JAP and Hilmy breached the Malaysian Institute of Accountants By-Laws on Professional Ethics, Conduct and Practice (MIA By-Laws) relating to the provision of prohibited services. Under Section R601.6 of MIA By-Laws, an audit firm or its audit partner is prohibited from providing accounting and book keeping services such as preparing financial statements for its audit client.

Hilmy was the Engagement Partner for the audit of five public interest entities (PIEs) when he prepared the financial statements for these PIEs and its subsidiaries.

The AOB views this non-compliance of ethical standards as a serious offence as it undermines the auditor’s independence and poses a self-review threat.

In this respect, the AOB revoked the registration of Hilmy and imposed a fine of RM400,000 on JAP. The firm is also prohibited from accepting and auditing any PIE or schedule fund for a period of 12 months effective 30 June 2021.

Separately, the AOB imposed a fine of RM150,000 and RM50,000 on JAP and Hilmy respectively for breaching the relevant requirements of the International Standards on Auditing (ISA) in relation to its audit engagement of a PIE client. JAP is also prohibited from accepting and auditing any PIE or schedule fund for a period of 12 months effective from 30 June 2021.

As the engagement partner of a PIE, AOB found that Hilmy had failed to perform sufficient audit procedures and obtained sufficient audit evidence to support the conclusions reached in the area of fixed deposits, share capital and other reserves, provision for defect liabilities, revenue and cost of sales and group consolidation. In most instances, the audit evidences in the audit file are either incomplete or inadequate to support the audit work performed, the basis of judgment applied and the conclusions reached.

Both JAP and Hilmy have appealed to the SC against the sanctions imposed by the AOB. The appeals were dismissed, and the SC had on 30 June 2021 affirmed the AOB’s sanctions against JAP and Hilmy.