KUALA LUMPUR: The Securities Commission Malaysia's (SC) Audit Oversight Board (AOB) has called on audit firms to continue improving audit quality despite a decline in the proportion of audit engagements requiring significant improvements last year.
In its Annual Inspection Report 2025 released on Thursday, the AOB said the proportion of audit engagements requiring significant improvements fell to 27% in 2025 from 46% in 2024.
“As at Dec 31, 2025, 41 audit firms and 397 individual auditors were regulated by the AOB.
“In 2025, the AOB inspected 14 audit firms, 40 individual auditors and 41 audit engagements across a range of industries and risk areas,” SC said in a statement.
The report found recurring deficiencies in areas including accounting estimates, sampling, internal control testing and revenue recognition.
The AOB conducted its Audit Firm Culture Assessment involving 4,092 respondents across nine major audit firms.
“While the assessment found strong ethical behaviour, consultation practices, compliance and professional challenge, it also highlighted the need for firms to address workforce-related challenges, including workload pressures, staffing, remuneration and talent retention,” it said.
The AOB also noted that several major audit firms have begun deploying artificial intelligence-powered tools to support document analysis, compliance assessments and audit documentation.
It said firms should ensure effective technology risk management and governance as they expand the use of AI and other digital tools in audit processes.
The AOB urged audit firms to continue strengthening governance, culture, monitoring and remediation processes, while investing in talent and technology to support high-quality audits and maintain confidence in audited financial statements.
