THE Minority Shareholder Watch Group (MSWG) has echoed the call by the Securities Commission’s (SC) Audit Oversight Board (AOB) for auditors to be more vigilant and diligent in the execution of their duties during the current period of economic uncertainties due to the COVID-19 pandemic.
Its CEO Devanesan Evanson described the call as a timely reminder given the ensuing financial challenges stemming from the global health crisis.
“Desperate times may force auditors to take desperate measures to increase or safeguard their existing fee income,” he told FocusM.
“A key advocation in the AOB’s statement is the need for auditors to exercise healthy scepticism – this cannot be over emphasised. The auditing technical release (ATR) is a step in the right direction as it increases transparency and facilitates the audit committee’s evaluation of the auditor.”
In its Annual Inspection Report 2020, the AOB noted that it is the responsibility of the directors and audit committee to assess their company’s ability to continue as a going concern when preparing financial statements.
This responsibility extends to ensuring disclosure on significant judgements arrived at in order to reach those conclusions.
Auditors are then required to verify and challenge the appropriateness of the going concern assumptions, as well as the adequacy of the related disclosures, according to the SC.
Due to prolonged uncertainties arising from the pandemic, the market regulator said it is even more important now for auditors to exercise appropriate professional scepticism in conducting their audits.”
“High quality audits promote integrity and ensure investor protection whilst contributing to better corporate governance in public interest entities (PIEs),” commented SC chairman Datuk Syed Zaid Albar.
“Quality financial reporting that adheres to internationally recognised standards promotes trust and confidence in the reliability of audited financial statements in Malaysia.”
In 2020, the AOB inspected 10 audit firms and performed monitoring and thematic reviews on four other audit firms. A total of 38 audit firms and 339 auditors are currently registered with the AOB.
The monitoring and thematic review programme included follow up assessment on remediation actions taken to address past AOB inspection findings, including evaluation of the firms’ internal monitoring review results and thematic reviews on specific areas of concern.
In this regard, the 2020 inspection and review had covered firms which collectively audit 72.6% of the total number of PIEs.
The AOB observed a significant increase in the percentage of audit engagements which required further evaluation and investigation – from 44% in 2019 to 88% in 2020.
The AOB’s Annual Inspection Report 2020 also includes key highlights on the new and revised auditing standards relating to the firms’ system of quality management which is to be implemented by Dec 15, 2022.
Audit firms are advised to take the necessary steps to implement these standards by the due date. – July 30, 2021
