Similar to the year 2020, the events surrounding the year 2021 has caused the AOB to review its focus and reassess its oversight functions. This year, the AOB took the opportunity to further enhance the data analytics driven approach in its inspection to ensure the inspection programme is sufficiently agile to identify key economic trends and market concerns effectively. The data analytics driven approach also allowed targeted inspection focusing on key areas. In addition, the AOB explored various options to perform off-site monitoring reviews i.e. virtual inspections to ensure the AOB’s inspection programme was not disrupted by the movement restriction during the pandemic.
Since the number of audits being performed remotely are increasing, strict adherence to auditing and ethical standards is even more crucial now. This year, the AOB continued to set the tone by bringing new dimensions to its oversight activities and sending strong signals through enforcement actions when regulatory expectations and professional standards were compromised. The AOB took five enforcement actions against audit firms and individual auditors that had failed to comply with auditing and ethical standards.
The SC continues to face legal challenges from auditors sanctioned by the AOB. The AOB’s powers in enforcing its rules and regulations and the manner in which the AOB conducts its enforcement proceedings were the main grounds of challenge. However, the AOB is pleased that the Judicial Review results in favour of the SC further reinforces the robustness of the AOB’s enforcement framework and its processes.
During 2021, the AOB also implemented the Annual Transparency Reporting which requires the AOB registered audit firms that meet the reporting criteria to share their Transparency Reports with the Audit Committees of their PIE clients. Briefly, the audit firms are required to disclose information on their legal and governance structures, measures to uphold audit quality and how they manage risks, as well as the measurements of their audit quality indicators. This information will greatly benefit the investor and the Audit Committees to facilitate decision-making on the appointment and re-appointment of auditors.