THE RELIABILITY OF QUARTERLY FINANCIAL REPORTS OF COMPANIES IN MALAYSIA

This study examines the reliability of corporate quarterly reports of Malaysian companies by analyzing the reporting of exceptional items. The quarterly reports are likely to be unreliable if companies tend to defer the reporting of exceptional items to the final quarter. In examining the quarterly reports of 114 companies listed on the Kuala Lumpur Stock Exchange, this study provides evidence that a majority of companies defer the reporting of exceptional items to the fourth quarter. It is also observed that a majority of companies made negative adjustments during the fourth quarter. Therefore, the quarterly reports are likely to be unreliable, and there are reasons to believe that companies manage their quarterly earnings. In addition, this study provides evidence that non-profitable companies defer the reporting of exceptional items to the fourth quarter more than the profitable ones. However, there is no evidence of association between the deferment of the recognition of exceptional items and the size, growth, and leverage of a company.