The study investigates the association between the effectiveness of the board of directors and the likelihood that a company receives a modified audit opinion (as a measure of the quality of companies’ external financial reporting) in Malaysia. The sample companies were extracted from the population of publicly-available information mainly the annual reports of publicly-listed companies on the Bursa Malaysia. 136 firm-year observations listed on Bursa Malaysia were identified to examine the relationship between the effectiveness of the board of directors and a modified audit opinion. Data used in this study are collected from two separate sources – annual reports and Datastream. Any missing financial figure from Datastream was acquired from the annual reports. To test the study’s hypotheses, we use the pooled cross-sectional logistic regression analysis for 136 firm-year observations listed on Bursa Malaysia over the period 2009-2011. The evidence we have uncovered is consistent with the hypothesis that companies with large score of the board of directors’ effectiveness are less possible to receive a modified audit opinion. Therefore, the result confirms that the combined effect of the board of directors’ characteristics has a significant negative association with the likelihood of the companies receiving a modified audit opinion.

Abstract
1. Introduction
2. Literature Review
3. Data and Methodology
4. Empirical Results and Discussion
    4.1. Descriptive Statistics and Univariate Analyses
    4.2. Multivariate Logistic Regression Results
5. Conclusion
References

• Waddah Kamal Hassan OMER(Department of Accounting, College of Business Administration, Northern Border University/Accounting Department, Faculty of Administrative Sciences, University of Aden) Corresponding Author.
• Khaled Salmen ALJAAIDI(Accounting Department, College of Business Administration, Prince Sattam bin Abdulaziz University)
• Mohd Atef Md. YUSOF(School of Accounting, College of Business, Universiti Utara Malaysia)