KUALA LUMPUR: Most stakeholders have preferred the new enhanced auditors’ report (EAR) as they acknowledge the improvements the new standards bring, a key tool in navigating complex financial reports.
This is revealed by a joint study by the Audit Oversight Board (AOB) of the Securities Commission (SC), the Malaysian Institute of Accountants (MIA) and the ACCA (Association of Chartered Certified Accountants) on the first-year implementation of the EAR.
The enhanced auditor reporting standards were issued by the International Auditing and Assurance Standards Board and adopted in Malaysia in 2015, with an effective date of December 15, 2016.
The results from this study are based on the review of EARs and annual reports of a sample of 190 companies listed on Bursa Malaysia with financial periods ended December 31, 2016, as well as views from over 170 audit committee members and investors.
AOB, MIA and ACCA were in agreement that the EAR has spurred constructive behavioural changes within the financial reporting ecosystem and improved engagement between investors and companies in Malaysia.
This follows early pre-implementation efforts such as SC’s establishment of the Steering Committee comprising key individuals representing the regulators, accounting and auditing profession, and public listed companies in June 2015 to identify implementation issues and risks, as well as to develop strategies and provide guidance on those issues and risks identified.
AOB, MIA and ACCA said the enhanced auditors’ report placed greater prominence on the auditors’ opinion and a key change introduced through EAR is the disclosure of Key Audit Matters (KAMs), resulting in a more transparent and informative auditors’ report.
“In the longer term, EAR is expected to drive the flow of useful and relevant information to the capital market, reduce speculation on company performance and promote better understanding of financial statements.”
AOB executive officer Alex Ooi Thiam Poh said EAR is a game-changer – affecting all stakeholders in the financial reporting system who each has its own role to play in promoting high quality financial reporting and corporate governance practices.
MIA chief executive officer Dr Nurmazilah Datuk Mahzan said the move to encourage auditor to be more transparent in communicating their work and insights have definitely driven positive change throughout the financial reporting supply chain, in relations to the overall perception and processes.
ACCA Asia Pacific regional head of policy Chiew Chun Wee said it has seen a promising start to the implementation of EAR in Malaysia, but more can be done to fully extract the value of this enhanced form of communication and heighten the level of transparency and trust in the information flow within the capital market.