Are we serious about sustainability matters?

How do you feel when there is no running water at your home while it has been raining regularly lately? What more when you are living near the equator where rainfall is aplenty? This is certainly a mystery to those who are not that educated about how we are living our lives and how much we care about the surroundings which we are living in.

Those who are living around the Klang-Valley would certainly appreciate this kind of question which is bothering my mind. Can we have rainfall and drought at the same time? Or it is simply a matter of mismanagement on the part of people who are responsible to manage our water resources. Have we, the society, been so indifferent so much so that those who are supposed to do the work (and get paid, not free ya) are also indifferent about the quality of their performance?

Perhaps one of the indicators of this indifference attitude is when we observe how Muslims, generally, perform their ablution, a practice of washing certain parts of their bodies with water, before performing prayers. Notwithstanding that Islam requires Muslims not to be wasteful, so many of them would use unnecessary amount of water. Some even leave the pipes running while they are folding the sleeve of their shirts before performing ablution. Here, we could observe the disconnect between the teachings of Islam and the practice of Muslims.

If this is extended to the society at large, we can see how our daily routines result in the waste of resources. What more when it involves things which provide us with wealth. For example, property development is a hot thing around Klang-Valley. Definitely this is a very profitable venture resulting in developers building houses on high grounds including those with high slopes. Not only our water catchment areas are slowly being encroached, hill slope failures do occur from time to time. It will be on the front pages of our newspapers for a while but when the incidence is forgotten, business will be carried out as usual.

I am not going to write about governance matters as it warrant an article on its own. However, sufficient to be mentioned here that in the absence of good governance, don't expect public interests to be the highest priority of those managing our water resources. So if we don't bother and do not indicate our interest about sustainability issues, who should we blame for any misgiving which we are facing?

Where do we go from here?  

Is the MIA’s latest report a clear snapshot of audit quality in Malaysia?

By Errol Oh

IT’S easy to be sceptical about self-assessment exercises. How many people can be wholly critical and objective when evaluating what they see in the mirror? And surely fewer still are secure and honest enough to share the full results with the rest of the world.

So how should we view the Practice Review Report released this week by theMalaysian Institute of Accountant (MIA)?

The tricky element here is that the institute is a regulator as well as a professional body. Is the report an authoritative, warts-and-all survey of the profession that the institute oversees, or is it something that promotes the interests of MIA members?

Then again, these objectives don’t have to be mutually exclusive. When steps are taken to elevate the standards of the profession – starting with identification of problems – the accountants have much to gain.

In his message in the report, MIA president Johan Idris (who also chairs the institute’s Practice Review Committee) wrote, “The findings of practice review have significant educational content and are beneficial to practitioners. They serve to guide our practitioners in training their staff and alerting them to many pitfalls that may derail them in the course of carrying out the policies and procedures of the firm.”

The institute’s media release expanded this point: “This quality assessment programme will drive consistency and raise the bar on audit quality, thereby underpinning public confidence in the accountancy profession.”

The MIA’s practice review applies to all member firms that conducts audits. Practice review refers to the evaluation of the work performed by the auditors and of these firms’ internal quality controls.

The institute’s practice review programme began in 2004. The first report came out in 2009 and it was for 2004 to 2008. The latest Practice Review Report covers the period 2009 to 2013. Of the 1,363 audit firms registered with the MIA, 639 (47%) had been reviewed as at June last year. Here are some noteworthy details from the new report:

Rating the auditors

The review reports are assigned ratings. Type 1 and Type 2 are labelled ‘Satisfactory’ and ‘Assurance to be provided’ respectively.

Both ratings denote a pass in practice review.

But when a firm gets a Type 3 rating, that means a follow-up review is required.

The report hasn’t been glowing so far. Only 8% of the firms reviewed have been rated Type 1. That’s about 50 companies. Type 2 firms make up the largest group, with 48%.

The rest (44%) are, of course, in the Type 3 category. After follow-up reviews of the Type 3 cases, the MIA found that half of them had improved on their audit quality and thus passed practice review.

The others would be referred to the institute’s Investigation Committee.

The survey says

In August 2012, a survey was conducted to get feedback that may be useful if there’s a revision of the practice review framework. This involved responses from 60 practitioners whose firms were reviewed and for which final reports were issued.

The results are rather confusing. For example, 90% of the respondents say the Practice Review Programme is effective in enhancing their firms’ audit quality subsequent to the review, and 80% consider the practice review report a useful reference material for staff training purposes.

Yet, almost half of the respondents agreed that the same practice review report is fault-finding.

In addition, only 43% say the practice review findings are useful in improving the audit quality of their firms. Another 52% says the findings are “somewhat useful”.

And you know for sure that accountants are the respondents when 62% deem the practice review fee as high.

A new approach

In January this year, the Practice Review Programme adopted the risk-based approach in selecting firms for practice review. The MIA is sending out risk assessment questionnaires to the firms so that it can determine the level of risk associated with each firm.

Another new initiative is to hold dialogue sessions with practitioners to create awareness on issues relating to the implementation of the revised practice review framework. These sessions double up as an avenue to address the practitioners’ grouses about practice review.

What they found

Chief among the report’s general observations is this: “The documentation of working papers is still a key factor which is not taken seriously by some practitioners.

“Our practice reviewers find that inadequate attention is given to writing down audit procedures performed, the findings made by the auditors with respect to the sufficiency and appropriateness of the audit evidence gathered and the conclusions reached by the auditor.”

Executive editor Errol Oh is waiting for the Audit Oversight Board’s annual report 2013. That should be more interesting when read together with the MIA’s Practice Review Report.

Source: The Star Online http://www.thestar.com.my/Business/Business-News/2014/03/29/Auditing-the-auditors/

MIA: Audit firms need to improve documentation process

PETALING JAYA: Audit firms should take stringent steps to improve on the documentation of audit procedures performed and the gathering of sufficient audit evidence to establish a solid and firm basis to support their audit opinions, according to the Malaysian Institute of Accountants (MIA).

In its Practice Review Report, the accountancy body found that in many firms, the partner’s involvement in the audit at the planning stage was not evident.

It also found that there were no formal policies and procedures on professional independence requirements, nor was there formal documentation of the procedures performed during the evaluation and acceptance or continuation of prospective and existing clients.

On human resources, many member firms did not maintain record on professional development for staff or documentation on performance evaluation conducted on the employees.

Other common findings it came across were a lack of audit planning documentation, no indication of any documentation to show the auditor had considered the risks of material misstatements in the financial statements due to fraud or error.

Customised audit programme was also not used in the execution of audit engagements, and if audit programme was used, there was no cross-reference to the respective detailed audit working papers where work is performed.

There was no working paper prepared to summarise the significant audit findings that form the basis for the audit opinion. “Such working papers should document the firm’s decision on any major issues of an engagement to support the audit opinion expressed,” the report said.

President Johan Idris said in a note in the report that firms were encouraged to comply strictly with procedures and international standards on auditing in order to mitigate risks.

He added that Malaysia had been resilient in the face of tidal waves of uncertainty in times when many Western economies faced a financial and currency crisis. “Malaysia’s diligent manning of her venerable financial institutions and the establishment of a well-integrated regulatory eco-system has contributed to our resilient economy.”

The findings are derived from MIA’s ongoing efforts through practice review, mainly conducted on small and medium size member firms.

The report can be downloaded here.

Source: The Star Online 28-3-2014 

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