AOB urges audit firms to embrace professional ethics and values

KUALA LUMPUR: The Audit Oversight Board (AOB) has urged audit firms to embrace and actualise professional ethics and values as a strategy to improve audit quality.

The audit regulator will also start publishing inspection reports of audit firms which failed to effectively remediate their weaknesses, to uphold audit quality and standard.

Executive chairman Nik Hasyudeen Yusoff in a statement on Tuesday said audit quality is an important factor which influences confidence in financial statement disclosure.

“Our findings suggested efforts to improve audit quality should go beyond process improvements and training.

“This should include the overall strategy of competing in the market, alignment of incentive and business model of the firm,” he added.

He said audit firm leadership should set a clear tone for the audit team to embrace and actualise professional ethics and values as the focal point.

According to the AOB 2014 annual report, six major firms and four other audit firms collectively audited 957 public-interest entities (PIEs), covering 98.6% of the market capitalisation of public-listed companies in Malaysia.

The report showed recurring findings in respect of the engagement partners involving re-inspected firms was reduced, but consistency of engagement performance among engagement partners remained a key challenge for most firms.

The AOB also took three enforcement actions last year,including, for the first time, barring an audit firm from accepting any PIEs as a client for 12 months and a penalty of RM30,000.

Moving forward, Nik Hasyudeen said, the implementation of the New Auditor Reporting Standard, to take effect on Dec 15 next year, would be a game changer in enhancing the quality of auditing and financial reporting in Malaysia.

“The new standards require auditors to disclose key audit matters in their reports, leading to a more informative and tailored reporting specific to the clients’ circumstances, instead of the present reporting approach consisting of standard terms and boilerplates,” he added.

Set up by the Securities Commission in 2010, the AOB oversees the auditors of PIEs, protects investors interest and promote confidence in the quality and reliability of audited financial statements of PIEs. - Bernama