2007 marked a critical year for the auditing profession in Malaysia.

The high level of negative publicity

connected with the financial scandals of Transmile and Megan Media has left little doubt that the auditing
profession in Malaysia is facing an accusation crisis. However, what happened in 2007 may only be the tip
of the iceberg because a few months after the Transmile and Megan Media cases became public
knowledge, another similar case occurred. Recently, Multi-Code Electronic Industries Bhd lodged a police
report against its former Managing Director, Gordon Toh Chun Toh, accusing him of misappropriating
company funds totalling RM36 million .

The role of auditors from the historical perspective

Auditing is a social function . Hence, the role of auditors will change according to the needs and demands
of society .

Prior to 1840
Auditing in the form of ancient checking activities was found in the ancient civilisations of China Egypt
and Greece . The ancient checking activities found in Greece appear to be closest to present-day auditing.
The existence of such activities can be proven by Aristotle’s quotation as follows:
Ten … and ten … are chosen by lot. Every single public officer must account to them. They have sole
control over those subject to … they place their findings before the courts. Anyone against whom they
prove embezzlement is convicted and fined by the court ten times the sum discovered stolen. Anyone
whom the court on … .evidence convicts of corruption, is also fined ten times the amount of bribe. If he is
found guilty of administrative error, they assess the sum involved, and he is fined that amount provided in
this case that he pays it within nine months; otherwise the fine is doubled.
Similar kinds of checking activities were also found in the ancient Exchequer of England. When the
Exchequer was established in England during the reign of Henry I , special audit officers were appointed to
make sure that state revenue and expenditure transactions were properly accounted for .

1960s to 1990s
The world economy continued to grow between the 1960s and 1990s. This period marked an important
development in technological advancement and the size and complexity of companies. According to
Carmichael , auditors in the 1970s played an important role in enhancing the credibility of financial
information and furthering the operations of an effective capital market. A similar description on the
auditor’s role was found in The New York Times on 6 April 1975 .

The present role of auditors

The collapse of Enron and Worldcom, together with their auditor, Arthur Anderson, in the 2000s put the
audit profession in the world under scrutiny .

The Sarbanes-Oxley Act

In response to the fall of Enron the Sarbanes-Oxley Act was implemented.

Include a statement in the Corporations

Require auditors to declare to the Board of Directors that their

independence is maintained.
Prohibit special relationships between the auditor and client.
Establish an auditor independence supervisory board.

Practice Review Programme and Public Oversight Board

The MIA launched the Practice Review Programme on 30 December 2002. The objective of this
programme is to serve as a proactive measure aimed at ensuring all audit firms operate at least to the
required standard .

The role of auditors in the future

It is rather difficult to predict the role of auditors in the future; however, it is generally believed that the
characteristics of auditors of tomorrow will be similar to those of today with respect to independence,
moral character, judgment, imagination, tact and willingness to accept responsibility . To enhance the
value of the auditing function, the auditors of tomorrow have to be always ready to live up to the
expectations of the public, maintain high professionalism, and uphold the good reputation of the auditing
profession.

Possible Solutions
Given the high level of litigation and accusation against auditors, it is believed that the public has a poor
understanding of the actual role of auditors. Research found that the public has a misperception on the role
of auditors in relation to their duties, for example, in the prevention and detection of fraud and errors, and
in guaranteeing complete accuracy of financial statements.
This indicates that the public’s perception of the present role of auditors remains at the «traditional
conformance» stage. In other words, the public has failed to recognise the shift in the auditing paradigm.

Conclusion
The role of auditors is highly controversial and this issue has been one of the most frequently debated areas
amongst auditors, politicians, media, regulators and the public.