Asean Economic Forum December 2003 Putrajaya

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1 Asean Economic Forum December 2003 Putrajaya Trade Liberalisation in the Accountancy Sub-sector Malaysia By Sazalina Kamarudin * * The views presented here are personal and should not be attributed to the Government of Malaysia. 1 Contents Part I Part II Part III Part IV Part V Overview of the Accountancy Sub-sector in Malaysia Negotiations and Commitments of the Accountancy Sub-sector under the AFAS Challenges in the liberalisation of trade in the accountancy services Conclusion Moving Forward 2

2 Part I Overview of the Accountancy Subsub-sector in Malaysia 3 The Regulatory Body Governing the Accountancy Sub-sector! 1967 Accountants Act was enacted to regulate the profession! Malaysian Institute of Accountants under the Ministry of Finance Sections 22 and 23 of the Act require a person residing in Malaysia to be registered with the MIA if he: (1) Practises or holds himself out as a chartered accountant, licensed accountant, associate member, auditor, tax consultant* or tax adviser* or any other term of like description; (2)Adopts, uses or exhibits the above mentioned terms or any other term of like description; or (3) Adopts, uses or exhibits the term "accountant" or any term of like description in such circumstances as to indicate or lead people to infer that he is a chartered accountant, licensed accountant or an associate member or that he is qualified by any written law to practise the profession of or is in practice as a chartered accountant or licenced accountant. 4

3 The Local Qualifications 1. Bachelor of Accounting, University of Malaya 2. Diploma in Accounting, University of Malaya (up to examination session 1981/82) 3. Bachelor of Accounting (Honours), Universiti Kebangsaan Malaysia 4. Bachelor of Accounting (Honours), Universiti Technology MARA 5. Advance Diploma in Accountancy, MARA Institute of Technology (up to October 1996) 6. Bachelor of Accounting (Honours), Universiti Utara Malaysia 7. Bachelor of Accounting (Honours), Universiti Putra Malaysia 8. Bachelor of Accounting (Honours), International Islamic University 9. Bachelor of Accounting (Honours), Universiti Sains Malaysia 10. Malaysian Institute of Certified Public Accountants 5 Foreign Qualifications Recognised in Malaysia since Institute of Chartered Accountants of Scotland 2. Institute of Chartered Accountants in England and Wales 3. Institute of Chartered Accountants in Ireland 4. Association of Chartered Certified Accountants (United Kingdom) 5. Institute of Chartered Accountants in Australia 6. CPA Australia 7. Institute of Chartered Accountants of New Zealand 8. Canadian Institute of Chartered Accountants 9. Institute of Chartered Accountants of India 10. Chartered Institute of Management Accountants (United Kingdom) 6

4 Requirements to be accountant 1. Has the requisite qualification under the Act 2. Practical relevant experience 3. Registration with MIA 4. To practice one needs : " A practising certificate issued by MIA " Pass an interview conducted by MOF " An audit licence 7 Membership Growth (as at 11 August 2003) Total Members 19,155 25,000 20,000 15, , ,000 3,234 3,560 3,791 4,301 5,314 5,496 5,492 5,693 6,205 6,932 7,431 8,464 10,038 11,242 12,128 13,447 15,678 16,186 17,479 18,429 19,155 0 YEAR 8

5 (as at 11 August 2003) COMMERCE 10 % PUBLIC SECTOR 6% PUBLIC PRACTICE 24% PUBLIC SECTOR PUBLIC PRACTICE INDUSTRY COMMERCE INDUSTRY 60% 9 PART II Negotiations and Commitments of the Accountancy Sub-sector under AFAS 10

6 sub-sector Limitations On Market Access Limitations on National Treatment Additional Commitments CPC 862 : Accounting, Auditing and Bookkeeping Services 1) None 2) None 3) Only through a locally registered partnership with Malaysian accountants or Malaysian accounting firms and aggregate foreign interests shall not exceed 35 per 4) Additional two experts for each institution, subject to temporary registration with MIA and fulfillment of residency requirements. Entry shall be limited to maximum period of two years, subject to domestic 1) None for accounting & bookkeeping services for MIA members Auditing services must be authenticated by licensed auditor in Malaysia. 2) None for accounting & bookkeeping services for MIA members Auditing services must be authenticated by a licensed auditor in Malaysia. 3) Only through a locally registered partnership with Malaysian accountants or Malaysian accounting firms and aggregate foreign interests shall not exceed 35 per cent. 4) Unbound except for the categories of natural persons referred to under market access. The qualifying examination to determine the competence and ability to supply the services for the purposes of registration with the MIA will be conducted in the English language. 11 Current 4 th Package 1. Common sub-sector approach or Asean X Formula 2. Focus on MRAs for professional and accreditation. Template on regulations of professionals is in process 3. New commitments by end Acceleration of Services Integration a) Free flow of trade in services- end date earlier than 2020 b) Mutual recognition arrangements for qualifications c) Establishment of exchange programme 12

7 Implications On The Accountancy Profession! No restriction for Mode 1 and Mode 2! Emphasis on Mode 3 and Mode 4! Asean X principle: target countries " Indonesia : cultural and language " Brunei : cultural, language and accounting systems " Vietnam and Cambodia :! Approached Malaysia to assist them in setting up a regulatory body! Standard setting, licensing and regulation 13 Part III Challenges in the liberalisation of trade in the accountancy services 14

8 Major Challenges 1. Governing Framework 2. Regulation of the Profession 3. Standards 4. Legal Requirements to practice accountancy " Professional qualifications " Licensing requirements " Establishment requirements 5. Technicalities of negotiations 15 (1) GOVERNING FRAMEWORK Regulator/Institute MOF / MIA Negotiators Profession Chartered Accountants Foreign Accountants Foreign Accountants 16

9 (1) GOVERNING FRAMEWORK (cont)! The regulators lack relevant data and statistics! The profession is complacent and lacks interest to venture overseas. Local market is perceived to be sufficient! The Negotiators adopt a wait and see approach and focus on CPC 862 (pure accountancy sub-sector)! New developments affecting the profession: governance issue and the need to enhance capacity of small medium practices 17 AMENDMENTS TO THE ACT IN 2001! Provision for expanded council to regulate the profession (from 14 to 30)! Introduction of the term chartered accountants to be more marketable overseas! Introduction of regulated advertising! Introduction of the Malaysian Institute of Accountants Qualifying Examination on 27 March 2003 FUTURE CHANGES ON REGUALTIONS! Corporate Practices! Currently, the profession can only practice in partnership / firm! Multidisciplinary Practices! Definition of residency! There is no express definition. Using the tax resident is not clear at this point in time! Guidelines on MRAs 18

(3) STANDARDS! Harmonisation of accounting and auditing standards! IASC (now IASB) created in 1973 to formulate standards of worldwide acceptance!

10 (3) STANDARDS! Harmonisation of accounting and auditing standards! IASC (now IASB) created in 1973 to formulate standards of worldwide acceptance! Certain ASEAN countries do not adopt the IAS standards " Malaysia adapts -similar subject to domestic requirements " Indonesia sets its own " Philippines adopts the US GAAP standards! Differences in standards poses difficulty for professionals to export services 19 Accounting systems in ASEAN Countries 20

11 (4) LEGAL REQUIREMENTS & CONSTRAINTS a. The recognition of professional qualifications among ASEAN countries b. The restrictions in establishment c. Differences in licensing requirements 21 4a 22

12 4b 23 4c 24

13 4c 25 MALAYSIA S ENTRY REQUIREMENTS Local Stream STUDENTS Foreign Stream STUDENTS MICPA Local Universities Foreign Universities Reg.Foreign Professional Bodies QE English practical experience 3 years practical experience MIA Members (CA) 26

14 (5) TECHNICALITIES OF NEGOTIATIONS CCS Meetings Business sub-sector! Lack of adequate knowledge the domestic regulations of each ASEAN country! No complete representation at meetings! The rapid change in the negotiators at each CCS meeting! Narrow focus on CPC 862 (accountancy sub-sector) without taking into account the other related services provided by accountants eg. taxation, management consultancy etc! Different level of readiness, legal, cultural and historical background 27 Part IV Conclusion Malaysia s Initiatives for professional services 28

15 THE FRAMEWORK PROFESSIONAL SERVICES Government NAPSEC Advisory Council PSDC 22 organisations Ministries Strategy for the professional services Other relevant agencies - Bar Council - MIA - Boards - CIDB 29 Part V MOVING FORWARD 1. Work with on the MRAs guidelines 2. Focus on capacity building 3. Encourage HR development 4. Increase activities to promote export readiness 5. Create awareness on import substitution 6. Educate the profession on the proper utilisation of information 30

16 Thank you For more information please contact 31

1.Snapshot of Malaysia s Services Sector 2. ASEAN Economic Community 3.ASEAN Framework Agreement in Services (AFAS) 4. Mutual Recognition Arrangement

1 1.Snapshot of Malaysia s Services Sector 2. ASEAN Economic Community 3.ASEAN Framework Agreement in Services (AFAS) 4. Mutual Recognition Arrangement in ASEAN 5. Accountancy Services 6. Legal Services