The Audit Oversight Board (AOB) today issued its third annual report and urged audit firms to focus on the actual root causes of their audit deficiencies in formulating remediation plans to improve audit quality.
AOB conducts yearly exercise of inspecting audit practices in the country. At the end of each inspection, the audit regulator issues an inspection report which points out deficiencies identified during the engagement and audit firms are required to submit their remediation plans for the AOB’s approval and subsequent monitoring of their implementation.
“The AOB expects audit firms to perform a more honest and robust root cause analysis to develop and implement sustainable and measurable remedial actions to enhance audit quality. Firms must also ensure their self-governance mechanisms to be forcefully applied to improve overall audit quality. At the same time, audit committees should engage more with their auditors to obtain comfort that material financial reporting issues are adequately addressed during the audit. Cooperation between audit committees and auditors is important for the audit to be effective” Nik added.
Moving forward, Nik said AOB will intensify its oversight over audit firms’ remediation efforts and will not hesitate to take appropriate enforcement actions if significant improvements are not observed.
During 2012, the AOB conducted 19 inspections, compared to six and 17 inspections in 2010 and 2011 respectively. AOB also took two enforcement actions against two auditors for their failures to comply with the auditing and ethical standards in the performance of their audits. AOB would not hesitate to act when public confidence on the reliability of their audit reports could be compromised.
The AOB was set up in 2010 to oversee the auditors of public-interest entities (PIEs), protect investors’ interest and promote confidence in the quality and reliability of audited financial statements of PIEs.
A total of 67 audit firms and 293 auditors had registered with the AOB as at 31 December 2012. AOB has also for the first time, recognised 14 foreign individual auditors from six foreign audit firms to audit seven foreign incorporated companies listed on Bursa Malaysia.
An electronic copy of the AOB Annual Report 2012 is available here
