PETALING JAYA: The majority of public-listed companies (PLCs) in Malaysia in 2016 preferred to outsource their internal audit functions, with outsourcing being more prevalent in smaller-sized companies, a study by the Institute of Internal Auditors Malaysia (IIAM) has revealed.
Among the sectors of the PLCs, IIAM’s study showed that the closed-end fund, mining and special-purpose acquisition company (SPAC) industries have entirely outsourced their internal audit services.
On the contrary, only 12% of the surveyed PLCs in the financial sector have outsourced theirs.
“We suggest that only those with professional accounting qualifications be appointed as the audit committee chair to ensure that the chairs have the skills to deliberate on financial matters and oversee the end results.
“Our study has indicated that about 41% of audit committee chairs in PLCs did not have professional accounting qualifications,” IIAM president Lucy Wong told reporters at a media briefing organised by IIAM.
IIAM has also called for the separation of audit committee chair and board chair roles to avoid impairment of independence in the companies’ operations.
The study, which was led by IIAM research and technical advisory committee member Dr Grace Mui Yanchi, found that approximately 54% of Malaysian-listed PLCs outsourced their internal audit functions.
Among the smaller-sized companies, a whopping 87% have obtained the service of outsourced service providers (OSP).
Wong noted that the cost of establishing and maintaining an in-house internal audit function may have determined the decision of the PLCs to outsource their internal audit functions.
“However, companies need to carefully vet prospective OSPs to ensure their independence and make sure that the OSPs’ staff have professional qualifications,” she said, while adding that quality should not be compromised to facilitate cost rationalisation.
Wong said that it was pertinent to improve the state of internal audit functions to establish the best and most transparent corporate practices in Malaysia.
The role of internal audit as a pillar of governance is not fully appreciated in Malaysian organisations. Such an important aspect of a company’s health cannot simply be overlooked.