The PLCs should be held responsible and actions or penalties be imposed on them too.
Every public listed company (PLC) in Malaysia must be audited by an audit firm and individual auditors who are registered or recognized by the Audit Oversight Board (AOB).
According to the Securities Commission Malaysia Annual Report 2025, the year-end total stand at 29 registered audit firms with 305 registered individual auditors.
As at 19 August 2026, there are a total of 1,079 companies listed on the Main Market and ACE Market of Bursa Securities.
The Big 4 audit roughly 48% to 50%+ of all PLCs on Bursa Malaysia.
They command an even larger share (over 75%) of total audit fees paid by listed entities because they service the largest capitalization and most complex groups.
In the last 2 years, the Audit Oversight Board (AOB) of the Securities Commission Malaysia suspended an audit firm and sanctioned the firm’s partners and penalising 2 partners in another mid size audit firm.
Coincidentally, both these mid size audit firms are part of the TGS Global network whose head office apparently is in France.
What were their offences?
Failure to gather adequate audit evidence or conduct proper procedures regarding,
- Revenue and Cost of Sales
- Bank Borrowings and Opening Balances
- Goodwill and Intangible Assets
- Going Concern Assumptions
- Property Development Costs and Fixed Deposits (which were recurring flaws from past inspections)
- Lapses in Quality Control: The Engagement Quality Control Reviewers (EQCR) failed to sufficiently review critical audit documentation and significant judgments
Audits of companies especially public listed companies are a matter of public interests.
When failed to conduct proper procedures in those areas concerned, have AOB enquireed and understand why?
Is it because the clients have poor bookkeeping and inadequate records and that is why auditors fail to verify these specific accounts?
When critical financial entries lack clear paths to independent, verifiable data, auditors cannot gather "sufficient appropriate audit evidence, this often leaves them with no choice.
Revenue can be complex due to accounting standards like MFRS 15 / ASC 606 (Revenue from Contracts with Customers).
If a business has long-term projects or variable pricing, failing to verify revenue might stem from management's aggressive assumptions or structural manipulation (fraud) rather than just messy paperwork.
If a business fails to maintain a systematic trail of invoices, delivery orders, shipping documents, and official receipts, auditors cannot verify the completeness or occurrence of sales.
Rushed year-end processes or messy general ledgers make it difficult to prove that sales actually happened or were recorded in the correct period (known as "cut-off issues").
Auditors rely heavily on direct external confirmation letters sent straight to the financial institutions.
If a bank refuses to respond, responds inaccurately, or if management hides secret credit facilities or undisclosed corporate guarantees, the auditor cannot verify the completeness of the borrowings.
If the company’s internal accounting software was altered, or if closing entries from the prior year were not systematically locked or brought forward correctly, the numbers become unreliable.
Under such circumstances, the auditor should resign from the engagement immediately.
Obviously if the auditors decide to go ahead and conclude the audit despite the above shortcomings from the clients, AOB did the right and correct thing in suspending them.
In fact, AOB should advise MOF to withdraw the licences of such auditors to ensure that they could no longer practice in the future
The burden of corporate integrity cannot fall solely on the shoulders of external auditors. While auditors face public sanctions like those from the AOB, the primary responsibility for honest financial reporting, strong internal controls, and fraud prevention rests squarely on the Public Listed Company (PLC), its Board of Directors, and management.
Why the fault lies primarily with the PLCs?
- Ownership of Financial Statements: Management prepares and owns the financial statements; auditors only express an opinion on whether they are free from material misstatement.
- First Line of Defense: The PLC’s internal audit function and Audit Committee are responsible for preventing and detecting fraud before the external auditors arrive.
- Information Asymmetry: Auditors can be intentionally deceived by management through collusion, forged documents, or off-balance-sheet transactions that are difficult to detect via standard audit sampling.
The increased rigour of regulations and supervision in recent years has sensitized managements, boards and audit committees to the need for reasonable audit-fee payouts.
Audit fees, however, remained almost the same, not raised by much.
In contrast, the audit fee of firms in the US after their registration with the Public Company Accounting Oversight Board has seen a significant increase.
Is AOB going to play its role and ensure that fees paid to the auditors by all PLC, regardless of their size, revenue or operations, commensurate with international standards?
Presently, AOB strictly enforces compliance with international auditing and quality control standards for Public Listed Companies (PLCs), but left the audit fees to be determined commercially between the PLC’s audit committee (representing management and shareholders) and the audit firm based on scope, complexity, and time spent.
If AOB still maintain this stance, and audit fees are their only available source of funding, probably the mid size audit firms should rethink their current engagement with their existing audit clients comprising of PLCs.
PLCs should be educated and taught the value of the auditor in the process and not to treat them and their role it as no more than a statutory requirement.
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