KUALA LUMPUR: The Securities Commission’s (SC) Audit Oversight Board (AOB) has urged auditors to be more diligent and exercise appropriate professional scepticism in conducting audits to improve the financial reporting ecosystem amid the ongoing economic uncertainties due to the Covid-19 pandemic.
SC chairman Datuk Syed Zaid Albar said high-quality audits promoted integrity and ensured investor protection while contributing to better corporate governance in public interest entities.
“Quality financial reporting that adheres to internationally recognised standards promotes trust and confidence in the reliability of audited financial statements in Malaysia,” he added.
According to the AOB’s annual inspection report 2020, it is the responsibility of the directors and audit committee to assess their company’s ability to continue as a going concern when preparing financial statements.
“This responsibility extends to ensuring disclosure on significant judgements arrived at in order to reach those conclusions,” it added. It noted that auditors are required to then verify and challenge the appropriateness of the going concern assumptions and the adequacy of the related disclosures.
“Due to prolonged uncertainties arising from the pandemic, it is even more important now for auditors to exercise appropriate professional scepticism in conducting their audits,” said the annual inspection report.
The AOB’s annual inspection report 2020 provides insights into the findings from its inspections last year.
It also offers observations on the impact of Covid-19 on the financial results of public listed companies, including disclosures in the annual reports and audited financial statements.
Currently, a total of 38 audit firms and 339 auditors are registered with the AOB.
Meanwhile, AOB’s executive director Alex Ooi explained that AOB’s regular inspection programme, which involves active monitoring and engagements with audit firms, helps to identify gaps and rectify weaknesses within audit firms, which in turn promotes high audit quality in Malaysia.
Last year, the AOB inspection had covered firms which collectively audit 72.6% of the total number of public interest entities (PIEs).
The board saw an increase in the percentage of audit engagements to 88% in 2020 from 44% in 2019.
Besides that, the implementation of the Annual Transparency Reporting this year would require eight AOB-registered audit firms that meet the reporting criteria to share their transparency reports with the Audit Committees of their PIE clients.
“The qualifying audit firms are required to disclose information pertaining to their legal and governance structures, measures to uphold audit quality and manage risks, as well as the measurements of audit quality indicators,” it said.
For next year, the AOB said the qualifying audit firms will also be required to publish their annual transparency report to the public.
Going forward, the board said it would continue to work closely with stakeholders to promote high audit quality in the country to improve the financial reporting ecosystem.
“While audit firms undertake measures to uphold audit quality in these difficult times, directors and audit committees are also reminded of the need for vigilance in managing the expanding range of issues and risks, particularly those relating to complexities in financial reporting caused by Covid-19,” said the AOB.