AOB: Key audit matters disclosure a must

PETALING JAYA: Under the New and Revised Auditor Reporting Standards, auditors are required to disclose key audit matters in their reports, leading to a more informative and tailored reporting specific to the clients’ circumstances, according to the Securities Commission’s (SC) Audit Oversight Board (AOB) Annual Report 2016.
This is in contrast to the present reporting approach, which consists of standard templates or boilerplate reports.
The AOB has organised engagements with the auditors and stakeholders prior to the adoption of these standards. These include briefings by the UK Financial Reporting Council and International Auditing and Assurance Standards Board experts on insights and practical experience in implementation challenges in the adoption of these standards in Malaysia.
SC said in a statement, it will closely monitor the auditors’ compliance in implementing the New and Revised Auditor Reporting Standards through AOB’s inspection programme, to identify instances of non-compliance and trends.
Preparers, senior management and directors of respective public-listed companies would also have to take definitive and compelling actions to elevate the quality of their respective financial reporting functions.
“This is in view that they will need to prepare the necessary evidence and documents to support the auditors’ work and help facilitate the audit process,” the report reads.
SC also urged audit firms to strengthen their capacity building and improve their quality controls to demonstrate the importance of the value of audits and its relevance to ensuring good corporate governance of companies.
In 2016, AOB inspected 12 audit firms that collectively audit public-listed companies which make up about 96% of the market capitalisation of the stock exchange.
SC noted incremental improvements, with the number of recurring findings reduced from previous inspections. Out of nine firms re-inspected in 2016, two recorded no recurring findings while improvements were noted for the other six firms.
However, certain deficiencies in the work of auditors in relation to revenue recognition, inventory, group audits and related-party transactions, remained a concern and AOB will continue to engage with the audit firms to understand the root cause of such deficiencies and monitor the remediation efforts taken by the firms on a timely basis.