The objective of the study is to investigate the compliance level and disclosure quality of FRS 136 by the top 20 Shari’ah-approved companies in Bursa Malaysia as at 2010. The weighted index is employed to differentiate the quality and importance of each mandatory disclosure under FRS 136. The weighted index was developed by constructing disclosure scoring sheets, obtaining companies’ annual reports, completing scoring sheets for each firm by assigned weighting for the disclosure items and calculating disclosure weighted index. This study revealed that 13 out of 20 companies (65%) failed to comply with the most basic elements of the FRS 136 pertaining to goodwill impairment testing, especially in goodwill allocation and key assumptions used in determining the recoverable amount of CGU assets. This study suggests that the performance of the top 20 Shari’ah-approved companies must improve before Malaysian practice can attain a truly international standard.

Theories of audit quality hypothesize higher quality audits associated with larger audit firms. The relationship between size and quality is derived from DeAngelo (1981) which is widely cited in the literatures as the basis for pooling big and small auditors when testing for audit quality differences among auditors. This study addresses this concern empirically by investigating the influence of audit quality on the use of the yearly goodwill impairment testing. Specifically, this study focuses on compliance with the requirements under FRS 36 among the Singapore firms whose 2005, 2006 and 2007 financial accounts have been audited by Big-4 or non Big-4 auditors. Consequently, this study constructed an appropriate methodology that able to distinguish audit quality between Big 4 and non Big-4 audit firms and attempt to question the homogenous audit quality assumption. The results of the study, using six analytical frames reveal that compliance level and disclosure quality are systematically failed to comply with even basic elements of the FRS 36 disclosure requirements in relation to goodwill impairment testing.