The Securities Commission Malaysia (SC), through its Audit Oversight Board (AOB), has suspended the audit firm Chengco PLT (CCO) for a period of two years following serious lapses in audit quality.
In its official statement, the SC confirmed the imposition of sanctions on five audit partners affiliated with Chengco. These individuals served as engagement partners and engagement quality control reviewers (EQCRs) in the audits of three public interest entities (PIEs). Among those sanctioned are Hong Thuan Boon and Yap Peng Boon, who face a two-year suspension. Three additional partners — Tan Wae Leng, Kong Tung Sam and Ng Kee Siang — have been barred from auditing or accepting PIEs and scheduled funds for one year.
The SC stated that the disciplinary action stemmed from the AOB’s findings of multiple breaches by Chengco, specifically its failure to comply with key provisions of the International Standards on Auditing, as adopted by the Malaysian Institute of Accountants. These breaches occurred in connection with audits performed on three PIEs.
The findings point to deficiencies in several fundamental audit areas. These include a failure to gather sufficient audit evidence in matters relating to bank borrowings, opening balances and prior year adjustments, going concern assumptions, other payables and accruals, revenue recognition, cost of sales, redeemable convertible preference shares and goodwill valuation. The AOB also noted recurring deficiencies concerning property development costs and fixed deposits.
Furthermore, the EQCR was found to have inadequately reviewed critical audit documentation, particularly in areas involving significant judgement and risk. This shortcoming was determined to have negatively impacted the overall quality of the audits in question.
The SC reaffirmed its commitment to maintaining high standards of audit quality and regulatory compliance, particularly in audits involving public interest entities.
-The Star
