International Practice Management. Supplementary Booklet Edition 12a

Transcription

1 International Practice Management Supplementary Booklet Edition 12a

2 Published by CPA Australia Ltd ABN August 2012 CPA Australia Ltd 2012 The material used in this segment has been designed and prepared for the purpose of individual study and should not be used as a substitute for professional advice. The material is not, and is not intended to be, professional advice. The material may be updated and amended from time to time. Care has been taken in compiling the material but the material may not reflect the recent developments and has been compiled to give a general overview only. Users of the material should not act on the basis of any of the material without first obtaining professional advice specific to their own situation. CPA Australia Ltd and Deakin University and the author(s) of the material expressly exclude themselves from any contractual, tortious or any other form of liability on whatever basis to any person, whether a participant in this segment or not, for any loss or damage sustained or for any consequence which may be thought to arise either directly or indirectly from reliance on statements made in this material. Any opinions expressed in the study materials for this segment are those of the author(s) and not necessarily those of their affiliated organisations, CPA Australia Ltd or its members. All rights reserved. Without limiting the rights under copyright reserved above, no part of these notes may be reproduced or utilised in any form or by any means, electronic or mechanical, including photocopying, recording, or by information storage or retrieval system, without prior written permission from CPA Australia.

3 Introduction This supplementary booklet is to be studied in conjunction with the Practice Management study guide. While in Module 2 of the study guide we examined the regulatory and professional requirements for accountants in Australia, this booklet gives you an overview of the requirements to practise as an accountant in: Hong Kong; Malaysia; New Zealand; and Singapore. Broadly, we cover the regulatory environment in each of these countries and discuss registration requirements for accountants, including tax agents, auditors and financial planners. We also briefly examine the risk, liability and insurance in some of these countries. This material is intended to be an introduction to the requirements only. Members are responsible for ensuring they are aware of and comply with all regulators requirements in the country in which they work. As CPA Australia does not regulate members working in public practice outside Australia, the material in this booklet is not examinable. This material reflects legislation and requirements at 1 November

4 Authors Dr Sebastian Bombaci is the author of the section on Hong Kong. He is a senior business development professional. For the last 10 years his focus has been on the establishment and development of new business channels, primarily in the financial services and the IT&T industries (with experience in Hong Kong, China and Singapore, and exposure to Indonesia and Malaysia). He is also the Chairman of the Business Management Committee (BMC) of CPA Australia Hong Kong China Division and was a member of the HKICPA Accountancy Accreditation Board for four years. The role of the BMC is to play a leading role in Hong Kong in identifying, researching and disseminating information to the community, CPA Australia members and the Hong Kong Special Administration Region Government on key issues that are of concern to business and the community. Cheah Foo Seong, FCIS, FIPA, MBA Henley, LLM Staffordshire, LLD. Cheah Foo Seong is the author of the section on Malaysia. He is the Chief Technical Officer of Tricor Corporate Services Sdn. Bhd a leading international corporate service, governance advisory and business consulting organization in Malaysia. TRICOR is a member firm of the Bank of East Asia Group. He is the current President of the Malaysian Institute of Chartered Secretaries and Administrators (MAICSA) and sits as Executive Committee member of the Corporate Secretaries International Association (CSIA), a federation for worldwide corporate secretaries and governance practitioners. He has authored for MAICSA many practice books on corporate law, disclosures for directors, and corporate governance principles and practices. He is also actively involved in the teaching and training of corporate directors. He wrote the Directors Manual, Malaysia and Company Law and Secretarial Practice, Malaysia, which were published by CCH. In June 2008, he jointly authored and published Corporate Governance in Malaysia: Principles and Practices. Cheah has lectured part-time at the Multimedia University, Cyberjaya, and the University Tunku Abdul Rahman postgraduate and research centre. Professor Susan Watson is the author of the section on New Zealand. She is Associate Dean Academic Faculty at the University of Auckland Business School. She is also Deputy Director of the New Zealand Governance Centre. She teaches, researches and consults in company and securities law and corporate governance. She has published widely in those areas both within and outside New Zealand. Publications include the corporate governance section of the leading text Company and Securities Law in New Zealand (Thomson Reuters) and the editorship and lead authoring of The Law of Business Organisations, the prescribed text in undergraduate business law courses throughout New Zealand. She is also co-editor of the New Zealand Business Law Quarterly, New Zealand s leading business law journal. Dr Themin Suwardy, PhD, BBus(Acc)(Hons), BComp (InfoSys), CMA, FCPA (Aust.), FCPA (Singapore). Dr Themin Suwardy is the author of the section on Singapore. He is an Associate Professor of Accounting Practice and Associate Dean of the School of Accountancy at the Singapore Management University (SMU). Dr Suwardy was the recipient of the 2004 Hewlett-Packard Mobile Technology for Teaching Grant Initiative, the 2006 SMU Most Innovative Teacher award, the 2010 SMU Distinguished Teaching Award and the inaugural 2010 CEEMAN s Champion Award for Management Teaching. Dr Suwardy is an elected Councillor and the 2011 Deputy President of CPA Australia, Singapore Division. 3

5 Malaysia 4

6 Contents Malaysian accountants and the regulatory framework 6 Qualifying Examination (QE) of the Institute Registration of accountants 8 Requirements and conditions for holding a Practising Certificate Requirements for a company auditor and company liquidator Requirements for a licensed tax agent or tax consultancy Requirements for financial planner and capital market positions Requirements for governance consultancy Setting up a public practice in Malaysia 12 Summary of professional services Continuity of practice in the event of death or incapacity of a sole practitioner Quality Assurance and Practice Review Audit Oversight Board Auditors of public interest entities Continuing Professional Education (CPE) 16 Annual CPE audit Risk, liability and insurance in public practice 17 References and further reading 18 5

7 Malaysian accountants and the regulatory framework Under the requirements of Sections 22 and 23 of the Accountants Act 1967, you can t practice or hold yourself out as an accountant in Malaysia unless you are registered as a member of the Malaysian Institute of Accountants (MIA). This includes holding company positions such as finance manager, accounts manager, financial controller, general manager finance or any other similar descriptions. Therefore, if you intend to work as an accountant, you must register with MIA. Members of CPA Australia who hold CPA status are eligible for admission to MIA without further requirement. This recognition is given under the First Schedule, Part II of the Accountants Act 1967 (see Table 2.1 below). The accountancy profession in Malaysia is regulated by an Act of Parliament, known as the Accountants Act 1967 (the Act) and the Malaysian Institute of Accountants (Membership and Council) Rules The Act was enacted to regulate and develop the accountancy profession in Malaysia, and establishes a statutory body called The Malaysian Institute of Accountants (the Institute) for carrying out the following functions: a. to determine the qualifications of persons for admission as members; b. to provide for the training and education by the Institute or any other body, of persons practising or intending to practise the profession of accountancy; ba. to approve the Malaysian Institute of Accountants Qualifying Examination and to regulate and supervise the conduct of that Examination; c. to regulate the practice of the profession of accountancy in Malaysia; d. to promote, in any manner it thinks fit, the interests of the profession of accountancy in Malaysia; e. to render pecuniary or other assistance to members or their dependants as it thinks fit with a view to protecting or promoting the welfare of members; and f. generally to do such acts as it thinks fit for the purpose of achieving any of the aforesaid objects (Accountants Act 1967, s. 6). The Act also controls the use of the word accountant, which is specifically to be used by members of the Institute. Section 22(c) of the Act prohibits a person, unless he is registered as a chartered accountant under this Act and has his principal or only place of residence within Malaysia, to adopt, use or exhibit the term accountant or any other term of like description in such circumstances as to indicate or to be likely to lead persons to infer that he is a chartered accountant or is qualified by any written law to practise the profession of, or is in practice as, a chartered accountant. In the same provision (Accountants Act, s. 2), no person, unless registered as a chartered accountant under the Act and has his principal or only place of residence within Malaysia, may practice or hold himself out as a chartered accountant, auditor, tax consultant, tax adviser or any other like description, or adopt, use or exhibit the terms chartered accountant, auditor, tax consultant, tax adviser or any other term of like description. However, an advocate or any person authorized under any other law for the time being in force in Malaysia is not prevented from carrying on the work of a tax consultant or a tax adviser. Accountants in Malaysia are employed in banking, commerce, industries and educational institutions. Others may set up firms to provide professional services in the field of auditing, financial planning, tax and corporate services. Every member may describe himself or herself as an accountant in Malaysia and shall use the designations Chartered Accountant, Licensed Accountant or Associate Member with the designatory letters C.A.(M), L.A.(M) or A.M.(M) respectively. Table 2.1 Schedule of recognized Malaysian public and private universities whose graduates in accounting gain direct entry into membership of the Institute FIRST SCHEDULE (Sections 14 and 15) PART I a. the final examination of the University of Malaya for the Diploma Perakaunan (Diploma in Accounting); b. the final examination of the University of Malaya for the Ijazah Sarjana Muda Perakaunan (Degree of Bachelor of Accounting); c. the final examination of the Universiti Kebangsaan Malaysia for the Ijazah Sarjana Muda Perakaunan (Kepujian) (Degree of Bachelor of Accounting (Honours)); d. the final examination of the MARA Institute of Technology for the Diploma Lanjutan Perakaunan (Advanced Diploma in Accountancy); e. the final examination of the Universiti Teknologi MARA for the Ijazah Sarjana Muda Perakaunan (Degree of Bachelor of Accounting); 6

8 f. the final examination of the Universiti Utara Malaysia for the Ijazah Sarjana Muda Perakaunan (Kepujian) (Degree of Bachelor of Accounting (Honours)); g. the final examination of the Universiti Pertanian Malaysia for the Ijazah Bacelor Perakaunan (Kepujian) (Degree of Bachelor of Accounting (Honours)); h. the final examination of the Universiti Putra Malaysia for the Ijazah Bacelor Perakaunan (Kepujian) (Degree of Bachelor of Accounting (Honours)); i. the final examination of the Universiti Islam Antarabangsa for the Ijazah Sarjana Muda Perakaunan (Kepujian) (Degree of Bachelor of Accounting (Honours)); j. the final examination of the Universiti Sains Malaysia for the Ijazah Sarjana Muda Perakaunan (Kepujian) (Degree of Bachelor of Accounting (Honours)); k. the final examination of the Universiti Utara Malaysia for the Degree of Bachelor of Accounting (Honours) (Information System), [Subs. P.U.(A) 28 1/2007] l. the final examination of the Universiti Tenaga Nasional for the Degree of Bachelor of Accounting (Honours), the academic programme for which first commenced from the academic year 2002/2003 onwards; [Am. P.U.(A) 281/2007] m. the final examination of the Universiti Multimedia for the Degree of Bachelor of Accounting (Honours), the academic programme for which first commenced from the academic year 2002/2003 onwards; [Am. P.U.(A) 281/2007] n. the final examination of the Kolej Universiti Sains dan Teknologi Malaysia for the Degree of Bachelor of Accounting (Honours); o. the final examination of the Universiti Malaysia Sabah for the Degree of Bachelor of Accounting (Honours). [Ins. P.U.(A) 281/2007] PART II The recognised bodies for the purposes of sections 14(1)(b) and 15(b) are: [Am. Act A1099] a. Malaysian Association of Certified Public Accountants; b. Institute of Chartered Accountants of Scotland; c. Institute of Chartered Accountants in England and Wales; d. Institute of Chartered Accountants in Ireland; e. Association of Chartered Certified Accountants (United Kingdom); f. Institute of Chartered Accountants in Australia; g. Australian Society of Certified Practising Accountants (CPA Australia); h. New Zealand Chartered Accountants; i. Canadian Institute of Chartered Accountants; j. Institute of Chartered Accountants of India; and k. Chartered Institute of Management Accountants (United Kingdom). Source: Commissioner of Law Revision, Malaysia, Accountants Act 1967, First schedule. Qualifying Examination (QE) of the Institute The Institute had introduced its own Qualifying Examination as a new avenue for admission to membership for those who do not possess an accounting qualification recognised under Part I and Part II of the First Schedule of the Accountants Act Those graduates who possess a qualification relating to accounting, business and finance degree recognized by the public Services Department of the Malaysian Government or other qualifications approved by the MIA Council are eligible to sit for the Qualifying Examination. Prospective candidates should consult the Institute s examination guidelines for more details. 7

9 Registration of accountants Pursuant to section 17 of the Act, a person who has been registered and continues as a member of the Institute shall describe himself as a Chartered Accountant, and may use the letters C.A.(M) after his name. Membership of the Institute is accorded upon payment of the prescribed fee, and based on the following entitlement to be admitted, if: a. he has passed any of the final examinations specified in Part I of the First Schedule, and has not less than three years practical accounting experience in the service of a chartered accountant or in a Government department, bank, insurance company, local authority or other commercial, financial, industrial or professional organization or other undertaking approved by the Council; b. he is a member of any of the recognized bodies specified in Part II of the First Schedule [including CPA Australia]; or c. he is eligible to sit for and has passed the Malaysian Institute of Accountants Qualifying Examination and has not less than three years practical accounting experience in the service of a chartered accountant or in a Government department, bank, insurance company, local authority or other commercial, financial, industrial or professional organization or other undertaking approved by the Council (Accountants Act 1967, s.14(a) (c)). The person to be admitted by the Council as a member of the Institute shall not be less than twenty-one years of age and in the opinion of the Council he is a fit and proper person to be admitted as a member. After having become a member of MIA, you may choose to be either a public practice service accountant or an employed accountant. A member in public practice means a chartered accountant or licensed accountant who, as a sole proprietor or in a partnership, provides or is engaged in public practice services in return for a fee or reward for such services, other than as an employee (Section 2, Malaysian Institute of Accountants (Membership & Council) Rules 2001). Public practice services may include the following: auditing, including internal auditing; accounting and all forms of accounting-related consultancy; accounting-related investigations or due diligence; forensic accounting; taxation, tax advice and consultancy; bookkeeping; costing and management accounting; insolvency, liquidation and receiverships; provision of management information systems and internal controls; provision of secretarial services under the Companies Act 1965; or such other services as the Council may from time to time prescribe. Most public accountants firms would provide public professional services to their clients in the following fields: company auditor and liquidator; licensed tax agent or tax consultant; financial planner; or governance consultant in a particular specialization, such as merger and acquisition, internal control, or recovery and insolvency consultant. Requirements and conditions for holding a Practising Certificate A member who intends to enter public practice should apply to MIA for a Practising Certificate if he/she intends to: Set up an audit or non-audit firm to be registered with MIA; Be a partner of an existing audit or non-audit firm registered with MIA; or Be a director and/or shareholder in a limited or unlimited company which offers advice and taxation consultancy services. To meet the requirements of the Practising Certificate, the member must have the following: a. At least three (3) years experience in the service of: A chartered accountant who is in public practice; or An accountant in public practice overseas who is a member of one of the recognized bodies specified in Part II of the First Schedule of the [Accountants Act 1967 ]; or An accountant in public practice overseas who is a member of any other professional bodies as may be recognized by the Council from time to time; or 8

10 b. At least three (3) years of such other experience in any areas of the public practice services as may be approved by the Council; and c. Attended the Public Practice Programme (PPP) organized by the Institute (MIA 2009a). The conditions for a Practising Certificate to remain valid are: a. Member must commence public practice within six months from the date of issuance of the practising certificate and shall practice on a full time basis. The member issued with a practising certificate but is unable to commence practice within the 6 months must return the certificate to the Institute immediately upon the expiry of the period. b. The certificate will be renewed automatically on a year to year basis for a period of twelve months each commencing on the first day of July next following, whereupon the annual practising certificate fee shall become due and payable. c. A member shall cease to be entitled to a practising certificate if he fails to pay the annual practising certificate fee by the last day of December in the year in which it becomes due and payable pursuant to subrule (4), unless the Council decide otherwise. d. The fee for practising certificate is RM250 annually (MIA 2009a). The registration and licensing requirements for various professional services are given in the following sections. Requirements for a company auditor and company liquidator The auditing of public companies and non-listed companies can only be undertaken by a member of MIA who has fulfilled the licensing requirements of the Ministry of Finance. This means that the member of MIA will need to apply to the Ministry of Finance for an audit licence. This is only granted if the applicant: is a member of MIA; has more than five years of audit experience in an audit environment; is a fit and proper person; and has successfully passed an interview conducted by the Ministry of Finance. The requirements for licensing to be an approved company auditor are in compliance with section 8 of the Companies Act Even after having obtained a licence to be an approved company auditor, he must also comply with section 9 of the Companies Act. Any approved company auditor may also apply for an approved liquidator s licence issued by the Ministry of Finance in the same manner and be subject to sections 8 and 10 of the Companies Act. Besides obtaining an approved company auditor licence or an approved liquidator licence, the Institute s By-Laws require members who wish to go into practice, including an audit practice or those intending to provide public practice services as listed above, to apply for a Practising Certificate. The Practising Certificate is issued only once and the member should retain the certificate for as long as they remain in public practice or engage in providing professional services full time. Members in public practice shall not practise with individuals who are not members of the Institute. With effect from 1 April, 2010 an approved company auditor who audits a public interest entity must register with the Audit Oversight Board established by the Securities Commission (refer to Audit Oversight Board Auditors of public interest entities below). Requirements for a licensed tax agent or tax consultancy Except for an MIA member who holds a valid audit licence, all members must apply to the Inland Revenue Board (IRB) for a tax licence under section 153(3)(c) of the Income Tax Act 1967 before the accountant can provide tax advisory and consultancy work to clients. To obtain a tax licence, the applicant must be a member of MIA (or any other approved professional body) and fulfil the following conditions: have at least five years of work experience in taxation; attend an interview conducted by the IRB, and pass the interview; and be a fit and proper person. 9

11 Responsibilities and duties The IRB has from time to time issued guidelines on the responsibilities of tax agents, the Tax Agents Guidelines. According to these guidelines it is the responsibility of a licensed tax agent to: quote the approval number, indicating the date of such approval on all correspondence with the IRB. inform the IRB when he ceases to be the tax agent of a client. Letters and return forms addressed to taxpayers who are no longer clients shall be returned with an appropriate notation. ensure his own tax affairs shall be kept up to date. All returns, accounts and such like ought to be lodged in a timely fashion and tax payable settled within the time allowed. It is further expected that the tax agent shall carry out all acts on behalf of the taxpayer under the Income Tax Act. These include: advising on records to be maintained; assisting in completing tax returns; impressing upon the clients their obligation to pay their dues as required under the law; attendance at field audits at clients premises; attendance at investigation, interviews, negotiations and proceedings; and filing of appeals and attendance at negotiation hearings and further appeals. A member of MIA with five years practical tax experience either in the public or private sector is eligible to apply under section 153(3)(c) of the Income Tax Act by submitting the application form (Borang EC) with evidence of having attended the most recent Annual Budget Seminar organized by IRB, and having acquired 40 Continuing Professional Development (CPD) or Continuing Professional Education (CPE) points in any recognized organization tax seminar. The application process requires the applicant to attend an interview with the IRB to verify competency and understanding of the taxation provisions and public rulings issued by IRB. The licence issued by the Ministry of Finance is valid for two years. It must be renewed at least one month before the expiry date. An unsuccessful applicant may re-apply six months after the date of rejection. The usual processing fee and relevant documents must accompany the application. The website of the Malaysian Institute of Chartered Secretaries and Administrators (MAICSA) refers to the Code of Conduct, which tax agents need to adhere to when discharging their duties. The Code refers to tax agents conduct in relation to their integrity, competency and professional advice. Compliance with this Code is used as one of the criteria for approving and renewing the licence of a tax agent. You can access the details of the Code on the website at < Requirements for financial planner and capital market positions Financial planning in Malaysia is a relatively new profession with the formation of the Financial Planning Association of Malaysia (FPAM) in December Generally, the financial planning profession requires a diverse and broad knowledge of the financial services industry, including: insurance, unit trust and stockbroking; the use of various financial services holistically in estate planning, investment planning, retirement planning and education planning; and the use of insurance policies as a device for long-term avoidance of business risks. Accountants who wish to pursue this career path as a Financial Planner must obtain certification from FPAM as a Certified Financial Planner (CFP ) and apply to Bank Negara Malaysia for the Financial Adviser s Licence. Reference to the following should be made: Licensing Guidelines on Application for Financial Adviser s Licence under Insurance Act 1996; Application Form for Financial Adviser s Licence under section 17 of the Insurance Act; and Application Form for Appointment of Financial Adviser s Representative under section 70(1A) of the Insurance Act. Effective 11 October 2007, financial planners with a Capital Markets Services Licence are also eligible to register with the Federation of Malaysian Unit Trust Managers (FMUTM) as corporate unit trust advisors (CUTA). 10

12 Licensing by the Securities Commission Accountants who are engaged in the capital and securities market should be aware that the Securities Commission (SC, < is the regulator of the capital and securities market in Malaysia. The SC is empowered to issue licences for market intermediaries. The Capital Markets and Services Act 2007 (CMSA) that came into force on 28 September 2007 has consolidated the Securities Industry Act 1983, the Futures Industry Act 1993 and Part IV of the Securities Commission Act 1993 which deals with fund raising activities in the capital market. The CMSA introduces a single licensing regime for Capital Markets Services Licences that are granted, on application to the Securities Commission, for the following regulated activities listed in Schedule 2 [subsection 2(1) and 58(1)]: dealing in securities; trading in futures contracts; fund management; advising on corporate finance; investment advice; and financial planning. However, section 58(2) of CMSA exempts a Specified Person, whether as a principal or agent who carries on a business in any regulated activity, from holding a Capital Markets Services Licence. This exemption applies to the persons or classes of persons specified in Schedule 3, inter alia any accountant who is a member of the institute established under the Accountants Act 1967 [Act 94] in practice whose carrying on of the regulated activity of advising on corporate finance or financial planning is solely incidental to the practice of his profession (CMSA 2007, Schedule 3, para. 3). This means that the accountant must not be operating a business relating to financial planning, investment advice, advising on corporate finance, fund management, trading in futures contracts and dealing in securities. For more information, please access the following on the Securities Commission website: Capital Markets and Services Act Capital Markets and Services Regulation Licensing Handbook. Guidelines on Regulation of Markets. Visit: < (accessed May 2010). Requirements for governance consultancy An accountant having several years of wide practical experience in audit, taxation, internal audit and in a corporate advisory role on merger and acquisition may provide governance consultancy. This is an independent non-audit type of consultancy that certain clients such as listed corporations would require to fulfil governance requirements under listing requirements. Such types of consultancy are: internal control and risk control reporting as required by the Malaysian Code on Corporate Governance and Bursa s Listing Requirements; merger and acquisition planning and compliance with the Malaysian Code on Take-Overs and Mergers of the Securities Commission Act 1993; and as an independent accountant to advise on due diligence process of an initial public offer of a corporation. In general, consultancy services on compliance requirements do not require any form of licensing, but for certain capital and securities issue matters it is advisable to check with the Securities Commission for clearance. Through its authority to issue licences, the SC regulates the market by ascertaining the fitness and propriety of companies and individuals applying for licences. In considering whether an applicant is fit and proper to hold a licence, the SC takes into account the following factors: probity; ability to perform such functions efficiently, honestly and fairly; financial status; and reputation, character, financial integrity and reliability. 11

13 Setting up a public practice in Malaysia A member in public practice will be governed by the Act, the Rules and the By-Laws (On Professional Conduct and Ethics) of the Institute. He/she is prohibited from public practice through a body corporate except where it is allowed by other statutes for limited areas of public practice, namely tax. In most instances, the member is allowed to be engaged in public practice as a sole practitioner or in partnership with another member(s). The Act and By Laws [prohibit] the sharing of profits with non-members. All public practice firms are described as firms of chartered accountants (MIA 2009b). Only members registered as chartered accountants and with a valid practising certificate can describe and hold themselves out as chartered accountants in public practice and are able to set up firms providing public practice services such as accounting, audit, liquidation, tax and other related services. However, the practice of audit, liquidation and tax are licensed under other legislation[s] and regulations (MIA 2009b). A member who is in public practice must hold a valid practising certificate and shall describe his or her firm as a firm of Chartered Accountants. Every member in public practice who signs any reports or other documents in a professional capacity either as an individual or for and on behalf of the firm shall only use the designation Chartered Accountant(s). Members also have to have their principal or only place of residence in Malaysia to be in public practice in Malaysia. Members who wish to set up a practice must first obtain the approval of the Institute on the use of the firm s name. It should not be a trade or association name. Upon the setting-up of his firm, the practice must be registered with the Institute (MIA 2009b). An audit firm and all the partners must be registered with the Registrar of Companies under section 9(4)(a) of the Companies Act The partners or a public practice providing auditing services must be members of the Institute and must possess a valid audit licence granted by the Accountant General s Office of the Ministry of Finance. However, for a public practice that provides services other than auditing, such as accounting, corporate secretarial, and governance consultancy services, no additional licensing requirements are needed. For a tax service and consultancy public practice firm, the tax practitioner must obtain a licence to act as a tax agent under the Income Tax Act The practice of taxation may be carried out under a body corporate, a sole proprietor or a partnership. But the body corporate cannot be described as chartered accountants and it cannot be registered as a member firm of the Institute. For other services, including management consultancy and corporate services such as secretarial services, and where these services are provided under the same audit firm that also provides tax services, no new licensing requirement is needed. This is because an approved company auditor under section 8 of the Companies Act 1965 is also a qualified tax agent under the Income Tax Act A member without a valid practising certificate may set up a corporate entity to provide management and corporate consultancy services but he or she cannot be registered as a member firm of the Institute and should not hold himself or herself out as a chartered accountant when describing his or her corporate activities. The company is also not allowed to describe itself as an entity of chartered accountants (MIA 2009b). The Institute puts the onus upon members who are in practice to have the requisite knowledge and expertise and to comply with all ethical and statutory requirements that relate to the particular public practice speciality. The following statutory enactments and the subsidiary legislations relating to a public practice and services rendered should be referred to: The Accountants Act, 1967 (as amended) The Institute s (Membership and Council) Rules 2001 The Institute s (Disciplinary) Rules 2001 The Institute s Qualifying Examinations Rules 2001 The Institute s By-Laws (On Professional Ethics, Conduct and Practice) (as amended from time to time) The Companies Act, 1965 The Securities Commission (Amendment) Act 2010 The Income Tax Act, 1967 The Service Tax Act, 1975 By-Laws of the Local Authorities The Employment Agencies Act, In summary, every member of MIA in public practice should fulfil the following requirements: To register his firm with the Institute in writing stating the name and address of his or her firm and the addresses of any branches and any other relevant particulars as requested by the institute; 12

14 To inform the Institute of any changes in respect of the particulars as required within one (1) month thereafter; To register any association with any other firm of accountants, whether locally of overseas with the Institute supported by written evidence or documents; To lodge an annual return with the Institute by 31 January of each calendar year after having registered the firm with the institute, despite the fact that there may be no changes in particulars to the firm; To state his/her firm s number immediately after or below the firm s name, in official letters, accounts, invoices, official notices, publications, bills of exchange, cheque, receipts, requisition forms and other like documents issued by the firm. A member who is in public practice, he or she should not allow the member firm including any branches of the member firm to be under the management and control of a person who is not a member of the Institute. It is the duty and responsibility of a member in public practice to ensure that any branch of his or her firm is under the management and control of a member of the Institute. A member in public practice shall describe his or her firm as a firm of Chartered Accountants or as a firm of Licensed Accountants, as appropriate. Every member in public practice who may be required to sign any reports or other documents in a professional capacity either as an individual or for and on behalf of the firm shall only use the designations Chartered Accountant or Chartered Accountants or Licensed Accountant or Licensed Accountants to describe that he or she is in public practice or the firm in the report or documents. Summary of Professional Services Summary of the types of services provided by members in Public Practice:- Accounting services: There is no additional licensing requirements, except that the member must first obtain the approval of the Institute on the use of the firm s name, which must be registered with the Institute. Audit services: Must posses an audit licence granted by the Accountant General s Office pursuant to the Companies Act [For details please refer to earlier paragraph on Auditor requirements]; Liquidation & Recovery Services: To have an audit licence for at least one year and have passed an interview by the Accountant General s Office. An approved liquidator s licence is issued by the Accountant General s Office pursuant to the Companies Act 1965; Tax and compliance services: To possess a tax agent licence issued by the Inland Revenue board. Other professional services: Management consultancy and corporate services such as secretarial services, governance consultancy and financial planning. [Please see details for licensing by the Securities Commission on relevant securities services/representatives] Other Related Professional Services: Most of the other professional services carried out include management consultancy and corporate secretarial services. There is no specific licensing requirement. However, if the professional services are those involving financial planning and dealing in securities, a relevant licence must be obtained from the Securities Commission. Also services in recruitment of personnel and foreign executive passes will require specific license to operate. Continuity of practice in the event of death or incapacity of a sole practitioner To safe guard the interest of a sole practitioner as well as the interests of the clients, it is important for the sole practitioner to enter into an arrangement with another member or member firm as it will enable the practice to be carried on with minimum dislocation in the event of death or incapacity of the sole practitioner. Such arrangements should be made within two (2) years from the date when the sole practitioner sets up the practice in order to ensure continuity as a going concern until such time as the sole practitioner recovers or the representatives of his or her estate decide to dispose of the practice. Quality Assurance and Practice Review Under section 550 of the Institute s By-Laws, a member in public practice is required to ensure that his or her firm complies with all relevant professional standards for the purposes of assurance as to the quality of the public practice services provided by the firm through that member, his or her partner(s) and/or employees. In doing so, every member in public practice has to ensure that the firm adopts and applies policies and procedures designed 13

15 to maintain adherence to professional standards. The professional standards required to be maintained, observed and applied by a member in public practice shall be related to the type of public practice services provided by that member or the firm, and shall include the following: a. all standards and statements of professional conduct and ethics in the form of the Institute s By-Laws in issue from time to time b. all approved standards whether issued by the Council or otherwise, and all guidelines, statements and/or circulars of best practices issued or prescribed by the Council and/or the Institute from time to time (MIA 2007, s and.2). The Practice Review programme is established with the following objectives: a. to ensure that all members in public practice maintain, observe and apply the relevant professional standards, so as to assure that those members in public practice, their firms and their employees are competent, ethical and exercise professional care in their professional work; b. to assist members in public practice to improve their professional standards where necessary; and c. to identify areas where members in public practice may require assistance in maintaining and observing professional standards (MIA 2007, s ). All members in public practice and/or member firms are required to submit to and undergo the Institute s Practice Review programme as established The Practice Review programme will be conducted over a cycle of not more than five (5) years or such other period as determined by the Council in respect of member firms which are selected at random from the Institute s records (MIA 2007, s and.9). Each member in public practice will be charged a fee in respect of the practice review conducted including any interim fees as may be charged and determined by the Practice Review Committee for that firm. Such fees are due and payable within 30 days of the date of the invoice for this purpose. The fees, if any, that are charged for the practice review are based on hourly rates as approved by the Council on the recommendation of the practice Review committee. Such fees are in respect of the time involved in the planning, execution and reporting of the practice review. Audit Oversight Board Auditors of public interest entities With effect from 1 April 2010 an Audit Oversight Board (AOB) was established under section 31C of the Securities Commission Act 1993 to register all auditors of public interest entities and to promote and develop an effective audit oversight framework in Malaysia. The Securities Commission shall function in relation to audit oversight as follows: To promote and develop an effective and robust audit oversight framework in Malaysia; To promote confidence in the quality and reliability of audited financial statements in Malaysia; and To regulate auditors of public interest entities. The Audit Oversight Board is responsible for assisting the Securities Commission in discharging its functions stated above. It shall perform the responsibilities on behalf and in the name of the commission in the following manner: To implement policies and programmes in ensuring an effective audit oversight system in Malaysia; To register auditors of public interests entities; To direct the Malaysian Institute of Accountants to establish or adopt, or by way of both, the auditing and ethical standards to be applied by auditors; To conduct inspections and monitoring programmes on auditors to assess the degree of compliance of auditing and ethical standards; To conduct inquiries and impose appropriate sanctions against auditors who fail to comply with auditing and ethical standards; To cooperate with relevant authorities in formulating and implementing strategies for enhancing standards of financial disclosures of public interest entities; To liaise and cooperate with oversight bodies outside Malaysia to enhance the standing of the auditing profession in Malaysia and internationally; and To perform such other duties or functions as the Audit Oversight Board determines necessary or appropriate to promote high professional standards of auditors and to improve the quality of audit services provided by auditors. To introduce suitable Continuing Education Programme for auditors registered under AOB. 14

16 For the purposes of section 31A of the Securities Commission Act 1993 as amended by the Securities Commission (Amendment) Act 2010, the public interest entities are listed as follows: A public listed company or corporation listed on the stock exchange; A licensed institution licensed under the Banking and Financial Institution Act 1989 [Act 372]; An insurance company licensed under the Insurance Act 1996 [Act 553]; A takaful operator registered under the Takaful Act 1984 [Act 312]; An Islamic bank licensed under the Islamic Banking Act 1983 [Act 276]; A development financial institution prescribed under the Development Financial Institutions Act 2002 [Act 618]; A holder of the Capital Markets Services licence for the carrying on of the regulated activities of dealing in securities, trading in futures contracts or fund management; and Any other person as the minister may, by order published in the Gazette, prescribe. In view of these new requirements, members of MIA who are auditors of a public interest entity should register themselves with the Audit Oversight Board because if they contravene the Securities Commission Act 1993 they commit an offence and shall, on conviction, be liable to a fine not exceeding one million ringgit or to imprisonment for a term not exceeding five years or to both. 15

17 Continuing Professional Education (CPE) Under the By-Laws of the Malaysian Institute of Accountants, it is mandatory for members to complete at least 120 CPE credit hours of relevant CPE every rolling three calendar year period, of which 60 CPE credit hours should be structured and verifiable (By-Law 410.4). Members shall complete at least 20 CPE credit hours of structured and verifiable CPE learning each calendar year. Structured CPE activities are those that involve attendance and participation. They can be grouped as follows: a. Attending as a presenter or lecturer, or participating in, short courses, conferences and seminars; b. Undertaking recognized postgraduate studies or a diploma course by distance learning which requires participation and assessment; c. Participation or rendering services in a technical committee where technical material is prepared by you, or writing technical papers; and d. Publication of books. Unstructured CPE learning includes private reading and study of technical briefs and journals, and technical research on accounting and auditing matters for practical work purposes. The CPE requirements are applicable to all members of MIA regardless of whether they are in employment or otherwise. Retired members have to comply with the CPE requirements. The objectives of the CPE requirements are continuous life long education that will provide the member with value and career development options, and keeping abreast with the profession. This is especially relevant for retired members who have undertaken a position as a non-executive director of public listed companies or simply as a business advisor or consultant. CPE learning activities ensure professional accountants are current in their knowledge so that they can perform competently within their professional environment. Therefore participation in CPE learning activities is vital in maintaining high standards to ensure public confidence in the profession. Annual CPE audit Each year members are randomly selected for CPE audit from the Institute s members register. A member selected will be required to submit the CPE report for the particular CPE cycle. Evidence on structured learning activities and programmes attended by the member must also be produced for verification purposes by the Institute. As such, all professional accountants are required to maintain records of their own compliance with the CPE requirements. The evidence of CPE requirements compliance comprises the following: a. receipts given by the organizer; b. certificates of attendance; c. enrolment form submitted; d. assessment reports; e. employer s report; or f. letter from organizers verifying the member s attendance. Members may use the new MIA Web Portal to keep track of their individual CPE credit hours and upload information about compliance with CPE requirements on a regular basis. The Institute views CPE compliance seriously and will not hesitate to take disciplinary action against those who wilfully fail to comply or to respond to the Institute s inquiries on compliance sent to them from time to time. 16

18 Risk, liability and insurance in public practice Risk minimization and loss prevention are important issues for all professionals today, and accountants are no exception. Legislation and regulatory rules affecting accountants are becoming more stringent and complex, and there is a possibility of prosecution for those who call themselves experts. There are already at least two cases where the Securities Commission has prosecuted independent auditors for giving auditors reports that were regarded as misleading the public in relation to rights issue and prospectus of listed corporations. In assessing the risk exposure, accountants would normally undertake the following steps: understand the type of professional services they provide and the related risks; determine and prioritise the level of risks and their ability to take the risk; determine a plan of action to reduce risk internally, particularly in the operational areas; and identify the type of insurance policies required, including professional indemnity insurance. A member of MIA who holds a Practising Certificate issued by MIA is defined as a member in public practice. Immediately upon commencement of public practice, the member must maintain a policy of Professional Indemnity Insurance having a minimum coverage of RM If the member in public practice carries on practice under more than one firm, then that member must have separate policies, with a minimum coverage of RM each, for himself or herself in each of these firms. Under section 510 of the MIA By-Laws (On Professional Ethics, Conduct and Practice) every MIA member in public practice must be covered by a policy of Professional Indemnity Insurance. Professional Indemnity Insurance provides clients with reasonable reassurance when dealing with members in public practice. A Professional Indemnity Insurance Scheme, underwritten by ACE Synergy Insurance Berhad ( ACE Insurance ), is available. The scheme has the following features: An individual policy is issued to each firm with the terms of coverage subject to approval by MIA; Insurance is provided to all members who are allowed to practice by MIA, subject to further underwriting review if necessary; The scheme provides cover from the minimum mandatory limit of indemnity of RM moving upwards in tiers until a maximum of RM ; and The number of partners in a firm determines the mandatory limit of indemnity. The range of coverage and extension of the policy includes the following: Coverage applies to civil liability occurring in Malaysia and any legal proceedings in Malaysia, and any proceedings in Malaysia for the enforcement of any award or judgment secured in any foreign jurisdiction except USA/Canada; Full retroactive date (date of firm s establishment); Defense costs shall be payable in addition to the limit of indemnity up to and not exceeding 20 per cent and in the aggregate of the limit of indemnity; Limit of liability for pro bono services is RM ; Loss of Documents extension; Libel and Slander extension; Insolvency Work extension; Contractors extension; Thirty days automatic cover for newly created or acquired entity or subsidiary extension; Estate and Legal Representatives extension; Intellectual Property extension; and Run Off Cover Insured Entity or Subsidiary extension. 17