Page 14 - AOB 2018 (ENG)

Audit
Oversight
Board
ANNUAL
REPORT
2018

New Criteria for Registration with the AOB

The AOB conducts regular inspections on audit firms and individual auditors to assess their compliance
with auditing standards and regulations. Over the years, results of the AOB inspections raised concerns
that:

• There were audit firms which lacked sufficient internal capacity at the partner level to effectively
carry out audits of PIEs and schedule funds, and comply with partner rotation requirements under
the MIA By-Laws;

• There were audit firms legally formed solely for the purpose of accepting PIE audit engagements.
However, in substance, these audit firms outsourced the roles and responsibilities of the
engagement partner (EP) and/or engagement quality control review (EQCR) partner. Consequently,
when audit quality concerns arose, these audit firms were unable to exercise effective oversight
and governance over the audit partners carrying out the audits of financial statements of PIEs or
schedule funds; and

• There were audit firms registered with the AOB for a number of years which have yet to perform
audits of financial statements for any PIEs or schedule funds since their registration. This raised
questions whether these audit firms have serious intentions to conduct audits of financial
statements of PIEs or schedule funds.

In view of the above, the AOB embarked on an in-depth review of its existing registration criteria in
2018 to ensure that its gatekeeping focus remains current and relevant, in line with the focus areas
identified in the AOB’s Strategic Plan 2017-2020. Further details on the review will be provided in the
2018 AOB Annual Inspection Report.

Diagram 2
New Criteria for Registration with the AOB – Project Timeline

Jan–Jun 2018 Jul 2018 Aug 2018 Jan 2020

In-depth review conducted Engaged with the Announced the • New Criteria for
on the AOB’s existing audit profession New Criteria for Registration with the
registration criteria which e.g. Dialogue with Registration during AOB is fully effective;
considers: Professional Bodies. the annual AOB and
Conversation with
• The AOB’s experience Auditors of PIEs and • All audit firms and
and inspection findings Schedule Funds. individual auditors
to date; and seeking registration
or are registered with
• Jurisdictional study the AOB are expected
and experience of The New Criteria for Registration took effect to fully comply with
other established audit on 16 August 2018. However, audit firms the New Criteria for
regulators. and individual auditors who were already Registration.
registered with the AOB as at 16 August
2018 are given an extension until 1 January
2020 to ensure compliance with these new
requirements.

12 | PART ONE FOSTERING HIGH QUALITY INDEPENDENT AUDITING IN THE CAPITAL MARKET