Stakeholders back EAR, study shows
KUALA LUMPUR: Most stakeholders prefer the new enhanced auditors’ report (EAR), a key tool in navigating complex financial reports, as they acknowledge the improvements that the new standards bring.
This was revealed by a joint study by the Audit Oversight Board (AOB) of the Securities Commission (SC), the Malaysian Institute of Accountants (MIA) and the Association of Chartered Certified Accountants (ACCA) on the 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 the study were based on the review of EARs and annual reports of 190 companies listed on Bursa Malaysia for the financial period ended December 31 2016, as well as views from more than 170 audit committee members and investors.
AOB, MIA and ACCA said the EAR had spurred constructive behavioural changes within the financial reporting ecosystem and improved engagement between investors and local companies.
This followed early pre-implementation efforts, such as SC’s establishment of the steering committee comprising key individuals from the regulatory, accounting and auditing professions, as well as public-listed companies, in June 2015 to identify implementation issues and risks, as well as to develop strategies and provide guidance on related issues and risks identified.
AOB, MIA and ACCA said the report placed greater prominence on the auditors’ opinion and a key change introduced via EAR was the disclosure of Key Audit Matters, resulting in a more transparent and informative auditors’ report.
AOB executive officer Alex Ooi Thiam Poh said EAR was a game-changer as it affected all stakeholders in the financial reporting system, each with 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 auditors to be more transparent in communicating their work and insights had driven positive change throughout the financial reporting supply chain in relation to the overall perception and processes.
EAR is a gamechanger as it affects all stakeholders in the financial reporting system.
ALEX OOI THIAM POH Audit Oversight Board executive officer