PETALING JAYA: The auditors who signed off on the controversial 1Malaysia Development Bhd (1MDB) accounts will be investigated by the Malaysian Institute of Accountants (MIA).
Confirming this to StarBiz, MIA chief executive officer Ho Foong Moi said this was following complaints made by an Opposition Member of Parliament (MP).
DAP’s Petaling Jaya Utara MP Tony Pua had made two complaints to MIA, one in March and another in May.
“We have a due process to investigate any complaints made against any of our members,” Ho said.
MIA would not say when it aimed to complete the investigation. Ho said the deadline would depend on many factors as the case was complex.
“It also depends on whether we can obtain the relevant documents as well as prompt responses from the relevant parties,” she said.
On how impartial the probe would be, given that several council members of the MIA also work for three firms or the Accountant General’s office – who are involved with 1MDB – Ho said that any conflicted party would not be involved in the MIA investigation.
Three of the Big Four accounting firms were at one time or another working for 1MDB. The three are Ernst & Young, KPMG and Deloitte. The Accountant General’s Department is an authority under the Finance Ministry and advises the minister on who to appoint to the MIA council. Nine out of the MIA’s 29 council members work for the three firms or the Accountant General’s office.
The RM42bil debt chalked up by 1MDB has been the interest of many, but this is the first time the MIA is stepping in.
There have been previous calls for it to check on the auditors. The chairman of the Public Accounts Committee, which is holding an inquest into 1MDB, said he had found some accounting issues.
Datuk Nur Jazlan Mohamed said a few major accounting principles seemed to have been stretched to achieve the unqualified opinion in 1MDB’s 2014 accounts.
He called for regulators like the MIA and the Audit Oversight Board to step up and enforce the law. But the board has made it clear that it has control only over auditors of public listed companies.
The MIA, on the other hand, is a regulator for the accountants in Malaysia. The body has the power to investigate and punish members. It can even bar members from practising. But Ho stressed that the body can investigate only individuals, and not firms.
When the misconduct is less serious, the MIA can reprimand or fine the member. The MIA can also suspend a member for up to three years.
Move to name and shame errant auditors
PETALING JAYA: The regulator of audit firms in Malaysia has raised the issue of firms not fixing problems it had raised during inspections.
To put pressure on such firms, the Audit Oversight Board (AOB) will to make its inspection report public.
“We are concerned that audit firms may have started to be complacent with the deficiencies and issues raised in our inspection reports and have not given the required attention to the effectiveness of their remediation plans as indicated earlier to the board,” said executive chairman Nik Mohd Hasyudeen Yusoff in the AOB annual report 2014.
He noted that while firms have been enhancing their quality control, the board had found little actual improvement.
Last year, the board set stricter conditions for registration. It refused an application for recognition by a foreign audit firm because that firm failed to meet the board’s standards.
Also, the board acted against another firm for failing to meet critical measures on independence.
The board said new and revised standards next year would be a possible game changer to raise the quality of auditing and financial reporting in the country.
It was referring to the rules from the International Auditing and Assurance Standards Board that take effect on Dec 15, 2016.
Nik said these new standards would require auditors to put in key audit matter disclosures in their reports.
This would make the reports tailored to the clients rather than the mostly standard terms and boilerplates.
The board expects this to give more insights “of the risks surrounding a particular reporting entity and some of this may have market impact”.
The annual report said there was no major change in the number of registered and recognised audit firms and individual auditors.
Six major audit firms and four others audited 957 public-interest entities (PIE), covering 98.6% of the market capitalisation of public listed companies in Malaysia in 2014.
Last year, the AOB acted against a firm and two individual auditors.
It was the first time it had barred a firm from accepting any PIE as a client for 12 months. The firm also had to pay a penalty of RM30,000. In the past, the penalties were limited to a reprimand and the highest fine was RM10,000.
Regulator AOB expects and has mechanism to ensure audit firms strictly adhere to the laws
PETALING JAYA: The Audit Oversight Board (AOB), which has taken enforcement actions against two individual auditors and an audit firm last year, expects audit firms to adhere strictly to the laws.
“AOB has in place a robust enforcement mechanism with sufficient safeguards to ensure that fairness and justice will prevail,” it said.
From April 2010 to December 2013, eight auditors were sanctioned for failure to comply with the recognised auditing standards in the performance of their audit of the financial statements of public-interest entities (PIE) and failure to comply with the ethical and professional standards of the Malaysian Institute of Accountants by-laws.
In 2014, action was taken against two auditors and one audit firm.
AOB has prohibited Wong Weng Foo & Co from accepting PIE clients for 12 months. The audit firm was also imposed a penalty of RM30,000.
The AOB has also rapped two registered auditors, Lim Kok Beng of Ong Boon Bah & Co and Chan Kee Hwa of Khoo Wong & Chan, for non-compliance.
They were reprimanded for not complying with the International Standards on Auditing while auditing the financial statements of public interest entities.
In addition to the reprimand, a penalty of RM10,000 was imposed on Lim
Salaries of audit firm employees higher than fees
PETALING JAYA: For the first time in two years, growth in employee costs has outstripped audit fees among Malaysian firms.
While the growth in audit fees has dipped by a quarter from 12% to 9% in the past year, the growth in staff cost has remained constant for the past two years.
There has been higher headcounts in the past year, which rose by 6.6%, according to the Securities Commission’s Audit Oversight Board’s (AOB) annual report 2014.
“Based on three years of analysis of the top 10 audit firms, salary costs continue to increase at a higher rate compared with the growth in the audit fees, which is a challenge for audit firms,” the board said.
Staff turnover was also another concern.
While the overall turnover has stabilised at about a quarter of the staff each year, the non-executives were leaving at a higher rate.
“This is a concern as turnover at this level may indicate the lack of attractiveness of audit as a career among younger accountants, which could be detrimental in the long term,” it said.
The report is compiled from 10 top audit firms, which collectively audited 957 public-interest entities (PIEs) covering 98.6% of the market capitalisation of public-listed companies in Malaysia.
The number of registered audit firms had decreased from 83 in 2010 to 52 last year.
The number of registered auditors has remained stable for the past five years. The number of registered auditors rose to 304 individuals in 2014 from 302 in 2013.
The annual report, AOB’s fifth, was released yesterday. AOB also questioned audit deficiencies for major firms.
AOB inspects accounting firms regularly to promote and develop an effective audit oversight framework and promote confidence in the quality and reliability of audited financial statements in Malaysia.
Sources: The Star/Asia News Network
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