By the MIA Practice Review Department
Effective date of revised Practice Review Framework: 1 July 2024
Practice review plays an integral part in the MIA’s quest to continue refining its approach to regulate the audit profession, especially the method by which it inspects audit, to determine the problems that auditors need to fix. As such, the revision of the Practice Review (PR) Framework will take effect from 1 July 2024.
MIA first revised the Practice Review (PR) framework on 1 July 2017 with the objective of expediting the process of instituting remedial actions while reinforcing the need for our practitioners to uphold a high level of audit quality. In 2017’s revision, besides the introduction of Type 4 rating, practitioners of Type 3 firms are compelled to submit a well structured remedial action plan (RAP) for Practice Review Committee (PRC) approval prior to implementation of the RAP. Monitoring reviews shall be conducted on audit firms (AF) rated as Type 3 after three (3) months upon the approval of RAP by the PRC.
Since approximately six (6) years after the last revision of the PR Framework in 2017, we observed that while some of the firms took their responsibility very seriously and worked closely with the practice reviewers to get insights into various type of remedial efforts that would address the issues identified, there are still audit firms failing to effectively remedy their weaknesses in the 2nd monitoring review. Factors include insufficient timeline (i.e. the conduct of monitoring review three (3) months after RAP approval) to fully rectify all the weaknesses identified and minimal support available within the audit industry to seek internal advice particularly when complex matters arise.
The following are some of the key changes to the current PR framework:
Elaboration of the changes to the Type 3 rating
Two types of ratings for Type 3 firms – Type 3A and Type 3B have been introduced based on the level of deficiencies identified in the practice review.
- The following is the definition of Type 3 – Remedial Action Plan Required as stated in Paragraph 35 (c) of Appendix VI of MIA By- Laws
“Where it considers that the audit firm has some significant weaknesses which were pervasive in complying with applicable professional standards, legal and regulatory requirements during the course of carrying out the work of the engagements reviewed in which the work performed and evidence obtained thereon were inadequate and/or inappropriate. Thus the basis needed to form the opinions expressed on those engagements was not adequately supported.”
In such a case, the audit firm shall be required to:
- submit their remedial action plan annually for a period of 24 months; and
- the PRC shall also require the practitioner(s) concerned to attend relevant training and educational seminars and other relevant rectification order as determined by the PRC.
A complaint shall be lodged with the Registrar on the audit firm which fails the subsequent review conducted after the 24 months.
- The two (2) types of ratings and examples of relevant actions required from the audit firm may include the following:
In conclusion, audit firms are reminded to take heed of the effective date of the revised Practice Review Framework which is 1 July 2024.