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The development of talent, particularly the non-managerial audit staff, is closely monitored by the AOB.
Malaysia's Audit Oversight Board (AOB) has highlighted the importance of developing talent and addressing staff workload concerns in the country's audit firms, to uphold consistently high-quality audits.
Recognising that audit quality is a shared responsibility, the AOB said it continues to work together with key stakeholders to drive improvements in the financial reporting ecosystem.
Annually, the AOB inspects nine major audit firms, which collectively audit 78% of the total number of public-listed companies (PLCs), representing 95% of the total market capitalisation of PLCs in Malaysia.
Most recently, the AOB’s inspection in 2023 encompasses assessments of 50 partners and 50 audit engagements across 15 audit firms, including the nine major audit firms.
Overall, there was a slight improvement in auditors’ performance in 2023, based on the inspection results of the AOB.
There was also a dip in the percentage of inspected engagements routed for enforcement, from 18% in 2022 to 16% in 2023. However, there was an overall increase in engagements requiring specific remediation measures. These measures are imposed on audit firms and engagement partners, with the intention of boosting improvements in the areas of an auditor’s professional skepticism and technical expertise in relevant auditing and accounting standards.
To enhance the monitoring and supervision of AOB-registered auditors, the Board issued the Guidelines on Continuing Obligations for Registered Auditors (Guidelines) in June 2023. The new requirements on change, resignation, and removal of auditors, effective 1 July 2024, were prompted by regulatory concerns associated with the resignation of auditors subsequent to their appointment at the PLCs’ annual general meetings.
Concerns include the risk posed by auditors who fail to carry out their statutory duties by resigning when faced with known or suspected financial irregularities in their audit clients. Beyond that, the resigning auditor (outgoing auditor) may not be transparent in communicating key audit concerns when providing professional clearance to the newly appointed auditor (incoming auditors).
The report also touched on key audit quality indicators — particularly, developing and supporting audit talent. As in prior years, a large proportion of the audit workforce for both the major audit firms and other audit firms comprise non-managerial staff. The percentage of non-managerial staff is as follows:
| 2023 | 2022 | 2021 | |
| Major audit firms | 80% | 80% | 78% |
| Other audit firms | 74% | 71% | 72% |
The development of talent, particularly the non-managerial audit staff, is closely monitored by the AOB. In doing so, both the major audit firms and the other audit firms were observed to have continued to invest in training to upskill their audit staff. The AOB further notes that a majority of the firms’ audit staff have obtained or are currently pursuing professional qualifications — Major audit firms: 86%, other audit firms: 62%.
At the same time, some firms have introduced incentives to encourage their audit staff to pursue professional qualifications by sponsoring their professional examination fees or by study fees subsidies.
As the average years of experience for non-managerial staff is about two years, AOB emphasised that there is a need for sufficient supervision of their work. In this respect, the AOB monitors the staff-to-partner ratio and staff-to-manager ratio, and has observed a "relatively stable" audit staff-to-partner ratio and audit staff-to-manager ratio over the last three years.
Lead image / AOB
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