As usual the issue of maintaining audit as a mandatory requirement for all limited companies who get attraction at the Malaysian Institute of Accountants (MIA) annual general meeting.
It appears that instead of taking advantage of the requirements of the law, many auditors feel that mandatory audit is a sort of rights and any attempt to relieve small companies from such requirement should be opposed. The following motion would be debated at the forthcoming MIA annual general meeting this Saturday:
BE IT RESOLVED THAT the Malaysian Institute of Accountants (MIA) expresses its members’ intention to the relevant government authorities that audit exemption be limited to dormant companies only. And, to request the Companies Commission of Malaysia (CCM) to engage with MIA before confirming the guidelines on the companies to be exempted from audit.
There are a number of public interest issues behind this discussion:
- Exempting from audit is practised in many countries recognising that audit is only valuable when companies have grown to a certain size. Why should Malaysia be different?
- Auditing standards, especially for private companies, generally are not up to the mark. As of 30 June 2015, out of 660 firms which were reviewed by MIA, 47% did not meet MIA own auditing standards (Type 3). This is a serious situation if considered from public interest perspectives. Were the clients of those firms which got Type 3 did not get their fair share of the bargain? Were there assurances, as expected by auditing standards, for those audit engagements? Interestingly, in the 2016 annual report, the statistics on the outcomes of practice review is not shared? The closest to this were the number of practice review failure cases which were referred to the Investigation Committee. 26 cases were referred!
- The MIA allows auditors in Malaysia to limit the usage of their audit reports to the shareholders of the companies only. While the legal position of this limitation has yet to be tested in Malaysia, the issue is whether such limitation is fair given that audit requirements is mandatory.
MIA is not a trade association. It is a body set up by an act of parliament to safeguard the accountancy profession and public interests. Section 6 of the Accountants Act requires MIA to regulate the practice of accountancy in Malaysia. Who are at risks when MIA members do not perform their work according to the standards set by MIA itself? It is obvious, the party which need protection is the public who are not in the position to assess the quality of work including those performed by auditors.
If the rate of sub-standard assessment is very high, what were the remedial measures done? All auditors would claim in their audit report that they have complied with the auditing standards, the MIA own practice review results indicate a high non-compliant rates. More information should be share, for the sake of the public who consumes the services of MIA members, especially auditors.
Sir David Tweedie, the former Chairman of the International Accounting Standards Board was in KL earlier this week. His advice to the accountancy profession was "You serve public interest first, then your profession, client, employer and your self". I trust this advise would be upheld by MIA.
Let's see what would transpire at the MIA AGM and see whether public interest becomes the overriding principle in the decision to be made by a profession which has legal backing for its existence.