The Securities Commission Malaysia’s (SC) Audit Oversight Board has prohibited Charles Lee King Long and Gan Kim Guan, partners of Kreston John & Gan from accepting and auditing any public interest entities or scheduling funds for 12 months effective from 3 August 2022.
In addition to the prohibition, the AOB has also imposed fines of RM35,000 on Lee and RM17,500 on Gan. The AOB’s findings of breaches and sanctions on Lee and Gan for their failure to comply with the relevant International Standards on Auditing (ISA) when auditing a PIE were made after the due process accorded to them including the opportunity for them to appeal against the SC’s decision.
The SC claimed that as an engagement partner for a PIE client, Lee had wrongfully assessed the PIE’s reversion from the Malaysian Financial Reporting Standards accounting framework to Financial Reporting Standards for the financial year ended 31 December 2016. The reversion was found to be inappropriate and inconsistent with the implementation of MFRS by the Malaysian Accounting Standards Board.
Lee had also failed to perform audit procedures on various elements of accounting estimates relating to property development costs and also failed to obtain appropriate audit evidence to support the conclusions reached. In many instances, the documentation in support of the conclusions reached by Lee was found to be either incomplete or inadequate.
Gan, the Engagement Quality Control Reviewer (EQCR), had failed to sufficiently review the selected audit documentation relating to significant judgments and significant risk areas of the engagement and the basis of the conclusions reached. This was apparent in the application of the accounting framework, property development costs, trade receivables, revenue, and going concerned.
The AOB views this seriously and reiterates the crucial role of EQCR in safeguarding the integrity of the audit quality and control process.