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Auditing Profession – Global Development And Key Issues

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A snapshot of development in auditing in Malaysia and globally

A snapshot of development in auditing in Malaysia and globally

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  • 1. Auditing Profession – Development and Key Issues Nik Mohd Hasyudeen Yusoff President Malaysian Institute of Accountants
  • 2. Agenda
    • The auditing profession in Malaysia
    • Global development
    • Audit quality review
    • Moving forward issues
  • 3. The auditing profession in Malaysia
    • As at 30 June 2008:
      • 2,436 accountants holding public practice certificate
      • 1,348 firms are registered as audit firms
      • 650 firms provide other accountancy services
    • License to audit companies incorporated under the Companies Act, 1965, is issued by the Ministry of Finance to:
      • Members of MIA holding public practice certificate
      • Have no less than 3 years working experience in auditing
      • Demonstrate capabilities during an interview process
  • 4. The auditing profession in Malaysia
    • Important elements in determining the performance and quality of audit services include:
      • The auditors
      • The firms
      • The legislative framework
      • Standards relating to auditing
      • The oversight of the quality of audit
  • 5. The auditing profession in Malaysia
    • The auditors should:
      • Uphold professional values and standards
        • Integrity, Objectivity, Due Care, Independent
      • Possess updated knowledge regarding auditing
        • Auditing standards
        • Accounting standards
        • Industry knowledge and experience
        • Legislative framework
      • Have the necessary skills which need to be applied in performing the audit
        • Global business environment
        • Web based business environment
        • Skills to apply principle-based standards
  • 6. The auditing profession in Malaysia
    • The firms should:
      • Put in place framework, processes and procedures to comply with auditing and quality control standards as well as the applicable legislative framework
      • Uphold professional values and standards
      • Have the capacity to accept audit engagements before doing so
  • 7. The auditing profession in Malaysia
    • The legislative framework in Malaysia includes, among others, the followings:
      • Financial Reporting Standards
      • Companies Act
      • Conditions on the Audit License
      • Accountants Act
      • Capital Market and Services Act
      • Bursa Malaysia Listing Requirements
      • Banking and Financial Institution Act
  • 8. The auditing profession in Malaysia
    • The standards relating to auditing are:
      • MIA By-Laws, particularly on auditors independence
      • International Standards on Auditing adopted in Malaysia
      • International Standards on Quality Control
      • Practice guides issued by MIA
  • 9. Global development
    • Issues regarding audit quality has been the focus for a long time
    • International Auditing and Assurance Standards Board (IAASB) is the body that sets auditing standards for global adoption ( www.ifac.org/iaasb )
    • Oversee by the Public Interest Oversight Board (POIB)
    • Convergence of auditing standards is part of the IFAC agenda
  • 10. Global development
    • IFAC is in support of a single auditing standard globally and a separate standard for SME is not foreseeable
    • Guidance on how ISAs to be applied in the context of SME was recently issued
    • The focus of IAASB 2009-2011 strategy would be:
      • Development of standards
      • Monitoring and facilitating adoption of the standards
      • Responding to concerns about the implementation of the standards
    • The planned activities of IAASB would be directed towards the effective operation of the world capital markets and the needs of SMEs and SMPs
  • 11. Global development
    • Proposed revision of standards on Review Engagements to provide alternative in jurisdiction where audit for small companies are not mandatory
    • A response towards the call for a separate auditing standards for SMEs by SMPs
    • IAASB recently issued an Audit Practice Alert regarding the audit of fair value accounting estimates under the current situation in the market where the level of uncertainty is very high
  • 12. Global development
    • International Forum of Independent Audit Regulators (IFIAR – www.ifiar.org ) serves the protection of public interest through enhancement of audit quality
    • Share knowledge of audit market environment and practical experience of independent audit regulatory activity
    • Provide the contact point for other international bodies which have interest on audit quality
    • It is now a global expectation that auditors of public interest entities are regulated by a body which is independent from the accounting profession
  • 13. Audit quality review
    • Practice review in Malaysia is conducted by MIA through its Practice Review Department
    • The reviewers are the staff of MIA, not a peer review approach
    • It is part of MIA’s commitment towards the protection of public interest through the assurance of audit quality
    • MIA Practice Review Committee’s Term of Reference:
      • To oversee the implementation of the Practice Review Programme.
      • To consider and approve the review reports as presented by the management centre (Practice Review Department).
      • To provide guidance to the management centre and address any concern which may arise in relation to the implementation of the Practice Review Programme
  • 14. Audit quality review
    • The practice review process includes:
      • Firms would be randomly for practice review
      • The selected firms to perform a self-assessment on their compliance with the relevant standards and legislative framework
      • The MIA practice review team would review the quality control and internal control practices as well implementation of audit standards by each partners within the firm
      • The findings of the practice review would be agreed upon between the practice review team and the partners of the firm
      • A report would be table at the Practice Review Committee for decision and action
      • Opportunity would normally be given for firms to improve their audit quality before disciplinary actions are taken
  • 15. Audit quality review
    • Among the recent development in Malaysia with respect to review of audit quality are:
      • The government had announced the setting up of the Audit Oversight Board to oversee audit quality of auditors auditing public listed companies and other public interest entities
      • The focus of AOB would be to review audit work, investigate specific audit failures and conduct enforcement actions against auditors who fail to comply with the standards
      • The MIA would continue to set and adopt auditing and ethics standards, but the AOB would have the residual power to adopt if MIA fails to do so
  • 16. Moving forward issues
    • The expectation on the quality of audit would remain high in view of the interest of the investors on the audited financial statement
    • Audit quality goes beyond the competency of individual auditor but depends on the capacity and professional values adopted by the auditing firms
    • As the business environment gets more globalised and complex, auditing would be more challenging and the quality of the people involved in audit would be very important to maintain audit quality
    • External agencies outside the accounting profession would be more involved in the audit quality issues