How did the RCI suggest the 2017 audit could have been more assertive?

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The RCI Suggested a Qualified Audit Opinion for Greater Assertiveness in the 2017 Audit

The Royal Commission of Inquiry (RCI) into Lembaga Tabung Haji (TH) suggested that the 2017 audit could have been more assertive by issuing a qualified audit opinion. This would have formally indicated significant issues within the audited accounts, differing from the unqualified opinion that was ultimately provided.
Understanding Audit Opinions and Emphasis of Matter Paragraphs

In financial reporting, an audit opinion is the auditor's conclusion on whether a company's financial statements present a true and fair view. An unqualified opinion, often referred to as a clean opinion, signifies that the financial statements are free from material misstatement. Conversely, a qualified opinion is issued when the auditor finds material misstatements that are not pervasive, or when the auditor is unable to obtain sufficient appropriate audit evidence to conclude that the financial statements are free from material misstatement. Emphasis of Matter (EOM) paragraphs, on the other hand, are used by auditors to draw users' attention to a matter that is already presented or disclosed in the financial statements and is of such importance that it is fundamental to users' understanding of the financial statements. While EOMs highlight significant issues, they do not alter the auditor's opinion on the financial statements themselves, unlike a qualified opinion.
RCI's Finding on the Auditor-General's Firmness

The RCI report explicitly noted a "lack of firmness on the part of the auditor-general" regarding the 2017 audit. This observation stemmed from the fact that despite the inclusion of two Emphasis of Matter (EOM) paragraphs in the 2017 audit report, which highlighted specific issues requiring attention, the overall audit opinion remained unqualified. The commission believed that the matters detailed in these EOMs were significant enough to warrant a more critical stance.
The Significance of a Qualified Opinion

The RCI concluded that the issues identified and detailed within the 2017 audit's EOM paragraphs were substantial enough to justify the issuance of a qualified audit opinion. A qualified opinion serves as a formal signal to stakeholders, including investors, depositors, and regulators, that while the majority of the financial statements may be presented fairly, there are specific areas of concern that could materially impact the overall financial position or performance. This would have provided a stronger cautionary note regarding the state of TH's accounts for that fiscal year.
Former Auditor-General's Defence of the EOM Approach

Tan Sri Madinah Mohamad, who served as Auditor-General from 2017 to 2019, defended her approach to the 2017 accounts. She stated that the EOM paragraphs were strategically employed to draw attention to material matters that had been identified during the audit process. Madinah asserted that her decisions were grounded in the available audit evidence and adherence to international auditing standards, maintaining that a qualified opinion should only be issued when the established criteria for such an opinion are demonstrably met.

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How did the RCI suggest the 2017 audit could have been more assertive?

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