Page 7 - Inspection Report 2018

To fulfil its mandate, the AOB conducts regular and special inspections on registered audit firms and individual
auditors of PIEs and schedule funds. Inspections involve an assessment of the degree of compliance by auditors
with auditing and ethical standards applicable in Malaysia and the quality of the auditor’s reports prepared by
the auditors relating to the audited financial statements of PIEs and schedule funds.

The AOB adopts a risk-based approach in its inspections and takes into consideration, among others, public-
listed companies’ (PLCs) market capitalisation and specific areas of concern in its selection of audit engagements
to be inspected. In addition, the AOB incorporates annual thematic reviews on certain areas of audits where
there are particular market interest or concern.

Part I of this report sets out snapshots of the current audit landscape in Malaysia relating to PIEs and schedule
funds. During the year, the AOB continued with its annual Statistics Gathering and Analysis (SGA) exercise
using statistical submissions by the Top 10 Audit Firms based on their PLC audit clients’ market capitalisation in
Malaysia (Top 10 Audit Firms). The Top 10 Audit Firms in Malaysia collectively audited PLCs that constituted
98% of the total market capitalisation of PLCs, and hence can be taken to be a close reflection of the audit
firms under the AOB’s purview. Acknowledging the challenges faced by the auditing profession in building
capacity, the AOB placed greater emphasis on the analysis relating to capacity building efforts of audit firms
during the year. Hence, the results from the SGA exercise relating to talent development are also presented in
Part I. In addition, Part I presents the results of an analytical exercise performed by the AOB, to link past audit
quality-related trends at the engagement level to its inspection results.

Part II and Part III set out the inspection findings and observations arising from Firm and Engagement level
reviews respectively. Recognising the continuing volatility of local and global economic conditions, the AOB
conducted thematic reviews on audits of PIEs with potential going concern issues. The AOB’s thematic reviews
in 2018 also included the extent of the audit firms’ use of data analytics (DA) in their financial statement
audits and extended its scope of inspections to cover the communication of Key Audit Matters (KAMs) by Other
Audit Firms as well.

Part IV covers the remediation progress of inspected audit firms to address the AOB’s inspection findings.

AUDIT OVERSIGHT BOARD
ANNUAL INSPECTION REPORT 2018 5

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