Reason?
Simple.
The Audit Oversight Board (AOB) who oversees auditors who handle public-interest entities and schedule funds under the Securities Commission enforce stringent compliance and high auditing standards on these auditors.
AOB regularly assesses registered auditors via firm-level reviews (focusing on the International Standard on Quality Management (ISQM) 1) and engagement-level reviews (benchmarked against the International Standards on Auditing (ISAs)).
When audit documentation lapses, or when auditors fail to verify high-risk items (e.g., revenue recognition, intangible assets, or multi-location inventory counts), the AOB actively initiates enforcement actions against the individual auditors and the audit firms.
AOB has a wide mandate of consequences for non-compliance up to a maximum fine of RM500,000 per violation.
Common enforcement actions include:
- Monetary penalties levied against individual engagement partners and quality control reviewers.
- Temporary or permanent prohibitions from accepting or practicing audits for PIEs or public listed companies.
- Public reprimands and mandatory training orders.
Thus, it is understood that an AOB registration is associated with an improvement in audit quality, and that AOB registered firms should and deserve to charge an audit fee premium for PLCs that they audit.
The Board of Directors for all PLCs are and should have been thoroughly aware that an auditor that is AOB registered has higher knowledge and expertise that comply with international quality controls.
Auditors and audit firms cannot legally review or sign off on financial statements for PIEs or listed companies without satisfying strict "fit and proper" criteria enforced by the AOB.
Thus, the PLCs need to pay a premium for the validation of the reliability of their financial statements that such reputational bonding provides.
Due to the audit quality of an AOB registered auditors, investors may be less skeptical of the financial information provided by companies with registered auditors.
AOB should help these mid size audit firms and inform the general public that audit firms registered with AOB, regardless of whether they are the Big 4 or a mid size audit firm, exhibit and provides the same audit quality as they are subject to the same standards imposed by AOB and thus PLCs that are audited by an AOB registered audit firm and an AOB registered auditor can be assured that they receive the same quality of work as any Big 4 firms.
If any of their existing PLC clients do not agree with a request for a fee increase, they always have a choice in looking for a replacement amongst the other 29 audit firms that are registered with AOB for fees that are amenable and meets their budgetary concerns.
Being listed on Bursa Malaysia share a lot of parallels with driving a Rolls-Royce—it is a massive status symbol, but it comes with intense costs, high maintenance, and everyone watching your every move.
The Board of Directors in the PLC surely do not want their chauffeur to drive into a petrol station and fill in their Rolls Royce with the subsidised RON 95.
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