THE Securities Commission Malaysia’s Audit Oversight Board (AOB) has highlighted the need for sustained efforts to improve audit quality, while acknowledging ongoing initiatives by audit firms to enhance governance, transparency and quality management practices.
In its Annual Inspection Report 2025 released on Thursday, the AOB said 41 audit firms and 397 individual auditors were under its regulatory oversight as at Dec 31, 2025.
During 2025, the AOB inspected 14 audit firms, 40 individual auditors and 41 audit engagements covering various industries and risk areas.
The report showed encouraging improvements in audit quality, with the proportion of audit engagements requiring significant improvements declining to 27 per cent in 2025 from 46 per cent in 2024.
However, the AOB noted that recurring deficiencies remained in several key areas, including accounting estimates, audit sampling, internal control testing and revenue recognition.
The regulator also conducted its Audit Firm Culture Assessment, involving 4,092 respondents across all nine Major Audit Firms, which found strong practices in ethical behaviour, consultation, compliance and professional challenge.
However, the assessment highlighted workforce-related challenges faced by firms, including workload pressures, staffing constraints, remuneration concerns and talent retention issues.
The report further noted that several Major Audit Firms have started deploying artificial intelligence (AI)-powered tools to support document analysis, compliance assessments and audit documentation.
As audit firms continue expanding their digital capabilities, the AOB stressed the importance of effective technology risk management and strong governance frameworks to ensure responsible use of emerging technologies.
The AOB encouraged audit firms to continue strengthening governance structures, workplace culture, monitoring systems and remediation processes, while investing in talent development and technological capabilities.
High-quality audits remain essential in maintaining confidence in audited financial statements and supporting the integrity and stability of Malaysia’s capital market. - August 6, 2026
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