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The Audit Oversight Board (AOB) today reprimanded four auditors for failing to discharge their professional duties as set out in the International Standards on Auditing. On top of that, one of the auditors was also fined RM5,000 for breaching the by-laws of the Malaysian Institute of Accountants (MIA) which relates to auditors’ independence.
The auditors failed to performed audit procedures as required by the auditing standards and in some cases, the auditors merely relied on representations from their clients without further verification to ensure they obtained sufficient appropriate evidence as the basis of their audit opinion.
AOB, set up in April 2010 to promote confidence in the quality and reliability of audited financial statements of public-interest entities, conducts yearly inspection to ensure audit firms comply with requirements of the International Standards on Auditing and the relevant MIA By-laws. Further details on AOB enforcement action can be found here.
“The inspection process is part of AOB’s strategic approach to enhance audit quality in Malaysia. It is important that the industry works together with the regulator to improve the audit profession,” said Nik Hasyudeen Yusof, Executive Chairman of the AOB.
“While the AOB engages the industry closely to improve audit quality, we are also mindful of the need to tackle critical root causes. We will not hesitate to take action on any breach that impairs or perceived to impair the independence of auditor,” he added.
However, he emphasises that the reprimands do not necessarily suggest that the financial statements of the affected public interest entities contained any material error or their financial reporting controls are weak.
Nik Hasyudeen said the AOB publishes its inspection findings annually which includes key root causes which could impact audit quality. They include auditor’s technical incompetence, not keeping abreast with the development in accounting and auditing standards, as well as failure to exercise professional scepticism in various occasions, which are fundamental ingredients to support quality audit work.
“Audit firms need to invest in the right resources and infrastructure to support high quality audit practices. The firms also should put in place effective monitoring control framework and a strong self-governance culture to ensure consistency of audit performance,” added Nik Hasyudeen Yusoff.
