Page 8 - Inspection Report 2018

WHAT THE
AOB dOES
WITH FINdINGS?
At the conclusion of each inspection, the AOB material accounting error, or a combination of the
issues a draft inspection report to provide details
on findings observed during the inspection. require the following actions to be taken:
Audit firms are expected to provide their
responses within the specific timeframes (i)
prescribed by the AOB. The AOB finalises the
inspection reports after taking into account
representations made by the audit firms. All
findings are expected to be remediated by the
audit firms within a timeline agreed with the
AOB.
Findings identified in relation to firm reviews
generally relate to compliance with the
requirements of the International Standard on
Quality Control (ISQC) 1. For engagement
reviews, findings are either deficiencies that are
individually critical which may have an impact on
the basis of audit opinion or those that relate to a
pervasive issue where the impact cannot be (ii)
easily quantified. Findings do not necessarily
suggest that the affected PIEs’ financial
statements contain a material accounting error
or its internal controls in respect of financial
reporting are materially weak.
(iii)
For engagements where significant
improvements are required, actions can be
taken on both individual partners involved as
well as the audit firms. As part of its normal
process, the AOB also assesses whether findings
relate to a lack of audit procedures, a potential
AudIT OVErSIGHT BOArd
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two. The result of the AOB’s assessment might
Imposing specific remediation measures on
audit firms to rectify the findings raised.
The audit firms are required to incorporate or
revise the relevant audit procedures in their
audits of the PIEs for the ensuing financial
year to evaluate the areas relating to the
findings raised. The audit firms are also
required to evaluate the impact of these audit
procedures to the audited financial
statements for the financial year inspected. In
certain instances, this has resulted in Prior
Year Adjustments (PYA) being made in cases
where accounting errors were discovered;
Following the inspection of audit
engagements, the related PIEs are referred to
the SC’s Corporate Surveillance Department
for consideration of further action to be taken
on the PIEs, where relevant;
Sharing findings with PIEs relating to
inspected audit engagements.
In 2018, the AOB had for the first time shared
inspection findings with the Audit Committee
members of a PIE. This was in relation to
concerns arising from the AOB’s inspection on
3:01 PM
an audit engagement of the PIE,
including relevant matters for the Audit
Committee’s consideration in their
appointment of their auditors; and
(iv) Imposing additional registration
conditions on audit firms.
In yet another first step for the AOB,
while enforcement proceedings were
ongoing, additional registration
conditions were imposed on individual
auditors and the audit firm to curb the
auditors from signing the auditor’s
reports of its PIE clients. This was due to
the severity and pervasiveness of
findings on several inspected audit
engagements. Such action on
registration conditions were imposed
with a view to safeguard the interest of
the capital market.
In instances where there are breaches of laws
and regulations, the AOB will not hesitate to
take action against individual auditors and
audit firms which can range from issuing
public reprimands to revoking the registration
of audit firms and its individual auditors with
the AOB.