Corporate Governance Mechanisms and Financial Reporting Quality: Examining the Roles of Audit Committee Effectiveness and Board Independence in Listed Firms

This article examines the relationship between corporate governance mechanisms and financial reporting quality among listed firms in Malaysia, focusing on audit committee effectiveness and board independence. The study is motivated by the central role of credible financial statements in capital allocation, investor protection and confidence in public markets, and by the continuing debate over whether formal governance structures translate into effective monitoring. Malaysia provides a relevant setting because its listed-company governance framework has developed through successive revisions of the Malaysian Code on Corporate Governance and Bursa Malaysia’s listing requirements, while empirical findings on governance attributes and earnings management remain mixed. The article adopts an integrative literature review and conceptual analysis, synthesising agency theory, resource dependence theory and relevant empirical evidence on Malaysian listed companies. Financial reporting quality is conceptualised through faithful representation, accrual quality, the extent of earnings management, timeliness and transparency. Audit committee effectiveness is considered in terms of independence, financial expertise, diligence and authority, while board independence is examined as a monitoring arrangement intended to constrain managerial opportunism. The review indicates that independent directors and audit committees can strengthen oversight, but their effectiveness depends on substantive expertise, access to information, time commitment, organisational culture and enforcement. Malaysian studies report differing associations between governance characteristics and earnings quality, suggesting that independence as a formal attribute is not sufficient on its own. The article develops an integrated framework and propositions for future empirical testing among Bursa Malaysia-listed firms. It recommends that regulators and boards focus on the functional quality of oversight rather than compliance counts alone. As a conceptual review, the article does not report newly estimated coefficients or original firm-level observations.