© securities commission, malaysia 1 what the audit oversight board will do icaa-micpa audit forum 3...

© Securities Commission, Malaysia

1

What the What the Audit Oversight Board Audit Oversight Board

will dowill do

ICAA-MICPA Audit Forum3 August 2010


Financial Reporting Ecosystem

Domestic Commerci

al transactio

ns / results

Directors and

management

Financial reporting function

Internal audit

function

External auditors

Financialstatement

s

Audit Oversight Board

Malaysian Institute of Accountant

s

Companies Commissio

n

Securities Commissio

n

Bank Negara

Malaysia

Ministry of Finance

Other experts: Valuers,

Actuarists,Lawyers

Foreign Commerci

al transactio

ns / results

Malaysian Accountin

g Standards

Board

Bursa Malaysia


Drivers of financial statement quality

FinancialStatemen

ts

Reporting entities

Corporate governance

practices

Reporting function competency

Financial reporting infrastructure

Reporting regulation and

standards

Appropriateness, clarity and simplicity

Availability of guidance when

necessary Auditors

Firm level quality control & risk management

Application of standards in

engagementsUsers

Knowledgeable

Context of usage

Professionalism and business

principles


4

About the Audit Oversight Board

• The Securities Commission has the function to (S31B):

• Promote and develop an effective and robust audit oversight framework in Malaysia:

• Promote confidence in the quality and reliability of audited financial statements in Malaysia: and

• Regulate auditors of Public Interest Entities (PIE)


5


• Among the responsibilities of the AOB are:

• Implement policies and programmes in ensuring an effective audit oversight system

• Register auditors of PIE• Conduct inspections and monitoring

programmes• Conduct inquiries and impose appropriate

sanctions• Cooperate and liaise with relevant

authorities and relevant oversight bodies in Malaysia and internationally


“Promoting confidence in the quality and reliability of audited financial statements of public interest entities in Malaysia through having effective and robust regulation and audit oversight”

Outcomes

Strategic Themes

Services Areas

Confidence in audited financial

statements

High quality and reliable audited

financial statements

High quality financial reporting

practices

Standards setting and guidance

Registration

Inspection and Inquiry

Collaboration and cooperation

Promotion of quality practices

Support adoption and implementation of standards

Promote high quality audit practices

Influence financial reporting ecosystem

Leverage on stakeholders support

Diagram 1

Resourceful and high quality audit

practices

Independent and high quality audit


7


• The Audit Oversight Board (AOB) became operational from 1 April 2010

• The AOB consists of:• An executive chairman• 6 non-executive members

• Not more than 2 non-executive members of the AOB shall be members of the Malaysian Institute of Accountants


Compliance with established auditing and ethical standards benchmark against international best practices is an integral aspect in ensuring audit quality

The AOB expects the accountancy profession to adopt all IFAC standards. The power to direct MIA to establish, amend, modify or alter its prescribed standards will only be exercised if there is a gap in the scope and timing of the adoption

Standard setting


9

Registration process

• AOB seeks to register audit firms and individual auditors of public interest entities (PIEs) who are fit and proper which includes (S31P):• Auditor approved under S8 of the CA• Not convicted of an offence involving fraud

and dishonesty• Not a bankrupt• Not engaged in practices with reflect

discredit in meeting professional standards


10

Inspection process

• The AOB will conduct annual inspection of audit firms

• The audited financial statements will be monitored and when necessary, auditors and their audit work will be inspected

• Firms and engagements will be inspected based on a risk-based approach

• Audit firms auditing high number of PIEs, for example, will be inspected annually while the rest will be inspected within 3 years


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Inspection process

• Audit inspections would be conducted at the firm level and the engagement level

• At the firm level, compliance with ISQC1 will be reviewed:

• Leadership and responsibilities within firm• Ethical requirements• Acceptance and continuance of audit clients• Human resources• Engagement performance• Monitoring


12

Inspection process

• At the engagement level, inspection is targeted at compliance with International Standards on Auditing and relevant regulation and laws

• The performance of the Engagement Partner and the Quality Control Reviewer will be assessed

• This includes:

• Audit planning• Risk assessment and risk response• Sufficiency and appropriateness of audit

evidence• Documentation• Compliance with regulation


To enable effective and proportionate sanctions to be taken…

Requiring additional professional educationRequiring additional

professional education

Requiring errant auditor to comply with the Act

Requiring errant auditor to comply with the Act

CensureCensure

Monetary finesMonetary fines

Cancelling or suspension of registration

Cancelling or suspension of registration

Inquiry and Sanctions

Inquiry conducted when there is reason to believe that provisions of the Act, written notice or guidelines are breached

AOB officers will be conducting inquiries

Inquiry officers will be appointed and will have necessary powers to conduct their duties

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