WITH reference to Risen Jayaseelan’s article in StarBizWeek dated Jan 9, 2010 titled Implication of the Audit Oversight Board, we wish to offer the following clarification for the benefit of your readers.
1) The International Standards on Quality Control (ISQC 1) was introduced by the International Federation of Accountants (IFAC) in 2005.
This standard was made compulsory for adoption by all audit firms providing assurance services in Malaysia by MIA in July 2006.
ISQC 1 is applicable across the board, regardless of the size of the firm.
This has created some difficulties for MIA member firms, with majority of them being small and medium-sized practitioners (SMPs). Many of their clients are family-controlled companies and small and medium-sized enterprises.
Therefore, to apply full-fledged quality control as pronounced in ISQC 1 is a daunting task.
Only in December 2007 did IFAC issue a guide titled Guide To Using International Standards On Auditing In The Audits of Small and Medium-Sized Entities that SMP had some reprieve in the audit of their SME clients.
And only in March 2009 did IFAC issue a guide titled Guide To Quality Control for Small and Medium-Sized Practices to assist SMP in putting in place those quality control measures as provided for in the ISQC 1.
MIA has also done its part by sharing this report with its members.
MIA had, through its Continuous Professional Development (CPD) programmes, carried out training seminars and workshops to assist its members in adopting those quality control measures.
MIA recognises that the road to quality control is a long and arduous one, and it continues to strive towards maintaining the high standards of the accountancy profession.
2) The article had quoted the findings of the Practice Review by MIA. While we don’t dispute the findings, we would like to bring your attention to certain facts.
Practice Review (PR) was introduced by MIA in 2003 – two years before the introduction of ISQC 1 by IFAC! The methodology of our PR was different from that of the ISQC 1 and more skewed towards the implementation of International Standards on Auditing.
In addition, of the 250 or so audit firms, as highlighted in the article, that had been reviewed, only a handful of them had Public Interest clients.
In other words, we would be guided accordingly in interpreting the said findings and linking it to the implementation of ISQC 1.
MIA is in the process of revisiting its PR methodology. Through its CPD programmes, it is hopeful that all practitioners will be able to meet and exceed the quality measures as promulgated in the ISQC 1 over time, since ISQC is about compliance with the minimum standard only.
3) The general public must understand that auditors are not “bloodhounds”; discovery of well-concealed fraud is not their primary function.
Auditors are engaged to express an opinion on the financial statements prepared by the company.
As such the primary responsibility of preparing financial statements that are free of misstatement and fraud falls on the preparers of the financial statement, that is, the management of the company. They are ultimately responsible for the financial well-being of the company. They are the custodian and steward of the company’s financial assets.
We would appreciate The Star publishing our above response to the said article to enable the public to have a clearer picture of the profession.
Malaysian Institute of Accountants
Jan 13, 2010