Investors' perceptions on the statutory audit function of Maltese listed companies in the new millennium

Abstract

Today's business environment is so complex and advanced that the profession is challenging the relevance and usefulness of traditional financial reporting and the auditors' role in serving the public interest. The question however, is not whether there should be an audit, but how to ensure its objectivity and effectiveness, in serving especially a business' primary stakeholders - investors. In recent years, Malta saw a complete overhaul in the provision of financial services, aimed primarily in making Malta a hub for financial services in the Mediterranean. This evolution saw a tremendous increase in the number of private investors and a new class of investors, the institutional investors, emerged. The objective of this study is to analyse existing perceptions of these two classes of investors, by focusing on the nature of the audit function, including the duties auditors are expected to perform and the message given by the auditors' report. Research data was collected by means of mailed questionnaires with private investors and pre-structured interviews with institutional investors. Out of 200 mailed questionnaires a response rate of 27% was obtained, and from 12 local institutional investors, 42% accepted an interview .. Results emerging from this study suggest that whilst private investors believed that audits should change to reflect more the investigative role of auditors, institutional investors required changes in order to rely more on auditing as an investment decision tool. Effective and value-added service, coupled with a continuous dialogue with investors would strengthen the auditor-investor relationship, maximise both ends needs and make audits a value added assurance service by professionals for a contemporary investor in the new Millennium.