Implications of the Audit Oversight Board: External Auditors' Perspective

Abstract

The purpose of Audit Oversight Board (AOB) is to oversee the external auditors who audit the listed companies. Its establishment is expected to improve the quality of the audited financial statements and to increase the confidence of the public on the quality of the services provided by the auditors. This study explores how the establishment of audit oversight board affects the auditors in Malaysia. As the study is exploratory in nature with limited studies being carried out on AOB, face-to-face interviews were conducted with the external auditors. The findings show that the establishment of AOB affects the job of external auditors, especially on the documentation and training costs, which vary across audit firms of different sizes. There are opinions that the increased pressure on the external auditors is not solely due to the establishment of AOB, but it is also due to the revised accounting standards and other regulations. The study also finds that the external auditors’ reliance on the internal auditors is not affected by the establishment of AOB. In addition, regardless of whether the internal audit department is in-house or outsourced, it will not affect the reliance of external auditors on the internal auditors work.