Financial Notes
MANAGEMENT & ACCOUNTING
Audit Challenges in Malaysia Today
Teck Heang Lee and Azham Md. Ali
Due to the outbreak of financial scandals involving Bursa Malaysia listed companies Transmile and Megan Media, it may be argued that 2007 was a “challenging” year for the auditing profession in Malaysia. The “ripple” effect of the scandals caused turbulence in the auditing industry which spilled over to 2008 when the auditing profession was once again in the limelight, in the case of Oilcorp Berhad. he negative publicity connected with these financial scandals could very easily damage the essence of the auditing profession i.e. “public trust.” Barker (2002) claimed that society’s trust in a group of professional persons is the “heartbeat of that profession.” Hence, if such trust is betrayed, the professional function, too, is destroyed, since it would become useless. Abdul Wahab Jaafar Sidek (The Star, 19 July 2008) of the Minority Shareholder Watchdog Group (MSWG) opined that the recent accounting scandals in Malaysia not only adversely eroded trust of the shareholders and stakeholders in the affected companies but also affected the integrity of the capital market, the regulators and the auditing profession. So, as far as the auditing profession is concerned, if that is indeed the case, interested parties may need to be on the highest alert for as mentioned by Railborn and Schorg (2004), the presence of growing distrust in the auditing profession may well be “a cancer that is metastasising”. All in all, there is little room for doubt that the auditing profession in Malaysia is currently experiencing a period of serious turmoil. With fierce criticism against auditors, it is only fair to hear the voices of the auditors themselves. This may bring to light the problems faced by these professionals. Who knows? Such enlightenment could one day lead to amicable solutions sought by both auditors and non-auditors.
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ACCOUNTANTS TODAY • October 2008
Audit
Audit Challenges in Malaysia Today
Teck Heang Lee and Azham Md. Ali
Due to the outbreak of financial scandals involving Bursa Malaysia listed companies Transmile and Megan Media, it may be argued that 2007 was a “challenging” year for the auditing profession in Malaysia. The “ripple” effect of the scandals caused turbulence in the auditing industry which spilled over to 2008 when the auditing profession was once again in the limelight, in the case of Oilcorp Berhad. he negative publicity connected with these financial scandals could very easily damage the essence of the auditing profession i.e. “public trust.” Barker (2002) claimed that society’s trust in a group of professional persons is the “heartbeat of that profession.” Hence, if such trust is betrayed, the professional function, too, is destroyed, since it would become useless. Abdul Wahab Jaafar Sidek (The Star, 19 July 2008) of the Minority Shareholder Watchdog Group (MSWG) opined that the recent accounting scandals in Malaysia not only adversely eroded trust of the shareholders and stakeholders in the affected companies but also affected the integrity of the capital market, the regulators and the auditing profession. So, as far as the auditing profession is concerned, if that is indeed the case, interested parties may need to be on the highest alert for as mentioned by Railborn and Schorg (2004), the presence of growing distrust in the auditing profession may well be “a cancer that is metastasising”. All in all, there is little room for doubt that the auditing profession in Malaysia is currently experiencing a period of serious turmoil. With fierce criticism against auditors, it is only fair to hear the voices of the auditors themselves. This may bring to light the problems faced by these professionals. Who knows? Such enlightenment could one day lead to amicable solutions sought by both auditors and non-auditors.
T
24
ACCOUNTANTS TODAY • October 2008
Audit
References: Barker, P. (2002). Audit committees: solution to a crisis of trust? Accountancy Ireland. June. Volume 34. No. 3. The Star (2008).The auditing profession – way for ward. The Star. 19 July 2008. Available at h t t p : / / b i z . t h e s t a r. c o m . m y / b i z w e e k / s t o r y. a s p ? f i l e = / 2 0 0 8 / 7 / 1 9 / b i z w e e k / 1622049&sec=bizweek 19 July. Accessed on 1 August 2008. Railborn, C & Schorg, C. (2004). The SarbanesOxley Act of 2002: An analysis of comments on the accounting-related provisions. Journal of Business and Management. Vol. 10. No.1. pp.1-13. The writers can be contacted leeth@mail.utar.edu.my (Teck Heang Lee) at 26 ACCOUNTANTS TODAY • October 2008