Page 29 - Inspection Report 2018

THEmATIC rEVIEWS

Key Audit Matters

KAms in the EArs – the second year in review

Communication of KAMs by Major Audit Firms was determined as one of the thematic areas of focus in 2017.
As highlighted in the report dated 25 January 2018 on the Enhanced Auditors’ Report: A Review of First-Year
Implementation Experience in Malaysia by the AOB, the Malaysian Institute of Accountants (MIA) and the
Association of Chartered Certified Accountants (ACCA), ‘most audit committee members (78%) and investors
(73%) agreed that the EAR is an improvement over the old format of the auditors’ report’ and ‘nearly two-
thirds (64%) of surveyed audit committee members indicated that based on their experience, the process of
considering KAMs and reviewing EAR had resulted in the board and management making improvements to
disclosures in the financial statements’.

In view of the reinforced importance of KAMs to the audit committee and investors, the AOB’s 2018 Inspection
Programme extended its focus to include the review of communication of KAMs by Other Audit Firms in the
EAR.

Details of the Engagement reviews performed are provided as follows:

diagram 5
Analysis of Engagements reviewed in 2018

AOB 2018 Inspection Best Practices

Focused training sessions on the
29 engagements identification and communication
of KAMs
67 KAm reported
2 engagements with 0 KAm Development of guidelines and
revised working papers to assist
the application and assessment by
8 engagements the engagement team
with findings
Earlier and meaningful
communication from the Auditor
40% 60% to TCWG
Insufficient audit evidence Inadequate assessment Reviews performed by technical
documented to support the to dispose significant functions on the drafting of KAMs
Auditor’s audit procedures areas communicated to reported and the disposal of
performed to address KAMs TCWG but not disclosed significant areas not disclosed as
communicated in the EAR as KAMs in the EAR KAMs by the engagement teams

Source: AOB

AUDIT OVERSIGHT BOARD
ANNUAL INSPECTION REPORT 2018 27

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