 of their listed investee companies in Malaysia.The ways the GLICs manage and control their investee companies vary depending on the GLIC's ownership level of a GLC and investment costs.In many cases, GLICs are controlling shareholders or own substantial stakes with board representation, i.e., they have at least one nominee director among the board members of the GLCs.By having institutional directorships, the GLICs can monitor and manage the GLCs more closely by influencing board decisions.Where GLICs are minority shareholders, shareholder activism can be exercised through active participation and voting at the shareholders' general meetings, meetings and dialogues with management, writing to the management of the investee companies to express their concerns, and attending analysts' briefings.
Among the seven GLICs, the two pension providers, EPF and KWAP, have issued their Corporate Governance Principles and Voting Guidelines, which encapsulate their commitments to encourage healthy corporate governance practices among the businesses in which they have invested.In these Guidelines, both the institutional investors emphasise the need for investee companies in order to give investors with promptly available and credible financial information that would benefit them in the course of making decisions: "As the largest institutional shareholder in the country, the aforementioned research work seek to ensure that . . . the company's operating and financial performance are consistently reported to shareholders in a transparent, accurate and timely manner" (EPF Corporate Governance Principles and Voting Guidelines, 2014, p. 11); and "KWAP constantly looks into companies with good shareholders' orientation which is characterised by . . .prompt and sufficient disclosures and announcements" (KWAP Corporate Governance Principles and Voting Guidelines, 2014, p. 3).
Empirical results on the relationship between Institutional directors (INSDIR) and audit reporting timeliness (AUDITLAG) are inconclusive (Balsam et al., 2002;Bamahros & Wan-Hussin, 2015a;Burns et al., 2010;Koh, 2007;Oranefo, 2022;Ramalingegowda & Yu, 2012), although some prior studies (Ishak et al., 2010;Oranefo, 2022;Pucheta-Martinez & Garcia-Meca, 2014), established negative association among INSDIR on corporate boards and AUDITLAG through effective control of corporate managers and company auditors.Specifically some of these studies state that institutional investors are actually linked to financial reporting quality as a consequence of their oversight of investees' financial reporting processes.Oranefo (2022), using manufacturing companies' data in Nigeria confirmed that Institutional directors who also lay claim to ownership have a negative and significant effect on audit report lag.According to Tee et al. (2017), institutional investors and their representatives on the board in Malaysia have placed pressure on auditors to throw in more time and energy, which has resulted not only in higher audit fees but also in timely and quality audit reporting.Ishak et al. (2010) in their study also demonstrate that the presence of institutional directors; representing institutional ownership on the board affected the timeliness of audit reports.Also, Pucheta-Martinez and Garcia-Meca (2014) making use of data from Spain; which has a high share of institutional directors, illustrate that having a number of representatives of institutional investors on the board of directors of a firm enhance financial reporting quality (FRQ), among which are timely rendition and infrequent qualified audit reports.
Financial reporting quality has been enhanced, as seen by a decrease in the frequency of qualified audit reports, implying that board members of companies and organizations are capable watchdogs.Hence, this study anticipates that: H1: There is a negative association between the number of institutional directors and audit reporting lag

Financial institution directors and audit reporting timeliness
Organizations that are registered under the Banking and Financial Institutions Act (BAFIA) in Malaysia have been subjected to a very high degree of corporate governance as a result of the regulatory framework that the country has in place.In conformity with the provisions of Section 57(2) of the BAFIA, appointments of directors in licensed institutions must be subject to the prior written permission of the BNM, which serves as the Central Bank.In accordance with Bank Negara Malaysia (2013), this is done in order to guarantee that the interests of depositors, policy owners, and participants are properly taken into consideration throughout the safe and accountable operation of financial institutions.The Board of Directors of Financial Institutions ought to possess the competence, confidence, and objectivity necessary to challenge senior management and hold them accountable, as stated by BNM.
In processing the applications for the appointment of directors, BNM conducts rigorous vetting to ensure that the proposed director is a "fit and proper" person.The directors have to guarantee the smooth operations of a licensed institution, which are entrusted to them by the shareholders and other stakeholders; thus, they must be individuals of high calibre.Among the criteria in the "fit and proper" person tests are (a) reputation, ethics, and integrity, particularly financial integrity; (b) honesty, reliability, skill, and sound judgment; (c) history of crimes including violence, dishonesty, and fraud; and (d) history of engaging in unfair, abusive, or unethical commercial practices or any other behavior that might harm the applicant's reputation.
In addition, politicians cannot be appointed as directors of institutions that are licensed in order to prevent the possibility of conflicts of interest arising between their duties as directors of a licensed institution and those owed to their constituents.If a person holds a position at the divisional level in a political party or is a member of the Supreme Council, State Assembly, or Parliament, they are considered politically active.The nominating committees are responsible for assessing, on an annual basis, that the directors are not disqualified under Section 56 of the BAFIA and must maintain the "fit and suitable" criteria; if a director is inept, irresponsible, or careless in their duties, they should be recommended for removal by the board.
Several previous studies are on BOD features and ARL, but there is a paucity of studies that are on the ARL and directors, particularly the CBN appointed directors, on the boards of financial institutions.There are few studies that examine the consequences of the appointments of commercial bankers in Chinese firms (He et al., 2016) and the monitoring role of bank-lender representation on the board in Poland (Slomka-Golebiowska, 2014).This study believes that the directors who serve as board members in financial institutions are deemed to be "fit and proper" individuals.Having been familiarized with the one-of-a-kind culture of financial reporting that is followed by financial institutions, it provides that licensed financial institutions are required to submit to BNM their yearly audited financial statements, which are submitted within 3 months after the closing of every financial year and prior to the laying of the financial accounts at the general meeting.This obligation lies within 3 months after the end of each financial year (Bank Negara Malaysia, 2015).
Considering the lack of empirical evidence on the positive effects or otherwise of CBN assigned directors on the board of financial institutions on audit reporting timeliness, it is believed that doing so is essential.In the context of this study based on the provisions of BAFIA and other guidelines on appointment of directors who serve as board members in financial institutions are deemed to be "fit and proper" individuals that to possess the competence, confidence, and objectivity necessary to challenge senior management/auditors and hold them accountable, as stated by BNM.Also, the law states that; licensed financial institutions are required to submit to BNM their yearly audited financial statements, which are submitted within 3 months after the closing of every financial year and prior to the laying of the financial accounts at the general meeting.This obligation lies within 3 months after the end of each financial year (Bank Negara Malaysia, 2015).This study anticipates that these organizations will demonstrate transformational leadership as well as assimilate the tradition of timely financial reporting.Thus, the following research hypothesis is stated: H2: There is a negative relationship between the number of Central Bank-approved directors and audit reporting lag.

Partner-client tenure and audit reporting timeliness
Through setting maximum terms of employment for audit firms, many nations have introduced forced audit partner rotation, including China, Argentina, Belgium, Australia, Denmark, France, Hong Kong, the Netherlands, Germany, Taiwan, New Zealand, Singapore, South Africa, South Korea, Spain, Russia, Sweden, Thailand, the UK, and the US (Ferguson et al., 2017;Lennox et al., 2014).Like in the US and UK, regulations established by the Malaysian Institute of Accountants (MIA) stipulate that all publicly traded companies must change their auditing partner every 5 years.In spite of the fact that rotating auditing firms doesn't seem absolutely necessary, the MIA By-Laws provide that an individual may not serve as a key audit partner for more than 5 years.This is stated in Part I of Section 290.151 of the MIA By-Laws.After that point in time, the person in question is not permitted to be a part of the engagement team or a key audit partner for the client for a period of 2 years.During that time period, the individual is not allowed to take part in the audit of the entity, offer satisfactory assurance for the engagement, consult with the engagement team or the client with regard to technical or industry-specific issues, transactions, or events, or otherwise have an immediate impact on the final results of the engagement (Malaysian Institute of Accountants, 2011: pp.82-83).
The relative benefits of requiring audit partner rotation have been a subject of heated discussion for a long time.Many researchers contend that a forced change of partners may have a negative impact on auditing outcomes since it would exclude partners with greater expertise, as auditors' competence grows with tenure with their clients.On the other side, a changeover in audit partners could be advantageous because it will provide each audit with a new perspective.Additionally, when partners become more familiar with management, they are more inclined to lose their independence and accept client roles (Laurion et al., 2017).
Previous studies have mainly concentrated on the impact of the duration of the partner-client relationship on the quality of audits, the quality of profits or on the length of time audit partners are hired (Bamahros and Wan-Hussin (2015b); Chi and Huang's (2005); Carey and Simnett (2006).Not so many research have been explored the impact of audit partner characteristics, specifically the tenure of the audit partner, on the timeliness of audit reports (Durand, 2019).Nevertheless, some authors Dao and Pham (2014), Habib and Bhuiyan (2011), Lee et al. (2009), Sharma et al. (2017), Wan-Hussin et al. (2018) have examined the association between Partner-client tenure and audit reporting timeliness, though with conflicting results.Sharma et al. (2017) reveal that partner rotation affects audit timeliness.They discover that partner turnover is strongly linked to increased audit delays and that this is especially true for larger audit clients and those who are not served by the Big Four accounting firms.Their findings also provide credence to the argument that audit companies will charge clients more for audits that take longer than usual because of obligatory audit partner rotation.Dao and Pham (2014) reported a negative relationship between audit firm short tenure and AUDITLAG.This report could be seen from the point of view of auditors needing more time to learn the accounting, operations, and auditing processes of the company (Lee et al., 2009).
In light of the foregoing, the present research work conjectures that partner tenure enhances the educational experience and that an engagement partner's greater knowledge of the client aids in the auditing process and improves audit performance through more timely audit reporting.Thus, the third hypothesis is stated as follows: H3: There is a negative association between audit partner tenure and audit reporting lag Finally, the study also included some control variables into our model.Particularly, previous studies viewed audit report lag as a reflection of the internal and external efforts of auditors where internal audit features are associated with audit report lag (Abbott et al., 2012).Considering audit committee's (AC) two characteristics; AC meeting and size, previous studies empirical findings are also not conclusive, although Kaaroud et al. (2020) agree that audit committee meetings have significant association with the extent of audit report lag.Sultana et al. (2015) confirmed AN insignificant relationship between AC and ARL.Finally, a study in Malaysia by Mohamad nor et al.
(2010) concluded that large AC members and regular AC members' meetings are more likely to produce audit reports on time.

Data and research methods
This study makes use of data from the accounting period of 2009, which was the final year that was conducted before the mandatory audit partner rotation was implemented, in order to analyze the impact, if any, that partner-client tenure had on the length of time it took to complete an audit.This strategy has the potential to enhance the amount of variation in the partner tenure variable as well as add power to the tests.The study partitions the partner's tenure according to short tenure (two consecutive years or less), medium tenure (three to five consecutive years), and long tenure (more than five consecutive years).As mentioned earlier, starting in 2011, the lead audit partner should be rotated every 5 years in accordance with the MIA By-Laws.If this study were to use the data post-2011, our maximum tenure would be limited to 5 years only.Regardless of whether the experimental findings on partner tenure have been obtained under a non-mandatory audit partner rotation regime, Chi and Huang (2005) maintain that the findings are nonetheless useful to regulators.
The researcher went through each of the 30 listed financial firms in 2009 and collected the names of their directors by hand.The following companies are included on the list of publicly traded financial institutions: Affin Holdings, Alliance Financial Group, Allianz Malaysia, AMDB, AMMB Holdings, Apex Equity, BIMB Holdings, CIMB Group, ECM Libra, EON Capital, HLG Capital, Hong Leong Bank, Hong Leong Capital, Hong Leong Financial Group, Hwang Capital, Hwang-DBS, K & N Kenanga, KAF-Seagroatt & Campbell, and then count how many of the board members in each of the sample firms are also directors in the financial institutions using the abbreviation "BANKDIR."The researcher studied the directors' profiles of the companies in our sample to establish who among the board members of those companies is a nominee director representing institutional investors (INSDIR).This allowed us to ascertain who among those board members were selected to represent the GLIC.The study noted that there are a few cases of financial institution directors who are also nominee directors representing institutional investors in our sample firms.For example, Samsudin Osman, who is Chairman of Bank Islam Malaysia (BIMB) Holding and Chairman of the Employees Provident Fund (EPF), sits as a board member of Sime Darby, our sample firm.Another example is Ismee Ismail, the CEO of institutional investor LTH and a director of financial institution BIMB Holdings, who is a board member at two of our sample firms: KFC Holdings and Pelikan International.
The audit delay models were adopted from previous studies by Wan-Hussin and Bamahros (2013), Wan-Hussin et al. ( 2018), Walker and Hay (2013), Bamahros and Wan-Hussin (2016), Harjoto et al. (2015), Habib (2015), Pizzini et al. (2015), Sultana et al. (2015), and Sharma et al. (2017) are altered so that the hypothesis may be tested.In order to test our research hypotheses, the researcher made use of the OLS regression model, which is depicted in Equation (1).AUDITLAG is represented in days using the natural logarithm, and Appendix 1 contains a description of the independent variables, directional expectations, and references to research that has already been done.The main equation is stated as follows: In the event hypotheses H1, H2, and H3 are proven true, then the research anticipates that the coefficients of 1, 2, and 3 are going to possess a negative value.For the purpose of calculating BANKDIR, INSDIR, and TENURE, the data needed to do so is gathered from the annual reports.This data include the names of directors, their profiles, and the names of lead engagement partners who signed the audit reports.Regarding the rest of the data, the research made use of the same dataset as Wan-Hussin and Bamahros (2013) did.In the year 2009, there were 431 usable observations that contained all of the necessary data for the audit lag model.Two other models have also been developed for robustness tests purposes.Table 1 discloses the definition and the measurement of the variables (see Appendix).

Descriptive statistics
Panel: A Table 2 indicates the percentage of businesses in our sample with institutional directors and the average audit lag.Among the 431 companies examined, 372 (or 86%) don't have any institutional directors.Thirty-seven firms have one institutional director (9%), 12 firms (3%) have two institutional directors, and 10 firms (2%) have at least three institutional directors.The sample distribution for financial institution directors, as reflected in Table 2 panel B, shows that 339 (or 79%) of the sampled firms have no financial institution directors.Seventy-three firms (17%) have one financial institution director, 15 firms (3%) have two financial institution directors, and 4 firms (1%) have at least three financial institution directors.Comparing the distribution of directors between panels A and B reveals the proportion of directors from financial institutions who serve on the boards of our sample companies are marginally greater by 7.66% (372-339 = 33 of 431) than the proportion of directors from other types of institutions.
The average audit lag for panels A (Institutional directors) and B (Central Bank-approved directors) show that for panel A, Firms with at least one institutional director have a considerably lower audit lag (78.97 + 79.98/2) of approximately 80 days compared to firms without institutional directors on their boards (100.69) of approximately 101 days.Similarly, firms with at least two central bank-approved directors have a much shorter delay (74.93 +  Regarding audit partner tenure as indicated in Table 2 panel C, 33 firms (7.66%) have partners serving more than 5 years, and 268 firms (62.18%) have partners serving less than 3 years.The remaining 130 firms (about 30.23%) of firms have partner tenure between 3 and 5 years.Furthermore, panel C indicates that partners with tenures in excess of 5 years have the largest audit delay (103.85) of approximately 104 days, when compared to short partnership tenure, which is less than 3 years at (97.87) or approximately 98 days.The medium partnership tenure which is between 3 and 5 years is at 96.25 or approximately 97 days audit lag.

Variable
Using our definition/measurement as reflected in Table 1 which is also adopted by other studies: Table 3 presents a variety of descriptive statistics regarding the sampled organizations.The minimum audit lag is 33 days, while the maximum is 127 days, the median is 98 days.On average, the number of institutional directors and central bank-approved directors in our sample firms is 0.23 and 0.27, respectively.The maximum number of institutional directors on the board is seven and five for financial institution directors.In 2009, external auditors and affiliates received audit fees of RM510, 000 on average, while internal audit costs were RM373, 000 on average.The average non-audit fee is around RM103, 000.
An audit by Ernst & Young, KPMG, PwC, or Deloitte has been carried out on about 0.65 (65%) of the sample companies.The average firm has about three business segments.On the average about 0.64 (64%) of the companies held no fewer than five audit committee meetings on a yearly basis.The preliminary estimates as well as the audited statistics for each of the businesses that were included in our sample deviate by an average of 2.75% from one another.The rest of the descriptive statistics of the variables are as indicated in Table 3. Table 4 serves to demonstrate the causal relationships that were found among all the variables.The correlations between AUDITLAG and INSDIR and AUDITLAG and BANKDIR are negative and significant, providing preliminary support for H1 and H2.The correlation between AUDITLAG and TENURE is negative but insignificant; this would imply that the timely delivery of audit reports has absolutely nothing whatsoever to do with the length of the partnership that exists between the partner and the customer.H3 is therefore partially accepted as it is negative but insignificant.

Multivariate analysis
The overall OLS regression results in Table 5 provide evidence that the main audit lag model (equation 1) has moderate explanatory power at R 2 = 0.34 or 34%, this result is comparable to 36% in a similar study by Harjoto et al. (2015).Table 5 further reports a negative and significant (β = −0.056;p-value = 0.05) relationship between INSDIR and AUDITLAG.A negative and significant (β = −0.050;p-value = 0.03) relationship is also established between BANKDIR and AUDITLAG.These results mean that INSDIR and BANKDIR play significant roles in reducing AUDITLAG in Malaysian companies.Thus, H1 and H2 are accepted.For the TENURE and AUDITLAG (β = −0.010;p-value = 0.54), the relationship is negative but highly insignificant.H3 is therefore rejected.Although the coefficient is negative, it is insignificant.
Refer Appendix for variable measurement.

Discussion
Table 5 reflects the empirical results of the analysis of our equation 1, the main model for this research.In line with the objective of this study, the focus is on INSDIR, BANKDIR and TENURE impact on AUDITLAG a proxy for Audit Reporting Timeliness.
Table 5 indicates a negative and significant relationship between INSDIR and AUDITLAG.This means that institutional directors on the boards of Malaysian companies play a significant role in reducing audit time lag.This result is consistent with the findings of Pucheta-Martinez and Garcia-Meca (2014); Tee et al. (2017) and Oranefo (2022) examined the effect of INSDIR and confirmed that INSDIR helped to improve the quality and timeliness of audit reports.This result in the context of Malaysia may be attributed to the effective activities of the institutional investors like the government-linked companies (GLCs).These are companies in which the government of Malaysia continues to hold direct controlling interest.The establishment of the code for institutional investors could also be associated with this result.Among others, this code is intended to give institutional investors guidance on effective exercise of stewardship responsibilities to ensure delivery of sustainable long-term value to their ultimate beneficiaries or clients, which also entails, among others, to ensure Audit Reporting Timeliness.
The results also show that BANKDIR is negative and significant with AUDITLAG, implying that CBN appointed directors on the board of Malaysian financial institutions are more likely to influence and encourage early rendition of audit reports.This finding may be associated with the stringent conditions in appointing such directors by the CBN as set by the country's BAFIA, with emphasis on competence, financial integrity, honesty, reliability, skill, and sound judgment.The result is also in line with Oraka et al. (2019).There is also a legal compulsion to submit audited financial reports within a period.This obligation lies within 3 months after the end of financial year (Bank Negara Malaysia, 2015).
For the TENURE and AUDITLAG relationship, the result as reflected in Table 5 is contrary to our expectation in this research.The relationship is negative but highly insignificant.This suggests that auditors' tenure does not substantially influence AUDITLAG in Malaysia.Specifically the result demonstrates that audit delay tends to be shorter during the initial years of engagement.This result is not in line with Sharma et al. (2017) which revealed that partner rotation/turnover affects audit timeliness and is strongly linked to increased audit delays.The result is also contrary to the findings of Dao and Pham (2014) and Habib and Bhuiyan (2011) which also showed that AUDITLAG was much longer for firms with a short-audit-tenure.But the finding of this study is in line with Azizkhani et al. (2021) and also with an earlier study by Wan-Hussin et al. (2018) which did not discover any empirical evidence linking Malaysia's audit partner tenure to AUDITLAG or audit reporting timeliness.
Finally, the various control variables included in our model also indicated different directions and levels of influence on AUDITLAG.For example, the ACMEET indicates that the higher the number of meetings, the bigger the AUDITLAG.Frequently occurring audit committee meetings are predictive of longer discussion periods between management and auditors for the purpose of resolving accounting difficulties, which ultimately results in longer audit delay times.ACSIZE shows that in Malaysia the bigger the ACSIZE the shorter the audit delay time, probably as a result of enough capable hands to handle and resolve audit issues on time.An earlier study by Mohamad nor et al. (2010) indicates that companies with a substantial number of AC members and a higher frequency of AC meetings have a greater likelihood of timely completion of their audit reports.

Robustness tests
Most prior studies used the level of institutional share ownership as a proxy for the intensity of institutional monitoring.The researcher performs additional analysis by replacing the test variable INSDIR with INSOWN, which is the total ownership by GLIC in the sample firm, and an interacting variable INSOWN*INSDIR.The findings are shown in Table 6, which demonstrates that INSOWN is not statistically significant, but INSOWN*INSDIR is highly significant with a negative sign.This suggests that institutional investors are more effective in pressuring the investee firms to expedite their financial reporting when they have board representation.The findings obtained regarding the control variables have been placed on par with one another in terms of quality, whereas those obtained for the test variable BANKDIR continue to be highly significant.
Further tests were performed using equations 2 and 3 to ascertain long-term partnership has on a partner's level of competence, and the correlation between the amount of time a partner has spent working in the field and the amount of time it takes to do an audit.For equation 2, the variable TENURE S in this model is assigned the value 1 if the partner's tenure has been less than 3 years, and it is assigned the value 0 if otherwise.In a similar manner, the value of the variable TENURE L is set to 1 if the partner has been in practice for more than 5 years, and it is set to 0 if otherwise.
The result shows that both coefficients for TENURE S and TENURE L turned out to be positive, but they are not statistically significant.This result is in line with Garcia-Blandon and Argiles-Bosch (2017), they reported that once a certain level of familiarity is attained, the beneficial effects of extended partner tenure on learning may begin to wane.This point of view is consistent with learning theories, which establish that performance has a tendency to grow quickly in the early stages of practice, followed by declining returns in later years of effort.It is also in agreement with Chi and Huang (2005) which pointed out that the positive influence that a long-term partnership has on a partner's level of competence begins to wane after the first few years of an engagement.As a result, they advise that the optimal time for optimizing audit performance is during tenures of medium length.Despite this, the INSDIR and the BANKDIR variables are still negative and significant.(Details of the analysis are not tabulated.)Furthermore, the results for equation 3 show that the regression coefficients for TENURE are found to be in the negative over time, and those for TENURE2 are positive, but both are insignificant.Again, the test variables INSDIR and BANKDIR remain negative and significant.Overall, the results suggest that short (or long) partner tenure does not necessarily generate costs or benefits for the clients by increasing or decreasing audit report lag.(Details of the analysis are not tabulated.)

Conclusion
Audit report delay has been an issue throughout the financial reporting chain for a very long time, and, a complete understanding of the reasons driving audit delays is essential (Abernathy et al., 2017).The ability of stakeholders to improve the effectiveness of global audits is facilitated by the identification of the elements that lead to audit delays.This research examines some features of the BOD.More specifically, the study examines the impact that institutional directors and directors approved by the central bank have on the length of time it takes to complete audits of financial reports in Malaysia.One of the board's key roles is to ensure that there are adequate processes and systems in place as well as competent resources to make sure the financial statements are completed on time and give an accurate depiction of the current financial state of the companies that are listed.Overall, our study suggests that firms that have institutional directors and/or central bank-approved directors on their BOD have timelier financial reporting, consistent with the notion that institutional directors are capable of providing enhanced monitoring and financial institution directors are capable of injecting transformational leadership to align the financial reporting culture of the commercial firms they oversee with the higher standards to which they are accustomed at the financial institutions.Contrary to the expectation of this study, our result demonstrates that audit delay tends to be shorter during the initial years of engagement.
The study's empirical results have important implications for policy-makers and regulatory authorities in Malaysia.The evidence that there is improvement in audit report timelines or reduction in audit report delay shows that the efforts of the Malaysian regulatory authorities in introducing governance regulations such as codes, guidelines, ACTs, etc., are improving the CG environment and creating awareness.Nevertheless, there is still the need for review of current regulations where and when necessary, put in place modalities for monitoring, enforcement, and penalty for non-observance of these guidelines.
A metric of finance reporting quality (FRQ) is timeliness (Al-Ajmi, 2008).This very important quality of financial reporting is not only of interest to investors but also for regulatory authorities as they work towards rendition of timely financial information by corporate bodies (Rusmin & Evans, 2017).This is more so for developing economies including Malaysia as a measure of transparency, to attract foreign investment.This study is not without any limitations.The scope of this study is restricted to the years before 2011, when the rule requiring mandatory partner rotation became operational.There is also the use of limited variables, as there are several variables that can influence audit reporting timeliness.To improve on this study and correct some of the limitations, subsequent studies in this area may investigate the impact of institutional directors, financial institution directors, and audit partner tenure on accounting and auditing outcomes during the post-regulatory change periods.Future study may consider the use of different measurements for the variables, especially the audit lag variable, as different method or approach may produce different results and offer divergent managerial and regulatory implications.Also, future study may consider a comparative study, comparing 2-3 different legal systems in relation to this topic.Finally, as the global banking system is undergoing fracturing amidst digitization, future research in this area may examine the benefits or otherwise of these innovations in the banking system.
audit fees paid to an external audit firm and any linked firms is expressed as the natural logarithm of such fees.+ Wan-Hussin et al. (2016)LnNASFEEThe non-audit services fees that were paid to an external audit firm and any related firms in 2009 as expressed by the natural logarithm

Table 4 .
Pearson (Spearman) correlation above (below) diagonal between audit lag, number of institutional directors, number of financial institution directors, partner-client tenure, and control variables (n is significant at the 0.01 level (2-tailed).†

Table 6 . Regression results on determinants of audit delay (INSDIR replaced with INSOWN and INSOWN*INSDIR. Added)
INSOWN is share ownership by the GLIC.Refer Appendix for the remaining variable measurements.