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AUDIT OVERSIGHT BOARD

AUDIT OVERSIGHT BOARD. AMIN IDRIS AB RASIP EX02397. Establishment of the AOB as a means to strengthen the independent oversight of auditors. To have an oversight system independent of auditors To ensure only fit and proper persons allowed to audit financial statements

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AUDIT OVERSIGHT BOARD

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  1. AUDIT OVERSIGHT BOARD AMIN IDRIS AB RASIP EX02397

  2. Establishment of the AOB as a means to strengthen the independent oversight of auditors • To have an oversight system independent of auditors • To ensure only fit and proper persons allowed to audit financial statements • To modernize appeal process • (currently appeal made to YDP Agong) • To have in place a broad range of sanctions

  3. Why is there a need to establish theAudit Oversight Board (AOB)? • The assurance function performed by external auditors on company's financial statements has long played an important role in the corporate governance framework. • The collapse of large firms and news of fraud involving globally recognised firms over the years have raised concerns regarding the credibility of audited financial statements.

  4. Accounting irregularities demonstrated lack of credibility, integrity and independence • "Balance sheets were over Inflated by $1billion, and over reliance on Information submitted by clients“ SATYOM • "Balance sheets were over inflated by $34 million, and over reliance on information submitted by clients" ORIENTAL CENTURY • "Conflict of interest as it was involved in both consulting and auditing for Enron and Arthur Anderson“ ENRON • "Auditors defrauded clients by approving sham audits as PCAOB does not require auditors of fund managers and brokerages to be inspected- such auditors not subject to f it and proper criteriaMadoff • Madoff • Enron • "Auditors defrauded clients by approving sham audits as PCAOB does not require auditors of fund managers and brokerages to be • inspected- such auditors not subject to f it and proper

  5. No different on the local front • Energro • RM64m fictitious export sales (FY 2003) • Welli Multi • 1 Provide misleading statement to Bursa • 1 Reported fictitious revenue increased to RM86m (3Q06) • Megan Media • Submitting false revenue of RM1b in financial statements

  6. Chronology of events • September to October 2007 Budget 2008 announcement by YAB PM- "Government will establish a Public Companies Accounting Oversight Board under the auspices of the SC" Consultations held with industry groups and regulators • January to April 2008 SC establishes High Level Task Force that met 6 times to deliberate on appropriate audit oversight framework for Malaysia • December 2009 Securities Commission (Amendment) Bill 2009 which contains the establishment and functions of the AOB passed in both Houses of Parliament • 1 April 2010 Part lilA Securities Commission (Amendment) Act 2010 came into force

  7. AOB Comes Into Action • 1st April 2010 • the Audit Oversight Board (AOB) to provide independent audit for public interest entities and to ensure our regulatory framework for auditors is on par with international standards.

  8. Functions of AOB - Registration • • Registration process will encompass individual auditors and audit firms of PIEs (Public interest entity) to ensure every party involved in the auditing process is fit and proper • • Non-registration is an offence • • Introduction of transparent registration eligibility criteria in section 31P SCA and AOB Handbook for Registration • • For auditors found not to be fit and proper,suspension,revocation or non-registration will be imposed • • Any person aggrieved may file appeal to SC • *Registration is done on an annual basis

  9. Application Procedures and Fees Form 1(Individual auditor) Form 2 (Audit Firm) To submit Forms manually in print and soft copies (disk or CD-rom) To attach documents for verification RMS,OOO (annual) per individual auditor payable at the time of receiving the notification of registration

  10. What are the procedures for application? • 6.02 Upon satisfying relevant criteria as set out in Part lilA of the SCA and Chapter 3 or 4 , you must fill the relevant forms outlined in Table 1 to apply for registration under section 310 of the SCA. • • 6.04 You must also submit the registration at the point of receiving your notification of registration in the form of bank drafts made payable to the "Securities Commission" and sent to the address stated in Form 1 and Form 2.

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