AUDIT OVERSIGHT BOARDAUDITING AND INVESTIGATION

(PAS3143)

LEONG SZE KEAT 4123000451NUR NAJWA ASYIQIN BT AHMAD YAZID 4123008721NURUL SYUHADA BINTI ZAINUDDIN 4123009901MOHD. SAZMAN MOHD ZIN JAMAL 4123004521MUHAMMAD ANIQ HAKIM BIN MAZLAN 4131008151

What is AOB?• Stands for Audit Oversight Board

• Was established under Part IIIA of the Securities Commission Act 1993 – 1st April 2010

• Purpose is:• To promote and develop an effective audit oversight

framework

• To promote confidence in the quality and reliability of audited financial statements in Malaysia.

What is AOB?• AOB is not a statutory body

• Securities Commission would remain accountable for all of the AOB's acts and omissions

• AOB would also work closely with all regulatory agencies to ensure a holistic regulatory framework for auditors in Malaysia

AOB’s members• The Board consists of:

An executive chairman 6 non-executive members

• To maintain independence of the AOB, not more than 2 non-executive of Board are members of Malaysia Institute of Accountants (MIA)

Standard setting of AOB• Compliance with established auditing standards is

an integral aspect in maintaining reliability of the company’s audited financial statements.

• As Malaysian Institute of Accountants (“MIA”) adopts all Internal Federal of Accountants (“IFAC”) standards, AOB will have power to direct MIA to establish, amend, modify or alter its prescribed standards if the need should arise.

• Currently auditing and ethical standards in Malaysia are on par with pronouncements issued by International Auditing and Assurance Standard Board (“IAASB”) and International Ethics Standard Board for Accountants (“IESBA”).

The structure of AOB• 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

• The members are appointed by the Securities Commission

The Members of AOBName Designation

Nik Mohd Hasyudeen Yusoff Executive Chairman of the Audit Oversight Board

Goh Ching Yin Executive Director of the Securities Commission Malaysia

Datuk Nor Shamsiah Mohd Yunus Deputy Governor of the Central Bank of Malaysia

Cheong Kee Fong Advocate and Solicitor of Cheong Kee Fong & Co

Chok Kwee Bee Managing Director of Teak Capital Sdn Bhd

Dato’ Gumuri Hussain Chairman of the SME Bank

Mohd Naim Daruwish Chief Executive Officer of the Companies Commission Malaysia

Overview strategies of the AOB• The AOB aims to achieve the following desire outcomes:

• High quality financial reporting practices by Public Interest Entities (PIEs)

• Resourceful and high quality audit practices

• Independent and high quality audits

• High quality and reliable audited financial statements

• Enhanced confidence in audited financial statements.

• The AOB has adopted a strategic framework which links the service areas and activities of AOB to the desired outcomes which manifest the attainment of its mission. The strategic framework has four strategic themes, which are:

• Support adoption and implementation of standards

• Promote high quality audit practices

• Influence financial reporting ecosystem

• Leverage on stakeholders’ support.

POWER OF AOB • 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

• Regulate auditors of Public Interest Entities (PIE)

• The AOB was established to assist SC in discharging the above functions

RESPONSIBILITIES OF AOB • Register auditing of PIEs

• Adopt auditing/ ethical standard of MIA

• Conduct inspection & monitoring programmers

• Conduct inquiries and imposed sanctions

• Cooperate with relevant authorities and other oversight bodies outside Malaysia

Registration• AOB seeks to register audit firms and individual

auditors of public interest entities (PIEs) who are fit and proper which includes:

i)Auditor approved under Sect.8 of the Companies Act

ii)Not convicted of an offence involving fraud and dishonesty

iii) Not a bankrupt

iv) Not engaged in practices with reflect discredit in meeting professional standards

• As at 31 October 2010, 77 audit firms and 289 auditors have been registered

Registration processPIE Category Number of PIEs as at 30 June 2010

Public Listed Companies 972

Licensed Financial Institutions 36

Insurance Companies 47

Takaful Operators 13

Islamic Banks 19

Development Financial Institution 3

Capital Market Services Licensed Holders 137

Inspection process• The AOB will conduct regular and special inspections of

audit firms and auditors determined on a risk-based approach

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

• Regular inspections are routine inspection to cover all firms based on AOB’s annual audit plan

• Special inspections are industry or event-driven

At the firm level, compliance with Implementing the International Standard on Quality Control 1(ISQC1) and the MIA By-Laws on Professional Ethics, Conduct and Practice will be reviewed:

• Leadership and responsibilities within firm

• Ethical requirements• Acceptance and

continuance of audit clients

• Human resources• Engagement

performance • Monitoring

At the engagement level , inspection is targeted at compliance with International Standard on Auditing This includes:

• Audit planning• Risk assessment and

risk response• Sufficiency and

appropriateness of audit evidence

• Documentation• Compliance with

regulation

• At the end of the inspection process, AOB will provide the firms with inspection reports which indicate areas where firms failed to comply with auditing and ethical standards

• Firms are expected to provide AOB with their plans to remediate the non-compliances

• Not with standing the remediation, further action could be taken by the AOB

Inquiry and Sanctions• Inquiry conducted

when there is reason to believe that provisions of the Act, written notice or guidelines are breached, including non-compliance with auditing and ethical standards

• AOB officers will be conducting inquiries

• Inquiry officers will be appointed and will have necessary power to coduct their duties

Cancelling or suspension of registration

Requiring additional

professional education

International affairs • AOB has been accepted as a member of International Forum of Independence Audit Regulations (IFIAR)

• Have liaised with audit regulators in Singapore, Australia, France and United Kingdom to benchmark against our current practices and understand their challenges

• AOB will develop closer relationship with audit regulators where Malaysian businesses have significant presence

Annual reporting• 3 months after the end of the year,

AOB shall report to the Securities Commission on:• Assessment on the effectiveness of AOB’s

performance

• Assessment on risk relating to quality and reliability of audited financial statements of PIE and measures recommended by AOB

• Systems , procedures and practices used by AOB in measuring its performance

• Other matters affecting the AOB in carrying out its functions

• Financial statements

Example where AOB has

exercised its power

THE NEWS FROM THE SUN DAILY

POSTED ON 19 FEBRUARY 2014 - 05:40AM

Summary• Lim Kok Beng of Ong Boon Bah & Co• Chan Kee Hwa of Khoo Wong & Chan• Failing to comply with the International

Standards on Auditing (ISAs).

• Found to have breached the registered conditions imposed by the AOB under section 310(4) of the Securities Commission Act 1993.

• Monetary penalty of RM10,000 was imposed on Lim.

THE NEWS FROM THE SUN DAILY

POSTED ON 3 JUNE 2014 - 05:40AM

Summary• Firm Wong Weng Foo & Co for two separate offences.• Slapped a RM30,000

• AOB has prohibited the firm from accepting public interest entities (PIEs) as clients for 12 months

• Failing to comply with Section 31N (1) of the Securities Commission Act 1993 which requires audit firms to be registered with the AOB when acting as auditors of PIE.

• Failed to comply with the Malaysian Institute of Accountants By-Law (On Professional Ethics, Conduct and Practice) which deals with independence

THE NEWS FROM THE SUN DAILY

POSTED ON 20 AUGUST 2013 - 05:36AM

Summary

• Reprimanded four auditors

• Failing to discharge their professional duties as set out in the International Standards on Auditing

• One of the auditors was also fined RM5,000 • Breaching the by-laws of the Malaysian Institute of

Accountants (MIA) which relates to auditors' independence.