KUALA LUMPUR: The Securities Commission Malaysia’s (SC) Audit Oversight Board (AOB) has found that major audit firms demonstrated strong ethical behaviour, consultation practices, compliance and professional challenge, indicating a strong quality-oriented culture across the firms.
In its Audit Firm Culture Assessment survey, which covered 4,092 respondents across all nine major audit firms, the AOB said personnel are more likely to adhere to professional and regulatory requirements, seek timely guidance on complex matters, and make well-informed judgments, contributing to reduced risk of audit deficiencies.
According to the AOB’s Annual Inspection Report (AIR) 2025 released yesterday, the survey found that firms must do more to address workforce-related challenges, particularly workload pressures, staffing, remuneration, talent retention among younger professionals, and inclusiveness and respectful communication within teams.
As at Dec 31, 2025, 41 audit firms and 397 individual auditors were regulated by the AOB.
In 2025, the AOB inspected 14 audit firms, 40 individual auditors and 41 audit engagements across a range of industries and risk areas.
It said encouraging progress in audit quality, with the proportion of audit engagements requiring significant improvements declining from 46 per cent in 2024 to 27 per cent in 2025.
However, recurring deficiencies were still observed in areas such as accounting estimates, sampling, internal control testing and revenue recognition.
Meanwhile, the AIR report said that several major audit firms have begun deploying artificial intelligence (AI)-powered tools to support document analysis, compliance assessments and audit documentation.
As firms advance their digital capabilities, the AOB emphasised the importance of effective technology risk management and appropriate governance over the use of technology.
The AOB encouraged audit firms to continue strengthening their governance, culture, monitoring and remediation processes, while investing in talent and technology.
It also said high-quality audits remain critical to maintaining confidence in audited financial statements and supporting the integrity of Malaysia’s capital market.
For 2026, the AOB said it would prioritise strengthening audit quality through targeted reviews at both the firm and engagement levels, alongside enhanced capacity-building initiatives.
At the firm level, it said its International Standard on Quality Management (ISQM) reviews would be targeted based on the specific risks posed by each firm and assessment of the firm’s governance framework, culture, information technology (IT) risk and monitoring function.
The AIB will also expand its Audit Firm Culture Assessment survey to include the remaining firms that were not covered in 2025.
“At the engagement level, thematic inspections will focus on public interest entities (PIEs) with higher-risk characteristics, such as complex accounting treatments and areas requiring heightened scepticism, with greater emphasis on IT audits.
“The AOB would continue to issue AOB Alerts on developing topics and collaborate with professional bodies and industry players to deliver training programmes aimed at improving audit quality,” it added. – BERNAMA
