A joint study on the first-year implementation of the enhanced auditors’ report (EAR) revealed that key users of audit and financial reports found value in the new reporting standards with two thirds of the surveyed respondents acknowledging that it is an improvement compared to the old auditors’ report.
Titled “Enhanced Auditors’ Report: A review of first-year implementation experience in Malaysia”, the joint study was conducted by the Audit Oversight Board (AOB) of the Securities Commission Malaysia (SC), the Malaysian Institute of Accountants (MIA) and the ACCA (Association of Chartered Certified Accountants) to assess stakeholders’ response to the new and revised enhanced auditor reporting standards.
AOB, MIA and ACCA were in agreement that the EAR has spurred constructive behavioural changes within the financial reporting ecosystem and improved engagement between investors and companies in Malaysia.
This follows early pre-implementation efforts such as SC’s establishment of the Steering Committee comprising key individuals1 representing the regulators, accounting and auditing profession, and public listed companies in June 2015 to identify implementation issues and risks, as well as to develop strategies and provide guidance on those issues and risks identified.
The enhanced auditor reporting standards were issued by the International Auditing and Assurance Standards Board and adopted in Malaysia in 2015, with an effective date of 15 December 2016. The results from this study are based on the review of EARs and annual reports of a sample of 190 companies listed on Bursa Malaysia with financial periods ended 31 December 2016, as well as views from over 170 audit committee members and investors.
The enhanced auditors’ report placed greater prominence on the auditors’ opinion and a key change introduced through EAR is the disclosure of Key Audit Matters (KAMs), resulting in a more transparent and informative auditors’ report. In the longer term, EAR is expected to drive the flow of useful and relevant information to the capital market, reduce speculation on company performance and promote better understanding of financial statements.
