Page 28 - Inspection Report 2018

In 2018, stern actions were taken by the AOB on ineffective EQCR partners for the first time which consisted of:

• Publicly reprimanding individual EQCR partners; and
• Prohibition of the EQCR partner in performing the audits of PIEs and schedule funds for a period of up
to 12 months.

External EQCR arrangements

Certain audit firms engaged external EQCR partners through the following arrangements:

• Outsourced the function of the EQCR partner; and
• EQCR partner was not a full time partner of the audit firm whereby he was also a partner in a separate
firm.

Results since 2011 showed that when the external EQCR partner arrangements were outsourced on audits of
PIEs, audit quality was more often than not, severely compromised. This is depicted in Diagram 4.

diagram 4
Findings of 21 engagements with external EQCr arrangements inspected between
2011 and 2018

Findings in 57%
sanctions imposed
95% Resulting in on the engagement
of PIEs partner, EQCR
inspected and/or firm

Source: AOB

Moving Forward …

Having considered the external EQCR arrangements as well as other observations arising from the AOB’s
inspections and ongoing monitoring efforts, one of the New Criteria for Registration with the AOB was
that the EQCR assigned for the audits of PIEs and schedule fund clients must be carried out by an AOB-
registered partner of the same audit firm appointed as the PIE’s or schedule fund’s auditor. 40%
Insufficient audit evidence
The new criteria took effect on 16 August 2018 for new registrants while existing AOB registrants were documented to support the
given an extension up to 1 January 2020 to ensure full compliance. Auditor’s audit procedures
performed to address KAMs
communicated in the EAR

AUDIT OVERSIGHT BOARD
26 ANNUAL INSPECTION REPORT 2018

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