AUD 689

CURRENT ISSUES

NUR HANANI MOHAMED DIN (2015856836)

WAN RABIA’TUL A’DAWIYAH BT WAN ABDULLAH (2015839714)
 MONEY LAUNDERING
Definition: The process used to disguise the source of
money or assets derived from criminal activity.

It involves certain crimes, such as:

• Extortion
• Inside trading
• Drug trafficking
• Illegal gambling
Which are "dirty" and needs to be "cleaned" to appear to
have been derived from legal activities, so that banks and
other financial institutions will deal with it without
suspicion.
• Stages in Money Laundering:

Placement: involves placing the proceeds of crime in the financial

system

Layering: involves converting the proceeds of crime into another

form and creating complex layers of financial transactions to disguise
the audit trail and the source and ownership of funds

Integration: involves placing the laundered proceeds back in the

economy under a veil of legitimacy
LEGAL ACTION:
The police would not
compromise when taking
action on those who
allegedly participated in
illegal activities such as
misusing bank accounts to
transact illicit payments

“If there are no witnesses brave

enough to provide information
or if there is insufficient
evidence to press criminal
charges against the suspects, the
police will not be lenient in
using Poca (Prevention of
Crime Act 1959)”
CURRENT ISSUE:

Boy Iman was arrested for

alleged housing scam that
cost victim approximately
RM6.2 million in losses

A bungalow measuring
1,650 sq was being offered
for RM60,000. After the
payment was made, the
actual construction did not
take place
 KEY AUDIT MATTERS (KAM)
Definition:
• Those matters that, in the auditor’s professional judgement,
were of most significance in the audit of the financial
statements of the current period.

• The concept of significant in the auditor’s professional

judgement, the ISA says, “recognizes that an audit is risk-
based”, and areas of significant auditor attention “often
relate to areas of complexity and significant management
judgement in the financial statements”.
How to determine matters of most significance?
The following factors may be considered to determine significance:

• Matters determined to be important to the users of the

financial statements
• Where management’s selection of an accounting policy
was complex or involved subjectivity
• Whether there are any misstatements identified that
related to the matter
• Matters which required the most audit effort
• Areas affected by a severe control deficiency
What to avoid?
A KAM is not any of the following:

• A substitute for disclosures in the financial

statements
• A substitute for a modified opinion
• A substitute for reporting a material uncertainty
related to going concern
• An implication that a matter has not been
resolved by the auditor.
 AUDIT OVERSIGHT BOARD
The Audit Oversight Board (“AOB”) is established under Part IIIA of the
Securities Commission Act Malaysia 1993 (“SCMA”) which came into force
on 1 April 2010 to promote and develop an effective audit oversight
framework and to promote confidence in the quality and reliability of
audited financial statements in Malaysia.

AOB is a mean to strengthen the independent OBJECTIVE

oversight of auditors
-to have an oversight system independent of
auditors
-to ensure only fit and proper person allowed
to audit the financial statement
-to modernise appeal process
-to have in place a broad range of sections
- To promote and develop effective and
robust audit oversight framework in Malaysia
- To promote confidence in the quality and
reliability of audited financial statement in
Malaysia
- To regulate auditors of Public Interest Entities
(PIE)
 FUNCTIONS
1. REGISTRATIONS
• AOB is responsible for the
registration of auditors of
public interest entities
• It is an offense if the auditor
and audit firm if the fail to
register
• The registration of auditors of
public interest entities or
schedule funds would ensure
that only fit and proper
auditors are involved in
auditing the financial
statements of public interest
entities or schedule funds
2. INSPECTIONS
• Conduct inspections and
monitoring programs on auditors
to assess the degree of
compliance with auditing and
ethical standards.
• The inspection may be done at a
firm level or an engagement level
or both.
• The AOB adopts a risk based
approach and conducts regular
inspections annually on audit firms
which have more than 10 partners
and audit more than 40 PIEs
• Regular inspections on mid-tier
audit firms and sole proprietors are
completed within a pre-
determined inspection cycle.
 4. SANCTIONS

• Sanction is a threatened
penalty for disobeying a law or
a rule
3. INQUIRY
• In determining the type of
sanction that is imposed on any
• Conducted when there is
contravention or breach, AOB
a reason to believe that
takes into account the nature
there is a misconduct,
and seriousness of the offences.
breach of the provision of
act, written notice and
Examples of sanctions: Reprimand,
guidelines.
requiring professional education
• The inquiries will be
to be undertaken, assigning a
conducted by the Inquiry
reviewer to oversee an audit that
Officers
is undertaken by the auditor
concerned and financial penalty
of not exceeding RM500,000;
 5. STANDARD SETTINGS

• Include the setting of auditing, quality control, ethics,

independence and other standards relating to the
preparation of audited financial statements.
• Compliance with established auditing standard is an
integral aspects in ensuring reliability of the company’s
audited financial statement
• The MIA adopts all IFAC Standard, the AOB will have
the power to direct MIA to establish, amend, modify or
alter its prescribed standards if need arises.
 TRANSNATIONAL AUDIT

• Transnational audit means an audit of financial statements which

are or may be relied upon outside the audited entity’s home
jurisdiction for purposes of significant lending, investment or
regulatory decisions;

• This will include audits of all financial statements of companies

with listed equity or debt and other public interest entities which
attract particular public attention because of their size, products
or services provided.
EXAMPLES OF TRANSNATIONAL AUDIT
The audit of a private company in U.S. raising debt finance in
Canada
This would qualify as a transnational audit as it is reasonable to expect that the
financial statements of the company would be used across national borders in
obtaining the debt financing.

The audit of the project financial statements for the construction of an electrical
generation facility in Nigeria using funds loaned by the World Bank
As it can be clearly demonstrated that the financial statements are being used
outside of the country where the facility is based for purposes of significant
lending, investment or regulatory decisions, the audit would be considered a
transnational audit.