Board tells audit firms to adopt quality-oriented culture

PETALING JAYA: The Audit Oversight Board (AOB) inspected six major audit firms and six other audit firms that collectively audited 872 public interest entities (PIEs) covering 97% of the market capitalisation of public-listed companies in Malaysia in 2015.

AOB said it was encouraged to note that out of nine firms reinspected in 2015, four firms did not have any recurring findings while the number of recurring findings for two other firms had reduced.

However, it also observed significant findings on some of the key audit areas of engagements belonging to major firms.

“The AOB urges the relevant firms to address this issue immediately,” it said in a statement following the release of its 2015 Annual Report yesterday.

In 2015, the AOB also reprimanded and imposed a monetary penalty of RM50,000 on one auditor for failing to comply with auditing standards in the audit of a private limited company (PLC) and, for the first time, revoked the registrations of an audit firm and two of its partners for failing to remain fit and proper to audit public interest entities.

Moving forward, AOB said it will continue to deal with failure of maintaining audit quality and professional standards decisively while working closely with audit firms to address issues in a timely manner.

The AOB was set up by the Securities Commission Malaysia in 2010 to oversee the auditors of PIEs and schedule funds, protect investors’ interest and promote confidence in the quality and reliability of audited financial statements of PIEs and schedule funds.

Meanwhile, the AOB has urged audit firms to embrace a quality-oriented culture as the tone at the top will positively influence partners and audit engagement teams’ behaviour and their commitment to audit quality.

The AOB reported that its inspection findings have shown that audit firms need to do more to ensure that their quality control systems are more effective.

It said that these efforts need to be holistic and cover areas such as partner accountability, human resources, training and monitoring functions.

AOB observed that firms that maintain audit quality and professional standards were not worse off economically compared with their peers, and in certain market segments were more competitive, debunking the myth that doing so is financially costly to firms.