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INTRODUCTION
In 2004, the International Auditing and Assurance Standards Board (“IAASB”) undertook a comprehensive endeavor to further enhance and clarify the existing ISAs. This journey came to its pinnacle point in 2009, when finally the Clarity Project was completed with 36 clarified auditing standards aimed not only to improve understandability of the ISAs but also to encourage consistent application and elevate the quality of audits performed, which have come under severe scrutiny over the recent years.

INTRODUCTION
The Malaysian Accounting Standards Board (“MASB”) has, on 14 February 2014, issued a new financial reporting framework for private entities, namely the Malaysian Private Entities Reporting Standard (“MPERS”). All private entities shall apply the MPERS for its financial statements with reporting periods beginning on or after 1 January 2016. An earlier application is permitted. Private entities are those non-public interest entities, such as non-listed companies. The MPERS is closely aligned with IFRS for SMEs issued by the International Accounting Standards Board (“IASB”) in July 2009. The 2015 Amendments were effective for its financial statements with reporting periods beginning on or after 1 January 2017.

INTRODUCTION

The new Practice Review (PR) Framework was issued by the Malaysian Institute of Accountants (MIA) and came into effect on 1 July 2024. The PR program is a quality assurance program established under Section B250: Quality Assurance and Practice Review of MIA
By-Laws, first established in 2003.

The key changes brought about by the 2024 revision include the introduction of a single review, annual submission of the Remedial Action Plan (RAP) over a 2-year period, the imposition of 2 Orders by the Practice Review Committee for Type 3 ratings and engagement peer reviews & enrolment in a Quality Assurance Program (QAP).

INTRODUCTION
The corner stone of an efficient and effective audit is the planning stage, which unfortunately have been overlooked by public practitioners over the years. This had amongst others, resulted in the inability to identify key risk areas and issues early in the audit, poor prioritization of significant audit areas and under/over auditing. The Clarity Project had “revitalised” the standards relating to audit planning and risk assessment so as to emphasize the role of planning and risk in the audit process by enhancing the requirements, including related documentation.

Increased scrutiny by regulators and professional bodies on public accounting practices has also elevated the importance of planning and risk assessment as a crucial element of the audit approach. The recent Practice Review Report 2024 issued by the MIA had also identified poor or lacking fraud risk assessment as a major deficiency in their findings.

One of the standards that saw significant changes when the Clarified Standards were issued is ISA 600 on the auditor’s responsibility for group financial statements, including considerations when working with components and component auditors. Many best practices in the past relating to group audits have now become explicit requirements as a result of the change to this standard. The 2023 revised ISA 600 now places enhanced responsibility on the group engagement team/partner; from accepting a group audit engagement including dealing with restrictions placed on the group auditor, group-wide risk assessment & planning, determination & scoping of components, obtaining sufficient & appropriate audit evidence and group audit documentation.

Aside from the manufacturing sector, the key industries in Malaysia consist of construction, and property development activities. As these are specialised industries, the accounting requirements set out by approved accounting standards is unique and requires proper understanding to ensure that key transactions and activities in these three sectors are properly accounted for. Being specialised industries, the audit of entities in these two sectors are also unique, which requires properly designed audit procedures to address key concerns arising from these activities and appropriate audit evidence that will enable the auditor to express an opinion given the circumstances.

Auditors perform various types of engagements with varying performance requirements and reporting responsibilities. While some engagements provide assurance, some do not – they are more of a review and/or reporting of factual findings. Despite the difference in the scope of work and reports issued, users of these reports place some form of reliance or reference when using these reports for making informed decisions or as required by certain regulators. With the proposed revisions to the audit exemption threshold looming, the need for statutory audits of financial statements amongst SMEs in Malaysia would likely reduce and would see a different scope of work and reporting required for non-statutory professional services from accounting/audit firms. Even though audits of financial statements will still be important in the corporate reporting landscape, other forms of engagements would likely gain more traction. As such, auditors should gain competency in other types of engagements such as compilations and agreed-upon procedures, while still having a comprehensive understanding and application know-how on reporting audit opinions; especially modified audit opinions.