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MIA and ACCA Provide Perspectives on Understanding Audit Quality 05/07/2013 News Press Releases Speeches Media Kit Videos C ontact Us e-News e-Updates Education & Development Professional Standard & Practice Surveillance & Enforcement

Kuala Lumpur, July 5 - Over the years, numerous financial and banking crises have seen stakeholders attempting to apportion guilt and liability in the aftermath of the meltdown. Given its role as assurance provider to businesses, the global auditing profession has not escaped unscathed from the blame game. It is thus necessary to rebuild its reputation and restore trust and credibility in audit and assurance services. The profession has identified efforts to enhance and communicate the quality and value of audit as a means to build credibility and progress. The Value of Quality Audit Forum , jointly organised by the Malaysian Institute of Accountants and the Association of C hartered C ertified Accountants (AC C A) today, brought together investors, businesses, auditors and regulatory bodies to facilitate open and constructive dialogue about audit quality issues in the broadest sense. "A quality audit will result in an audit opinion that should carry weight of impact and is reliable, hence instilling confident in the market. While there can be differing views on the definition of audit quality, it is clear that shareholders, company directors, audit committee members and regulators unanimously agree that quality external audit is fundamental to business and capital market confidence," remarked MIA Vice President Johan Idris during the forum. "The value of audit is deeply intertwined with its quality. Hence, a compromise on the quality of audit would also lead to a diminished benefit of audit. To date, there has been little guidance available to help businesses understand the quality of audit service provided to them. This lack of information has compounded the "audit expectation gap" in the business and investor communities. MIA and AC C A are committed to addressing this expectation gap by raising awareness of the benefits of audit and by educating stakeholders on the drivers of audit quality."

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"Audit quality is not easy to define and is affected by several factors, such as auditor training and skills, the evolution of global auditing standards, and adequate remuneration and resources and support, to name a few. Over recent years, there has been intense debate about what audit quality is and the difficulties of trying to measure it," he added further. Attesting to the importance of the issue, audit quality is also the topic of a recent consultation paper from the International Auditing and Assurance Standards Board (IAASB). Entitled A Framework for Audit Quality, it gives preparers, auditors, shareholders, regulators and others a shared understanding of audit quality. Speaking at the forum, Jennifer Lopez, head of AC C A Malaysia said: "What is crystal clear in IAASB's paper is that audit quality is not only about the auditor. Although auditors have to comply with stringent quality control standards, all the stakeholders in the corporate reporting supply chain have to pull together to maximise audit quality. AC C A strongly believes that the audit is not 'broken', but needs to have its value constantly tested against the demands and needs of users and beneficiaries of assurance." That said, the perspectives of audit quality clearly vary among stakeholders. Balancing these different views suggests that a quality audit involves an effective audit being performed efficiently, on a timely basis and for a reasonable fee. There is, however, subjectivity around the words 'effective', 'efficiently', 'timely' and 'reasonable'. To bridge the audit expectations gap, the forum sought to clarify misconceptions about the distinction between the role of financial statement preparers and auditors. "Frequently, we find that this distinction is blurred. Stakeholders and preparers expect auditors to be responsible for a company's financial statements. This perception must be corrected," added Johan. The C ompanies Act 1965 clearly provides that the directors are responsible for the preparation and fair presentation of the financial statements, while the duty of the auditors is to express an opinion on the financial statements. "Auditors conduct an audit on the financial statements to obtain reasonable assurance as to whether the financial statements as a whole are free from material misstatement," clarified Johan. He stated that it is important to note that the auditors are not supposed to be involved in the preparation of financial statements, which would otherwise affect their independence (as provided for in MIA's bylaws). Education will be the key to clarifying misconceptions and communicating the value of highquality audits. "It is vital to communicate the true value of audit and audit assurance services. Internally, MIA has set up a special task force which is responsible for creating awareness and communicating the true value and benefits of audits in order to raise the market perception of audit and assurance services," he added. These issues and perspectives were discussed at length at the forum by panellists; Nik Mohd Hasyudeen Yusoff, Executive C hairman of Audit Oversight Board (AOB); Paul C han, Founding Board Member and Deputy President of Malaysian Alliance of C orporate Director (MAC D); C hari Tvt, C FO of C elcom Axiata Bhd; and Sukanta Dutt, Managing Partner, Global Risk Management Infrastructure, Ernst & Young; moderated by AC C A's Head of Policy - Asia Pacific, C hiew C hun Wee.

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