KUALA LUMPUR: The Audit Oversight Board (AOB), to be formed around mid-year, is expected to create a new governance structure that will underscore auditors’ responsibilities in financial statement reporting, said Securities Commission (SC) executive director Goh Ching Yin.
Goh said the collapse of large firms and news of fraud involving globally-recognised companies over the years had raised concerns regarding the credibility of the audit profession, audit oversight and regulatory response.
“In light of this, the profession and relevant regulators have come up with reforms to help address the causes of audit failures.
“The need to reform the current audit oversight framework is thus seen as a direct response to the discovery of serious irregularities in financial reporting in Malaysia as well,” he said at a forum on The Audit Oversight Board and Ethical Dimensions – Credibility of Accountants.
Goh said the efficient functioning of capital markets depended on investors having confidence in the financial reporting of companies.
“Statutory auditors, who review companies’ financial statements, play an important role in ensuring that companies’ accounts are trustworthy and reliable,” he noted.
Goh said the SC had formed a high-level task force to advise it on the establishment of an independent and effective audit oversight framework in Malaysia.
“This culminated in the drafting of the AOB provisions in the Securities Commission Act 2010,” he said.
Goh said the high-level task force would comprise representatives from the Malaysian Institute of Accountants (MIA), Malaysian Institute of Certified Public Accountants, Bank Negara, Bursa Malaysia and the businesss community.
He said the AOB would provide independent oversight and regulation to external auditors of public-listed entities and would have the power to reprimand auditors that had done wrong, including issuing penalty and deregistering them from the audit practice.
“The AOB is not a regulatory concept that is unique to developed markets. It has been adopted in countries such as Egypt, Lithuania, Mauritius and Sri Lanka. All these countries have some form of independent regulatory oversight for its auditing profession.
“However, the scope of regulatory oversight between one country to another may differ in respect of their functions, powers, level of activities, independence and degree of interaction with the audit profession,” he said.
MIA president Abdul Rahim Abdul Hamid said audit firms of all sizes should aim to be fully compliant with the Internal Standards on Quality Control (ISQC1), ahead of concerns over independent oversight.
“Compliance with international accounting best practice and MIA by-laws will prepare firms to face the rigour of any additional oversight regime that may be introduced at the local level,” Abdul Rahim said.