Research Insight · Malaysia · Audit Ron’s Financial Lab · Based on Bajary, Shafie, Ali, Bin-Nashwan & Rusli (2025), Journal of Financial Reporting and Accounting
Key Numbers at a Glance
Metric Figure
| Metric | Figure |
| Average audit report lag in Malaysia | ~100 days |
| Firm-year observations studied | 1,059 |
| Firms with a female CFO | 34.7% |
| Days faster with a female CFO | 1.25 days |
Every year, thousands of Malaysian companies go through an audit. The clock starts ticking from their financial year-end, and auditors have four months to sign off. That gap — called audit report lag (ARL) — matters more than most people realise. Investors read auditor reports. Regulators track them. Delayed reports signal trouble.
A new study published in the Journal of Financial Reporting and Accounting asked a straightforward question: what speeds up or slows down this process? Two factors stood out — the number of key audit matters (KAM) disclosed in the report, and whether the company’s CFO was female.
What Are Key Audit Matters?
Since December 2016, Malaysian auditors have been required to disclose KAM — the areas they considered most significant when conducting the audit. Think of these as the complex judgement calls that auditors had to work through: asset valuations, revenue recognition, loan impairment, and similar areas where errors or manipulation are most likely.
KAM were introduced to give investors more transparency. And they do. But they also create more work. The study found that each additional KAM item adds meaningfully to the time it takes to finalise an audit report.
“Auditors typically undergo multiple draft revisions before presenting them to the client for discussion and approval — and several further revisions may follow after board and committee meetings.” — Bajary et al. (2025), Journal of Financial Reporting and Accounting
The Main Findings
More KAM = longer audit lag. Each additional KAM item added approximately 1.13 days to the audit report timeline. Auditors spent more time on testing, deliberation, and drafting.
Female CFOs shortened audit lag. Companies with a female CFO issued their audit reports about 1.25 days faster than those with a male CFO. Female CFOs were more proactive in addressing audit concerns before they became delays.
Female CFOs neutralised the KAM effect. When a female CFO was present, the usual delay caused by KAM reversed. The interaction term showed a reduction of 1.43 days per KAM item — meaning more KAM items actually had less impact on lag when a woman held the CFO role.
The Numbers Behind the Story
| Factor | Effect on Audit Lag | Significant? |
| Key Audit Matters (KAM) | +1.128 days per item | Yes (p < 0.001) |
| Female CFO | −1.250 days | Yes (p = 0.05) |
| KAM × Female CFO (interaction) | −1.431 days per KAM item | Yes (p = 0.001) |
| COVID-19 period | +34.997 days | Yes (p < 0.001) |
| Big 4 auditor | +2.071 days | Yes (p = 0.008) |
Why Do Female CFOs Make a Difference?
The researchers draw on two theoretical frameworks to explain this.
The first is the Upper Echelon Theory, which argues that the personal characteristics of senior leaders — values, personality, experiences — directly shape organisational outcomes. Gender is one such characteristic.
The second is risk aversion theory. Women in CFO roles tend to be more conservative, more compliant with accounting policies and regulations, and less likely to use aggressive earnings management. This makes them better partners for auditors — they proactively resolve issues rather than waiting for the auditor to raise them.
What this looks like in practice: A female CFO tends to prepare her team thoroughly before auditors arrive. She flags judgement areas early, keeps documentation tight, and communicates with the audit committee before disagreements become bottlenecks. The result is a smoother, faster process — especially when KAM items are involved.
The subsample analysis made this even clearer. For companies with male CFOs, more KAM items significantly increased audit delay. For companies with female CFOs, that relationship disappeared entirely — KAM had no significant effect on lag.
What About Audit Fees?
The study ran a parallel test using audit fees instead of audit lag as the outcome variable. The results held. More KAM meant higher fees — reflecting the extra auditor effort. Female CFOs were associated with lower fees. And when a female CFO was present, the fee increase from KAM was smaller.
This suggests the effect is not just about speed. Female CFOs appear to reduce the overall burden of the audit — not by cutting corners, but by making the process more efficient through better preparation and cooperation.
What This Means for Boards and Investors
Boards: rethink CFO selection criteria. Gender diversity in the CFO role is not just a governance checkbox. It has a measurable effect on reporting timeliness and audit quality.
Investors: ARL is a signal worth reading. A consistently long audit lag may reflect more than complexity — it can indicate weaker management-auditor cooperation or less proactive financial leadership.
KAM disclosure adds real workload. The transparency gains from KAM come with a real cost in time and fees. Audit teams need to be resourced accordingly, especially in the first years of implementation.
Regulators: the MCCG 30% target has substance. The Malaysian Code on Corporate Governance recommends at least 30% female participation in senior management. This study provides direct empirical backing for that recommendation.
Honest Limitations
• The study covers 2017–2019 only — a relatively short, pre-COVID window. The KAM effect may diminish as auditors become more familiar with the requirements over time.
• Only the CFO’s gender was examined. Other CFO characteristics — age, tenure, accounting expertise — were not included and may also influence audit timeliness.
• The sample excludes financial institutions, which operate under different regulatory conditions.
• The study does not examine the COVID-19 period, during which both KAM complexity and audit pressures increased significantly.
The management–auditor relationship is not just a process formality. Who sits across the table from the auditor shapes how fast and how smoothly the audit gets done.
The next time a company’s audit report comes out late, it may be worth asking: how many KAM items did the auditors have to work through — and who was the CFO helping them do it?
Academic Reference
Bajary, A. R., Shafie, R., Ali, A., Bin-Nashwan, S. A., & Rusli, A. R. Z. (2025). Key audit matters, female chief financial officers, and audit report lag: evidence from Malaysia. Journal of Financial Reporting and Accounting. https://doi.org/10.1108/JFRA-04-2024-0198