AC220 8H

Role of Audit Oversight Board PREPARED FOR :

PM. DR. ZAINI
(Breach of Contract & Negligence) AHMAD
PRESENTED BY:

ZARITH SOFIA BT NASUHA 2017649058

NURASMIRA BT MOHD PUZI 2017638992
WIDAD HAYATI BT ABDUL GHANI 2017639158
HUMAIRA SYUHADA BT ITHNIN 2017638856
Introduction

• The Audit Oversight Board (“AOB”) is established under Part IIIA

of the Securities Commission Act Malaysia 1993 (“SCMA”) which
came into force on 1 April 2010

• The objective of AOB is to promote and develop an effective

audit oversight framework

• To promote confidence in the quality and reliability of audited

financial statements in Malaysia.
The key responsibilities of the AOB are to:

• Implement policies and programs in ensuring an effective audit

oversight system in Malaysia
• Register auditors of public interest entities (PIEs)
• Establish or adopt, or by way of both, the auditing and ethical
standards to be applied by auditors
• Conduct inspections and monitor programs on registered auditors to
assess the degree of compliance of auditing and ethical standards
 The key responsibilities of the AOB are to:

• Conduct inquiries and impose appropriate sanctions against auditors

who fail to comply with auditing and ethical standards
• Cooperate with relevant authorities in formulating and implementing
strategies for enhancing standards of financial disclosures of PIEs
• Liaise and cooperate with oversight bodies outside Malaysia to
enhance the standing of the auditing profession in Malaysia and
internationally; and
• Perform such other duties or functions as the Audit Oversight Board
determines necessary or appropriate to promote high professional
standards of auditors and to improve the quality of audit services
provided by auditors.
What is Public Interest Entities (PIEs)

• A Listed Entity;
• or an entity (a) defined by regulation or legislation as a public
interest entity or
• for which the audit is required by regulation or legislation to be
conducted in compliance with the same Independence
requirements that apply to the audit of Listed Entities.
• Such regulation may be promulgated by any relevant regulator,
including an audit regulator.
 What is Public Interest Entities(PIEs)
• 2.04 Part 1 of Schedule 1 of the SCMA currently specifies 16 groups of public interest
entities.
• They are–
• (a) a public listed company or a corporation listed on the stock exchange;
• (b) a bank licensed under the Financial Services Act 2013 (FSA);
• (c) an insurer licensed under the FSA;
• (d) a takaful operator licensed under the Islamic Financial Services Act 2013 (IFSA);
• (e) an Islamic bank licensed under the IFSA; 6
• (f) a financial institution prescribed under section 212 of the FSA or section 223 of the IFSA;
• (g) a development financial institution prescribed under the Development Financial
Institutions Act 2002;
• (h) a holder of a Capital Markets Services Licence for the carrying on of the regulated
activities of dealing in securities, dealing in derivatives or fund management;
.
What is Public Interest Entities(PIEs)

• (i) an exchange holding company approved under the securities laws;

• (j) an exchange approved under the securities laws;
• (k) a central depository approved under the securities laws;
• (l) a clearing house approved under the securities laws;
• (m) a self-regulatory organisation recognised under the securities laws;
• (n) a private retirement scheme administrator approved under the securities
laws;
• (o) a trade repository approved under the securities laws; and
• (p) the Capital Market Compensation Fund Corporation. 2.05 Part 1 of Schedule
1 of the SCMA also provides that the Minister of Finance may prescribe by order
published in the Gazette, any other person to be a public interest entity
Differences between Audit Oversight Board (AOB)
and audit practices review
Audit oversight board (AOB) Audit practice review

DEFINITION Audit Oversight Board (AOB) is a register Practice reviews are primarily intended to
individual auditors and audit firm that evaluate whether a firm’s quality control
audits the financial statements of a Public policies and procedures for its accounting,
Interest Entities (PIE) assurance, non-assurance and tax services
are appropriately comprehensive and
suitable designed

ACT The Audit Oversight Board (AOB) IS The practice review is conducted pursuant
ESTABLISHED UNDER PART IIIA OF THE to Part B section B250: Quality Assurance
Securities Commission Act Malaysia 1993 and practice Review under MIA
which came into force on 1 April 2010
OBJECTIVE Audit Oversight Board (AOB), oversee Objective of practice review under
the auditors of public-interest entities section B250.4 is to ensure that all
(PIEs) and to protect the interests of members in public practice comply with
investors by promoting confidence in all applicable professional standard,
the quality and reliability of audited legal and regulatory requirements in the
financial statement of PIEs. performance of their work

MONITORING Under Part IIIA of the Securities Under Section 550 of the MIA By-Laws,
Commission Act 1993 (SCA 1993), the MIA is responsible for surveillance and
AOB is responsible for conducting enforcement of audit firm registered
Quality Assurance (QA) review of audit with MIA, monitoring through its Practice
firm that are registered with AOB and Review Framework.
audit PIEs. AOB is an establishment set
up to monitor the external auditor’s
role.
 CASE
XiDeLang Holdings Ltd said its auditor Afrizan Tarmili Khairul Azhar has resigned with immediate effect,
due to sanctions imposed on the auditor for non-compliance with auditing standards by the Securities
Commission Malaysia (SC)’s Audit Oversight Board (AOB).
Afrizan was previously reappointed as XiDeLang’s auditor at its 10th annual general meeting on June 20,
2019.

“The resignation of Afrizan was due to the sanctions imposed upon them by the Audit Oversight Board
which, inter alia, prohibits them from auditing the financial statements of a public interest entity for 12
months with effect from Nov 25, 2019,” XiDeLang, which manufactures footwear, said in a filing with Bursa
Malaysia yesterday.

On Nov 25, the SC announced that AOB had prohibited the audit firm and its partners from accepting clients
and auditing public interest entities or schedule funds, for 12 months.

The partners involved are Datuk Mohd Afrizan Husain, Tarmili Dulah Kusni and Khairul Azahar Ariffin.

The SC said the audit firm and its partners were sanctioned for several breaches involving non-compliance
with auditing standards on fundamental and basic audit procedures, which affected key financial
statement line items including inventories, revenue, cost of goods sold and trade receivables.
Nature of Conduct Parties Involved Brief description of
misconduct

Breach the AOB's registration condition
imposed under Section 31O(3) of the Securities
Commission Malaysia Act 1993 .
31O. Application for registration, renewal of
registration and recognition as auditor of
public interest entity.
(3) Subject to section 31P, the Audit Oversight
Board may–
Khairul Azahar Bin Ariffin Failure to comply with certain
("KAA") of AFTAAS was the requirements of the International
engagement partner for the audit Standards on Auditing in the
of a public interest entity for the performance of an audit of a public
financial year ended 31 interest entity.
December 2017.

(a) approve or refuse the registration of an

applicant as a registered auditor or the
renewal of registration of a registered
auditor; or
(b) approve or refuse the grant of recognition
of an applicant as a recognized auditor.
Action taken by AOB

• Prohibit KAA from accepting any public interest entity or schedule fund as client or preparing
reports in relation to financial information of any public interest entity or schedule fund, as may
be required under the securities laws or guidelines issued by the Securities Commission for 12 months;
• Prohibit KAA from auditing financial statements of a public interest entity or schedule fund or
preparing reports in relation to financial information of a public interest entity or schedule fund,
as may be required under the securities laws or guidelines issued by the Securities Commission
Malaysia for 12 months; and
• Imposed monetary penalty of RM88,000.00.

Appeal
On 25 September 2019, KAA appealed to the SC on the AOB's decision. The SC dismissed the appeal
and affirmed the decision made by the AOB.
The prohibitions to accept and audit any public interest entity or schedule fund for 12 months will take
effect from 25 November 2019.