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The Audit Oversight Board (AOB) was established in Malaysia on 1 April 2010 with the aim of enhancing the

quality and reliability of audited financial statements of public interest entities in Malaysia through effective regulation and oversight of auditors. The AOB is not a statutory body, but since it was established under the auspices of the Securities Commission (SC), the SC would remain accountable for all of the AOB's acts and omissions. The AOB would also work closely with all regulatory agencies to ensure a holistic regulatory framework for auditors in Malaysia. Therefore, in this essay I will elaborate the way that the AOB affect the quality audit performed by companies in Malaysia. The AOB has taken its first step, by registering individual auditors and audit firms that audits the financial statements of a public interest entity (PIE). After the registration stage, the AOB would knock on the auditors doors to make inspections. This inspection process allows AOB officers to have the power to access working papers, books and accounts. Apart from inspections, AOB officers would also have the necessary powers to conduct inquiries and impose proportionate sanctions against auditors. Other functions would include the setting of auditing, quality control, ethics, independence and other standards relating to the preparation of audited financial statements. The next phase is audit inspection in line with international best practices, AOBs audit inspection would cover two key components. First is the inspection of audit firms compliance with quality control elements as outlined in the International Standard on Quality Control (ISQC1). The elements are; i) leadership responsibilities for quality within the firm, ii) relevant ethical requirements including independence, iii) acceptance and continuance of client relationships and specific engagements, iv) human resources, v) engagement performance and vi) monitoring by firms of their quality control system and their application. The second component of the inspection is engagement review. Sample audit engagements would be selected based on certain risk profiling and assessment would be made on how far audit firms have ensured compliance with auditing standards. The AOB will also monitor financial statements issued by public interest entities and identify factors that may trigger further actions. This includes engaging with the auditors and conducting reviews of particular audit engagements. Through audit inspection, the AOB was able to assess the appetite of audit firms towards delivering quality audits and the system of quality control and risk management practices that they put in place towards ensuring audit quality. In the event where serious non-compliances are discovered, appropriate sanctions would be imposed to protect public interest. Conclude that AOB has played significant role in facilitating better and more successful businesses from affect of quality of audit performed by companies, while balancing their role as an oversight body. Auditors could help encourage better business practices, while guiding businesses on their compliance with regulations, and strike a balance in their independent role.