Notice of Meeting 2. Objects and Mission 4. Council 2006/ Committees 2006/ President's Statement 19. Report of the Council 56

C O N T E N T S Notice of Meeting 2 Objects and Mission 4 Council 2006/2007 6 Committees 2006/2007 7 President's Statement 19 Report of the Council 56 Balance Sheet 58 Income Statement 59 Statement of Recognised Gains & Losses 60 Cash Flow Statement 61 Notes to the Financial Statements 62 Statement by Council Members 74 Statutory Declaration 74 Report of the Auditors to Members 75 Report and Financial Statements of MACPA Educational Trust Fund 100 Form of Proxy 123 KANDUNGAN 79 Laporan Majlis 81 Kunci Kira-kira 82 Penyata Pendapatan 83 Penyata Keuntungan dan Kerugian yang Diiktiraf 84 Penyata Aliran Tunai 85 Nota-nota kepada Penyata Kewangan 97 Penyata oleh Ahli-ahli Majlis 97 Akuan Berkanun 98 Laporan Juruaudit kepada Ahli-ahli 112 Laporan dan Penyata Kewangan Tabung Amanah Pendidikan MACPA 123 Borang Proxy Page

Notice of Annual General Meeting NOTICE IS HEREBY GIVEN that the Forty-ninth Annual General Meeting of the Institute will be held at Bilik Meranti, Level 4, Seri Pacific Hotel, Jalan Putra, Kuala Lumpur on June 23, 2007 at 10:00 a.m. for the following purposes: 1. To receive and adopt the Report of the Council and the Financial Statements of the Institute for the year ended December 31, 2006. 2. To elect the following nominees as Council members: Abdul Jabbar Abdul Majid Dato Ahmad Johan bin Mohammad Raslan Beh Tok Koay Datin Fadzilah bte Saad Loh Lay Choon Sukanta K Dutt Tan Ghee Kiat Venkatramanan Viswanathan 3. To appoint two auditors. 4. Any other business. By order of the Council Foo Yoke Pin (Mr) Secretary Kuala Lumpur June 1, 2007 Note: A member entitled to attend and vote at this meeting is entitled to appoint a proxy to attend and vote in his stead. A proxy must be a member of the Institute. The instrument appointing the proxy must be deposited at the office of the Institute at No. 15, Jalan Medan Tuanku, 50300 Kuala Lumpur, not less than 48 hours before the time set for holding the meeting. Page

1. Pursuant to bye-law 89, the following are lists of members nominated for membership of the Council and for appointment as auditors : i. In accordance with bye-law 5, the following Council members shall retire at the Annual General Meeting: Abdul Jabbar Abdul Majid Dato Ahmad Johan bin Mohammad Raslan Beh Tok Koay Chin Kwai Fatt Datin Fadzilah bte Saad Loh Lay Choon Sukanta K Dutt Tan Ghee Kiat Venkatramanan Viswanathan Pursuant to bye-law 6, these Council members are deemed to be nominated for re-election except for Chin Kwai Fatt who has signified in writing that he does not desire to offer himself for re-election. ii. The following nominations have been receive for election to the Council in accordance with byelaw 7: Seow Yoo Lin Lee Tuck Heng iii. In accordance with bye-law 120, the following members shall retire as auditors of the Institute at the Annual General Meeting. Pursuant to bye-law 121, they are deemed to be nominated for reappointment as auditors for the ensuring year: Siew Kah Toong Datuk Tan Kim Leong, JP Page 3

Objects of the Institute The principal objects of the Institute as set out in the Memorandum and Articles of Association are as follows: To advance the theory and practice of accountancy in all its aspects. To recruit, educate, train and assess by means of examination or otherwise a body of members skilled in these areas. To preserve at all times the professional independence of accountants in whatever capacities they may be serving. To maintain high standards of practice and professional conduct by all its members. To do all such things as may advance the profession of accountancy in relation to public practice, industry, commerce, education and the public service. Our Mission To enhance the value and distinctiveness of the Certified Public Accountant (CPA) qualification. To promote high standards of professional conduct and technical competence of members to safeguard public interest. To provide quality professional education and training thereby creating a competitive advantage for members. Page

Council Members for 2006/2007 Seated - left to right: Dato' Abdul Halim Mohyiddin (President) Dato' Nordin Baharuddin (Vice-President) Standing - left to right: Datuk Robert Yong Kuen Loke Loh Lay Choon Tan Ghee Kiat Left to right: See Huey Beng Sam Soh Siong Hoon Dato' Ahmad Johan Mohammad Raslan Mohamed Raslan Abdul Rahman Dato' Hj Maidin Syed Ali Left to right: Venkatramanan Viswanathan Ng Kim Tuck Dato' Yeo How Datin Hjh Fadzilah bte Saad Left to right: Goh Lee Hwa Pushpanathan a/l S A Kanagarayar Abdul Halim Md Lassim Beh Tok Koay Tan Shook Kheng (Executive Director) Left to right: Peter Lim Thiam Kee Sukanta K Dutt Not in photograph: Abdul Jabbar Abdul Majid, Datuk Dr Abdul Samad Hj Alias, Ahmad Mustapha Ghazali, Chin Kwai Fatt, Foo Yoke Pin (Chief Operating Officer), Ho Heng Chuan, Lim Tian Huat, Poon Yew Hoe, Tan Chin Hock, Dr Veerinderjeet Singh. Page

MICPA COUNCIL - 2006/2007 President Dato Abdul Halim Mohyiddin (1987) Kuala Lumpur 5 Vice-President Dato Nordin Baharuddin (2000) Kuala Lumpur 2 Attendance at Council Meetings Members Abdul Halim b Md Lassim (2006) Selangor 4 (LOA-1) Abdul Jabbar Abdul Majid (1981) Kuala Lumpur 2 (LOA-2) Datuk Dr Abdul Samad Hj Alias (1986) Kuala Lumpur 0 Dato Ahmad Johan Mohammad Raslan (2003) Kuala Lumpur 2 Ahmad Mustapha Ghazali (2004) Selangor 2 Beh Tok Koay (1989) Kuala Lumpur 4 Chin Kwai Fatt (2004) Kuala Lumpur 1 Datin Hjh Fadzilah bte Saad (1987) Kuala Lumpur 3 Goh Lee Hwa (2006) Selangor 3 (LOA-1) Ho Heng Chuan (1987) Kuala Lumpur 0 (LOA-1) Peter Lim Thiam Kee (2002) Kuala Lumpur 2 Lim Tian Huat (1999) Kuala Lumpur 0 Loh Lay Choon (2004) Kuala Lumpur 4 Dato Hj Maidin Syed Ali (2002) Kedah 3 Mohamed Raslan Abdul Rahman (2002) Kuala Lumpur 2 Ng Kim Tuck (2005) Kuala Lumpur 2 Poon Yew Hoe (1998) Kuala Lumpur 3 (LOA-2) Pushpanathan a/l S A Kanagarayar (2001) Kuala Lumpur 4 Sam Soh Siong Hoon (1983) Johor 4 See Huey Beng (2006) Kuala Lumpur 3 (LOA-2) Sukanta K Dutt (1999) Kuala Lumpur 4 (LOA-1) Tan Chin Hock (2002) Kuala Lumpur 1 (LOA-1) Tan Ghee Kiat (1989) Kuala Lumpur 2 Teh Chee Ghee (resigned on November 4, 2006) (2002) Selangor 1 Dr Veerinderjeet Singh (2004) Kuala Lumpur 4 (LOA-1) Venkatramanan Viswanathan (1986) Melaka 2 Dato Yeo How (2003) Selangor 4 Datuk Robert Yong Kuen Loke (1998) Kuala Lumpur 3 Secretary Ms Tan Shook Kheng (resigned on May 31, 2007) Mr Foo Yoke Pin (appointed on June 1, 2007) Registered Office No.15, Jalan Medan Tuanku 50300 Kuala Lumpur Auditors Siew Kah Toong Datuk Tan Kim Leong, JP Penang District Society c/o J. Ramachandran P.O. Box 325, 10200 Penang Denotes Past President Denotes member not in practice ( ) Denotes year in which member first joined Council LOA Leave of absence Page

COMMITTEES - 2006/2007 Executive Committee No. of meetings: 4 Attendance Dato Abdul Halim Mohyiddin (Chairman) 4 Dato Nordin Baharuddin 2 Abdul Jabbar Abdul Majid 2 (LOA-1) Datuk Dr Abdul Samad Hj Alias 0 (LOA-1) Dato Ahmad Johan Mohammad Raslan 3 Beh Tok Koay 4 Tan Ghee Kiat 2 (LOA-2) Datuk Robert Yong Kuen Loke 4 Terms of Reference:- To identify and implement plans of action on specific issues of current concern affecting members, the Institute and the accountancy profession. Accounting & Auditing Technical Committee No. of meetings: 3 Attendance Sukanta K Dutt (Chairman) 2 Ng Kim Tuck (Alternate Chairman) 2 Datuk Dr Abdul Samad Hj Alias 0 Ahmad Mustapha Ghazali 0 Loh Lay Choon 0 Venkatramanan Viswanathan 2 Dato Yeo How 2 Co-opted Members Chia Kum Cheng 2 Stephen Khoo 1 Lee Hin Kan 0 Ooi Chee Kun 2 YM Raja Azmi Raja Nazuddin 1 Stephen Oong 1 Dr Susela Devi 1 David Siew Kah Toong 2 Robert Tan Bun Poo 1 Page 7

Bank Negara Malaysia Guidelines Working Group No. of meetings : 0 Sukanta K Dutt (Convenor) Seow Yoo Lin Soo Hoo Khoon Yean Robert Tan Bun Poo MIA-MICPA Joint Working Group on Auditing No. of meetings: 1 Attendance Sukanta K Dutt (Co-Chairman) MICPA 1 Mohammad Faiz Mohd Azmi (Co-Chairman) MIA 0 Ng Kim Tuck MICPA 0 (LOA) Loh Lay Choon MICPA 1 Chia Kum Cheng MICPA 0 Josephine Edward Bursa Malaysia Berhad 0 Khairudin Ibrahim MIA 1 Ng Mi Li MIA 1 Stephen Khoo Siong Kee MIA 0 Dato Siow Kim Lun Securities Commission 0 Thomas A Scott MIA 0 Robert Tan Bun Poo MICPA 1 MIA-MICPA Joint Working Group on Securities Guidelines No. of meetings: 3 Attendance Sukanta K Dutt (Convenor) MICPA 2 Loh Lay Choon MICPA 2 Ng Kim Tuck MICPA 3 Ahmad Shahrul Hj Mohamed MIA 0 Chan Kam Chiew MICPA 2 Chen Voon Hann MIA 2 Chia Kum Cheng MICPA 1 Janice Lee Guat Hoe MIA 0 Loh Kok Leong MIA 0 Mohammad Faiz Mohd Azmi MIA 2 Ng Mi Li MICPA 3 Stephen Oong MICPA 2 David Siew Kah Toong MICPA 2 Robert Tan Bun Poo MICPA 2 David Tan Lye Chong MIA 1 Wong Chee Leong MIA 0 Page

Malaysian Insurance Accounting Standards Working Committee No. of meetings: 0 Datuk Dr Abdul Samad Hj Alias (Chairman) (MICPA) Pushpanathan a/l S A Kanagarayar (MICPA) Jessica Chew Cheng Lan (BNM) Chia Kum Cheng (MICPA) Maggie Chong Sook Yin (LIAM) Choong Kooi Wah (MICPA) Ezamshah Ismail (LIAM) K. Komalavalli (BNM) Kang Hak Koon (PIAM) Lee Kok Wai (MICPA) Lee Lai Keong (PIAM) Lim Chong Beng (PIAM) Mohd Adib Ariffin (PIAM) Ng Kim Tuck (MICPA) Ng Yoke Ling (MICPA) Robert Tan Bun Poo (MICPA) Tee Choon Yew (PIAM) Tunku Yaacob Tunku Abdullah (LIAM) Yeo Took Keat (LIAM) Public Sector Accounting Working Group No. of meetings: 0 Pushpanathan a/l S A Kanagarayar (Convenor) Co-opted Members Asso Prof Azmi b Harun Dato Mohammad Aidid b Mohd Shariff Hj Othman bin Abdullah Saadatul Nafisah bt Baslir Ahmad Tan Poh Ling, Shirley Wu Chih Shan The terms and reference of the Accounting and Auditing Technical Committee are as follows: (a) To formulate auditing and assurance standards and other auditing statements for approval by Council. (b) To provide interpretations and guidance on MASB standards in the form of technical releases (TR). (c) To review exposure drafts and other consultation documents issued by the Malaysian Accounting Standards Board and the International Auditing and Assurance Standards Board. (d) To review and provide guidance on statutory financial reporting requirements and listing rules. (e) To undertake research in contemporary accounting and auditing issues and where appropriate, publish the research findings in the form of accounting research bulletins (ARB). (f) To establish and supervise working committees formed to produce recommendations on financial reporting and auditing standards and guidelines. (g) To liaise with international bodies of the accountancy profession on all matters of a technical nature, concerning or affecting accounting or auditing. Page

Administrative & Financial Affairs Committee No. of meetings: 2 Attendance Dato Nordin Baharuddin (Chairman) 1 Abdul Jabbar Abdul Majid 0 Ho Heng Chuan 1 (LOA-1) Datuk Robert Yong Kuen Loke 2 Terms of Reference:- 1. To be responsible for the smooth running of the Secretariat. 2. To be responsible for the preparation of budgets and financial statements of the Institute. 3. To supervise the staff employed by the Institute. 4. To organise the General Meetings, Council Meetings and Annual Dinner. 5. To liaise with the Trustees of the MACPA Educational Trust Fund with regard to the maintenance of the Building and the administration of the Fund. Commerce & Industry Committee No. of meetings: 1 Attendance Dato Yeo How (Chairman) 1 Abdul Halim Md Lassim 0 Chin Kwai Fatt 0 Datin Hjh Fadzilah bte Saad 1 Ho Heng Chuan 0 Datuk Robert Yong Kuen Loke 0 Co-opted Members Chai Lai Sim 0 Cho Oi Kwan 0 Chong Kee Hong 0 Vincent Seow 0 Terms of Reference:- 1. To ensure that the interests and views of members in commerce and industry are properly reflected in the Institute s policies and activities. 2. To develop, in conjunction with other committees of the Institute, such activities as are of interest to members in commerce and industry, particularly in relation to continuing professional development programmes in management accounting and other topics. 3. To develop management accounting and reporting guidelines for recommendation to Council. 4. To provide a consultative media for members in commerce and industry. 5. To co-ordinate liaison with local, regional and international bodies on all matters concerning management accounting and reporting. Page 10

Disciplinary Committee No. of meetings: 2 Attendance Chin Kwai Fatt (Chairman) 2 Abdul Jabbar Abdul Majid (Alternate Chairman) LOA-2 Sukanta K Dutt 2 Dr Veerinderjeet Singh 2 Dato Yeo How 0 Prof Hj Abdul Manap Said 2 Chua See Hua 2 Terms of Reference:- 1. On receipt of a formal complaint, to inform the defendant of the Committee s intention to consider the complaint and to hear the complaint. 2. Where the committee finds that a complaint has been proved, to take appropriate disciplinary action against the defendant which includes exclusion or suspension from membership in the case of a member and exclusion from the relevant register in the case of a registered student, censure, reprimand, admonishment or payment of a fine/costs. 3. To give notice of its finding and decision to the defendant. 4. To refer the complaint to the Council for a final decision if no unanimity is reached by the Committee. 5. To report all findings and decisions of the Committee to the Council for recording. Education & Training Committee No. of meetings: 2 Attendance Dato Abdul Halim Mohyiddin (Chairman) 2 Abdul Halim Md Lassim 2 Datin Hjh Fadzilah bte Saad 2 Loh Lay Choon 0 Pushpanathan a/l S A Kanagarayar 2 Teh Chee Ghee (resigned on 04.11.2006) 0 Dr Veerinderjeet Singh 2 Co-opted Members Prof Hj Abdul Manap Said 1 Dr Hafiz Majdi Ab. Rashid 0 Asso Prof Dr Arfah Salleh 2 Datuk Prof Dr Daing Nasir Ibrahim 0 Prof Dr Ibrahim Kamal Abdul Rahman 2 Mrs Joyce Yap 1 Prof Dr Juhari Samidi 2 Prof Madya Dr Mahamad Bin Tayib 1 Asso Prof Susan Tho Lai Mooi 1 Prof Dr Takiah Mohd Iskandar 0 Asso Prof Dr Ibrahim Ali 2 Dr Thillaisundaram 2 Prof Madya Dr Norman Mohd Salleh 1 Dr A Seetharaman 1 Asso Prof Dr Zakaria Abas 1 Page 11

Terms of Reference:- 1. To organise education and training programmes for students. 2. To plan and administer continuing professional development programmes for members. 3. To liaise with institutions of higher learning and other local and overseas professional organisations in matters pertaining to education and training. 4. To evaluate courses/qualifications referred to the Committee by the Membership Affairs Committee for the purpose of student registration and/or exemption from the Institute s examinations. 5. To regularly review the Institute s examination syllabus. 6. To develop and maintain a library to provide reference and research facilities for members and students. Examination Committee No. of meetings: 4 Attendance Abdul Jabbar Abdul Majid (Chairman) 4 Beh Tok Koay (Alternate Chairman) 3 Chin Kwai Fatt 2 (LOA-1) Goh Lee Hwa 3 Mohamed Raslan Abdul Rahman 1 Poon Yew Hoe 2 See Huey Beng 3 Sukanta K Dutt 2 (LOA-2) Tan Ghee Kiat 4 Terms of Reference:- 1. With Council s approval, to issue from time to time, regulations for the:- a) conduct of the examinations, and b) eligibility of students to sit for the examinations. 2. To give notice in writing to all students when entry for examinations is open. 3. With Council s approval, to appoint and remunerate examiners and moderators. 4. To recommend to Council the fees to be charged for the examinations. 5. To appoint and remunerate invigilators at each examination centre. 6. To consider reports of examiners and moderators and determine the examination results. 7. To notify students of their performance at the examinations. 8. To issue certificates to successful students at each examination. Page 12

Financial Statements Review Committee No. of meetings: 2 Attendance Pushpanathan a/l S A Kanagarayar (Chairman) 1 Abdul Halim Md Lassim 2 Loh Lay Choon 1 Ng Kim Tuck 0 Tan Chin Hock 2 Venkatramanan Viswanathan 1 Co-opted Members Choong Mei Ling 0 Lee Keen Pong 0 (LOA-1) David Siew Kah Toong 1 Robert Tan Bun Poo 2 Terms of Reference:- 1. To enhance the standards of the accountancy profession in Malaysia by assisting members to ensure that their responsibilities with regard to financial statements are discharged in compliance with statutory requirements and with the published recommendations and standards promulgated by the Institute from time to time, and with generally accepted accounting principles and auditing practices. This is to be done by a review of financial statements selected at random by the Committee or referred by a person to the Committee and by drawing the attention of the member responsible for their preparation, or for reporting on them, to any areas in which the presentation or content appears to fall short of such compliance. 2. To respond appropriately to questions and problems submitted to the Institute by members who may have difficulty in complying with the directives of this Committee. 3. As and when appropriate, to refer special items of difficulty or interest to the Council. 4. Where the matter is justified to authorise a member of the Committee to make a complaint to the Investigation Committee where in the opinion of the Financial Statements Review Committee disciplinary action should be taken against a member or members of the Institute arising out of the work undertaken by the Financial Statements Review Committee within its terms of reference. Page 13

Government Affairs Committee No. of meetings: 3 Attendance Dato Ahmad Johan Mohammad Raslan (Chairman) 3 Dato Abdul Halim Mohyiddin 0 Datuk Dr Abdul Samad Hj Alias 1 Ahmad Mustapha Ghazali 0 Lim Tian Huat 0 Dato Hj Maidin Syed Ali 0 Pushpanathan a/l S A Kanagarayar 3 Terms of Reference:- 1. To coordinate liaison with the Government on policies or any other matters pertaining to accounting and the profession. 2. To establish and supervise liaison committees with the Government, its Ministries or agencies in relation to Corporate Law. 3. To coordinate reviews of legislation or draft legislation as and when appropriate. Insolvency Practice Committee No. of meetings: 1 Attendance Lim Tian Huat (Chairman) 1 Tan Chin Hock 1 Co-opted Members Adam Primus Varghese b Abdullah 1 Chua See Hua 1 Datuk Gan Ah Tee 1 Gopal Sundaram 1 Jamhirah bte Ali 0 Khairudin b Rosli 0 Lim San Peen 1 Mak Kum Choon 0 Ng Chih Kaye 1 Ng Pyak Yeow 1 Nitin Nadkarni 0 Saidatul Ishan bte Abd Rahman 0 S Suhendran 0 Wong Chee Lin 1 Yap Wai Fun 1 Terms of Reference:- 1. To consider practical problems faced by members relating to receivership or liquidation and make appropriate recommendations to the relevant authorities. 2. To review and clarify any anomaly in law or regulations affecting insolvency practice and to liaise with the relevant authorities. 3. To prepare guidance notes on various aspects of insolvency practice. 4. To coordinate liaison with local, regional and international bodies on all matters concerning insolvency practice. Page 14

Investigation Committee No. of meetings: 4 Attendance Ho Heng Chuan (Chairman) 4 Datin Hjh Fadzilah bte Saad (Alternate Chairman) 4 Dato Ahmad Johan Mohammad Raslan 2 Ahmad Mustapha Ghazali 2 (LOA-1) Mohamed Raslan Abdul Rahman 2 See Huey Beng 2 (LOA-1) Teh Chee Ghee (resigned on 04.11.2006) 2 Terms of Reference:- 1. To consider any facts or complaints laid before it indicating that a member, provisional member or registered student of the Institute has become liable to disciplinary action. 2. Where the Committee is of the opinion that a prima facie case has been made out, it shall make a formal complaint to the Disciplinary Committee. 3. To request a member to support the formal complaint during a hearing before the Disciplinary Committee. 4. To request a member to support the decision of the Disciplinary Committee during a hearing before the Appeal Committee. Membership Affairs Committee No. of meetings: 4 Attendance Tan Ghee Kiat (Chairman) 3 Datin Hjh Fadzilah bte Saad 2 Dato Hj Maidin Syed Ali 0 Teh Chee Ghee (resigned on 04.11.2006) 1 Lim Tian Huat 0 Ng Kim Tuck 2 Goh Lee Hwa 3 Terms of Reference:- 1. To consider applications for membership. 2. To consider applications for practising certificates. 3. To consider enquiries of members pertaining to membership. 4. To consider applications from students for registration and exemption from examinations. 5. To recommend to Council fees to be charged for membership and issue of practising certificates. 6. To prepare guidance notes on various aspects of the Code of Professional Conduct and Ethics. 7. To provide counseling services to members on professional conduct and ethics (in accordance with the above Code) and other professional matters where possible, but so as not to infringe on matters within the purview of other Committees. 8. To promote the profession to the public in liaison with other relevant Committees. 9. To deal with correspondence from members and public where the subject matter does not fall within the ambit of other Committees. Page 15

Public Affairs Committee No. of meetings: 2 Attendance Datuk Robert Yong Kuen Loke (Chairman) 2 Ho Heng Chuan 2 Loh Lay Choon 0 Dato Hj Maidin Syed Ali 0 Dato Nordin Baharuddin 1 See Huey Beng 0 Sam Soh Siong Hoon 0 Tan Chin Hock 2 Co-opted Members Chia Kum Cheng 1 Esther Tan Choon Hwa 1 Terms of Reference:- 1. To organise programmes to enhance and project the image of the Institute and the profession. 2. To coordinate and organise all public relations activities of the Institute. 3. To develop and maintain contacts with the media. 4. To foster better understanding, relationship and co-operation between the Institute, the Government and the financial and business communities. 5. To be responsible for publication of promotional materials, including the Institute s journal and press releases. 6. To plan and organise the Institute s annual and regional conferences hosted by the Institute, and joint conferences with other professional bodies. Page 16

Public Practice Committee No. of meetings: 8 Attendance Sam Soh Siong Hoon (Chairman) 8 Peter Lim Thiam Kee 3 Mohamed Raslan Abdul Rahman 4 Poon Yew Hoe 2 Tan Chin Hock 6 Venkatramanan Viswanathan 0 Co-opted Members Abu Bakar Rajudin 4 Ahmad Shahrul Hj Mohamad 3 Heng Ji Keng 4 Dato Raymond Liew 3 (LOA-1) Lim Kok Beng 0 Mohd Afrizan Husain 2 Mohd Noor Abu Bakar 5 Ng Pyak Yeow 6 David Siew Kah Toong 3 Tong Siew Choo 7 Gary Yong Yoon Shing 3 Terms of Reference:- 1. To identify the professional development needs of smaller practices. 2. To promote the professional standing of members in practice. 3. To assist members in practice management. 4. To provide a forum for interaction and consultation for members in practice. 5. To formulate and provide training courses for staff of smaller practices. Page 17

Tax Practice Committee No. of meetings: 2 Attendance Beh Tok Koay (Chairman) 1 Goh Lee Hwa 0 Peter Lim Thiam Kee 2 Poon Yew Hoe 2 Sam Soh Siong Hoon 0 Dr Veerinderjeet Singh 2 Co-opted Members Lee Voon Siong 1 Lim Poh Chin 0 M J Monteiro 1 Ng Kim Lian 1 Ong Lay Seong 2 Phoon Sow Cheng 0 Soo Huk Kheong 0 Tang Chin Fook 1 Robert Teo Keng Tuan 1 Tong Siew Choo 2 Kenneth Lim Tiong Beng 1 Naomi Chee Mee Ching 1 Terms of Reference:- 1. To serve as key liaison between the Institute and Government on taxation matters. 2. To participate in Government s consultation process on the development, revision and implementation of tax legislation and regulations. 3. To consider practical problems faced by members relating to the application of tax legislation and compliance with the regulations of the Inland Revenue Board. 4. To be responsible for the Institute s publications on taxation and related matters. Page 18

PRESIDENT S STATEMENT Once again I am pleased to report on a very full and satisfying year of activities across the complete spectrum of the Institute s operations and to highlight some of the new initiatives that the Institute has progressed on your behalf. Dato Abdul Halim Mohyiddin In the past 12 months, we continued our path towards fulfilling the Institute s vision as set out in our Medium Term Strategy and Action Plan 2006-2008 To be the premier professional business qualification in Malaysia, comparable to the best in the world. The primary objectives of the Strategic Plan remain unchanged, which include providing education and training, maintaining the professional and technical standards of our members and to serve as thought leaders on professional and technical issues. Communicating the value of the CPA Malaysia qualification to the next generation of accountants occupies a major part of our on-going strategy and requires significant long-term investment. In this regard, the enhancement and promotion of the CPA Malaysia qualification has been high on our agenda and gathered momentum. With the guidance and professional advice of a brand consultant, one of the most significant output has been the Institute s branding exercise, which is anchored by the overall brand theme Success, Achievement and Accomplishment that underlies the value of membership to MICPA. Positioning the CPA Malaysia brand as the designated choice was a major task in our initial modest brand awareness programme. With the assistance of the Young CPA Group, the Institute conducted career talks at schools, universities and institutions of higher learning and participated in career fairs and exhibitions across the country. New marketing collaterals including publicity leaflets, corporate brochure, posters and display panels have been produced for use in career fairs and exhibitions. The Secretariat is also mindful that a two-way flow of information is important. We have responded positively to the call from members at last years Annual General Meeting for a more coordinated approach in our communications process and to be more visible and proactive. Emphasis has been given to improving the framework for communication between the Institute and members. To create awareness on the Institute s activities, we have contributed regular articles to other professional bodies journal and have produced the CPA e-newsline, a monthly electronic newsletter designed to provide members, students and the public with quick updates on recent developments at the Institute Page 19

and in the business environment. It is inspiring to note that we have received positive feedback from members on these initiatives. In the coming year, the Institute will embark on a more aggressive marketing strategy to position the CPA as a Number 1 Business Professional. We have also focused on improving our marketing strengths with the formation of a new Marketing Department in order to be more customer-orientated and to raise the profile of the Institute to various stakeholders. The development and delivery of new and exciting outreach activities have been planned to promote and attract new entrants to the CPA Malaysia programme in line with our overall brand theme. We will continue to highlight the significant value a CPA can add to business by showcasing that CPAs are powerful business partners and highlight our accumulated strong assets in terms of our technical expertise. We will also communicate that we have a strong pool of successful luminaries and business individuals in our fold of CPAs and the diverse roles they undertake. The Institute continued in its efforts to seek mutual recognition of the CPA Malaysia qualification with overseas professional accountancy bodies and I am pleased to report that our efforts are slowly taking shape. Following our initial successful effort to gain exemptions towards the ACA Qualification of The Institute of Chartered Accountants in England and Wales (ICAEW) in 2004, I am pleased to report that the Association of Chartered Certified Accountants (ACCA) have just completed an independent review of the CPA Malaysia qualification. MICPA and ACCA are in the process of working out Mutual Recognition Agreement (MRA) to set out the terms and basis upon which recognition for membership of qualified members of each body may occur. We will inform members of the arrangements in due course. The success of the endeavour should provide an opportunity for young Malaysian CPAs to attain an additional qualification that will further increase the career mobility of Malaysian accountants across borders and enhance the opportunities of exporting professional services. The initiative also helps to foster a close working relationship between the bodies and allows us to share best practices in education and training. As highlighted in last year s annual report, the Institute had undertaken a review of the Advanced Stage Examination (ASE). The ASE has been restructured into four modules from the earlier three modules. Module D, which covers accounting, financial reporting and auditing has been split into two separate modules as the syllabus has become increasingly challenging resulting from the changes in international accounting and auditing standards. The new Module D focuses on advanced topics in accounting and financial reporting whilst the new Module E focuses on competence requirements for audit professionals, covering the advanced aspects and issues relating to auditing and other assurance engagements, the legal and professional environment, and assessment and advice on corporate governance and business controls. The new examination structure took effect from the November 2006 examination. At the Extraordinary General Meeting held last year, members had passed the resolution to pave way for the admission of a new class of members who shall be entitled to use the designation Certified Financial Accountant (CFiA). The CFiA designation will be awarded to persons who possess a recognised degree in accountancy who have completed the CFiA Professional Competence Programme and obtained the relevant 3 years approved practical experience. Alternatively, students who have completed Modules C and D of the ASE may be admitted as members who are entitled to use the designation Certified Financial Accountant (CFiA) and having obtained the relevant 3 years approved practical experience. The CFiA qualification will equip accounting graduates with the knowledge and competencies expected of a professional accountant in business. They will be well qualified to build a career in accounting, finance and management in the business and public sectors. Although the CFiA is a stand-alone professional qualification in its own right, holders enjoy immense flexibility in attaining the next level of professional achievement the prestigious and challenging Certified Public Accountant (CPA) qualification. The Institute will promote the CFiA qualification to graduates undertaking the Bachelor of Accountancy degree with the aim to expand and strengthen our membership base. The Education and Training Committee is in the process of finalising the syllabus for the CFiA qualification before the programme is officially launched in August 2007. The CFiA is your bridge to greater achievements A review of the Articles of Association and Bye-laws was undertaken in 2006 as a result of the CFiA qualification. The proposed amendments were approved by a general meeting of members held on June 24, 2006. The main changes to the Articles of Association and Bye-laws are to provide for the admission of a new class of members who shall be entitled to use the designation Certified Financial Page 20

Accountant (CFiA) and their rights of membership. A CFiA will have the same rights of membership as a member with the CPA status, with the exception of the right to vote at general meetings of the Institute and the right to carry out any duty reserved to CPAs. They will be entitled to access the full range of services provided by the Institute to members. Accountancy is not practised in a vacuum. A modern accountancy profession must be dynamic, accessible and relevant to changing market needs. We operate in a highly competitive environment, where differentiation is fundamental in ensuring future growth. The Institute continued to deliver Continuing Professional Development (CPD) Programmes throughout the year to help members keep abreast of current developments and to build on their knowledge, skills and experience. We organised training programmes in the form of conferences, seminars and workshops on topics of current interest to members. Our Education and Training Department will continue to roll-out more CPD programmes which is a manifestation of our commitment to life-long learning and the up-keeping of professional knowledge to enable members to maintain their competitive edge in an ever evolving competitive environment. Members should actively participate in these programmes to remain at the cutting edge of their profession so as to provide value-added services to clients, employers and other stakeholders. The Council issued the Statement on CPD in January 2007, which implements International Education Standard for Professional Accountants (IES) 7, Continuing Professional Development: A Programme of Lifelong Learning and Continuing Development of Professional Competence. IES 7 prescribes mandatory continuing professional development requirement for all professional accountants, including those working in public practice, in commercial, governmental, academic and non-for-profit entities to ensure that they develop and maintain competence relevant to their work and professional responsibilities. It is now mandatory for members to complete at least 120 hours of CPD in each rolling cycle of three years, of which 60 hours should be verifiable structured learning activities. Members are required to submit an annual declaration as to the compliance with the CPD requirements prescribed in the CPD Statement. A CPD on-line record functionality has been added to the MICPA website, which facilitates members to update their CPD records. In the face of globalisation, it is crucial that the Institute s Code of Ethics conforms with international standards in order to maintain investors confidence in the quality of services provided by Malaysian accountants. The Institute requires that members adhere to the Code of Professional Conduct and Ethics to ensure that members uphold their professional values in all their work. In this regard, the Council has undertaken a revamp of the MICPA Code of Professional Conduct and Ethics, to be in line with the revised Code of Ethics for Professional Accountants issued by IFAC. The revised Code is intended to strengthen the self-regulatory regime of the profession, and hence public confidence in the standards and quality of services provided by CPAs. The revised Code emphasises that auditors need to be constantly vigilant to identify threats to independence and apply appropriate safeguards to eliminate such threats. The Code also provides in-depth guidance for members in business. All these changes are aimed at restoring trust in the accountancy profession and rebuilding investor confidence to the credibility of financial information released by companies, which are used for making investment decisions. The revised Code has been approved by the Council, which will soon be issued to members. In keeping with our stature as a leading professional accountancy body, the MICPA is recognised as an informed and valued commentator on key business issues. It is important to note the Institute s role in contributing and providing a significant source of intellectual capital across a diverse range of finance, accounting and business issues on draft legislation, law reforms and regulation during its early stages of development. Through negotiations and submissions, we are able to highlight to government and regulators any unintended or adverse consequences for the profession and the community at large. We will continue to act as a recognised voice to protect members interests. In recognition of the increasingly global nature of the accountancy profession, the Institute seeks opportunities to participate and contribute to the international accounting organisations. The Institute s involvement is focused on areas that are most relevant to the Malaysian environment. Currently, two of our Council members are serving on the IFAC Board. We have also contributed to the work of the International Auditing and Assurance Standards Board, the International Accounting Education Standards Board and the Developing Nations Committee. In the area of international co-operation, the Institute certainly welcomes the exchange of information between fellow accountancy bodies to strengthen Page 21

Membership Statistics as at December 31, 2006 Members in Practice Members not in Practice Total Membership CPA Graduate Members Female Members Male Members Page 22

professional relationship and understanding of the current developments in the accountancy profession and business environment in the various countries. A delegation visit from the Institute of Cost & Works Accountants of India was made to the Institute during the year, which certainly served to strengthen the friendship between the two accountancy bodies and open up further opportunities for close co-operation on professional activities where there may be mutual benefit for members. The Institute is certainly undergoing challenging times. We will need to work hard to strengthen the Institute s position in a rapidly changing and highly competitive environment. I am confident that I can count on the continued support of members in our challenge to maintain the recognition of the CPA Malaysia qualification as a premier brand of business qualification and further advance the Institute s position as a pre-eminent professional body. Finance The Institute achieved a surplus of RM282,600 compared to a deficit of RM97,200 in 2005. Total income increased by RM221,400 or 7% due mainly to the increase in income from member and student sources resulting from the revised rates of annual subscriptions and fees. Total expenses decreased by RM152,100 or 5% due mainly to a non-recurring professional fee of RM161,700 incurred in 2005 for the review of the MICPA qualification by an education consultant with the aim of achieving recognition by the Chartered Accountants Group. Total assets increased by RM118,500 or 10% due mainly to the substantial increase in fixed deposits by RM250,000. The increased in total assets was partly off-set by the amortization of the development cost of study manuals amounting to RM120,500. Total liability reduced by RM164,000 or 12% resulting mainly from the repayment of term loan, which was obtained to finance the development cost of study manuals. The Institute has an accumulated fund of RM75,900 as at December 31, 2006 compared to an accumulated deficit of RM206,600 in previous years. The Institute was able to rebuild its reserves due to a revision of the annual subscriptions and fees payable by members and students, which took effect from the financial year 2006. The Council will continue to undertake fund raising activities to increase the Institute s financial resources in order to enable the Institute to invest in the key initiatives set out in the Strategic Plan. Membership During the year, a total of 66 new members were admitted. After taking into account members who resigned or were excluded from membership for failure to pay the annual subscriptions/practising certificate fees, a net increase of 6 members was recorded. Of the new admissions, 56 members were admitted from the register of students, having completed the Institute s examinations and fulfilled the prescribed practical experience requirements. The other new members were admitted on the basis of their professional accountancy qualifications, which are recognised by the Institute. This category of members are required to either pass the Institute s Admitting Examination, which consists of two papers focusing on taxation law and the regulatory and financial framework of Malaysia, or demonstrate their knowledge at an interview and supported by evidence of relevant work experience in Malaysia. There has been no significant change in the membership profile. As at December 31, 2006, 46% of the members worked in public practice firms, MICPA President, Vice-President and Ms Tan Shook Kheng listening to matters raised by members at the AGM. Council Meeting in progress. YBhg Tan Sri Azman Hashim receiving Anugerah Presiden 2006 from YB Tan Sri Nor Mohamed Yakcop, Minister of Finance II. Page 23

Membership Status Membership by Field of Employment Financial Institutions 5% (143) Public Sector 0.5% (15) Education 0.5% (28) Consultancy and Others 3% (90) Retired 6% (179) Public Practice 14% (432) Commerce and Industry 39% (1,211) Employees of Accounting Firms 32% (990) Membership by Age 56 & above 19% (591) 21-30 5% (135) 51-55 9% (289) 41-50 33% (1,022) 31-40 34% (1,051) Page 24

of whom 14% were members holding practising certificates. A total of 47% of the members were employed in the business and 1% in education and the public sector. Retired members accounted for 6% of the total membership. During the year, a total of 39 female members were admitted, constituting 59% of the total new admissions. The proportion of female members increased by 1% to 36% at the close of 2006. MEMBERSHIP STATISTICS As at December 31 Net 2006 2005 Increase In Practice 432 417 15 Not in Practice 2,656 2,665 (9) Total 3,088 3,082 6 Provisional Members A total of 10 new provisional members were admitted during the year. These are graduate members who have completed the Institute s examinations but have not fulfilled the practical experience requirement for admission as full members. Provisional members enjoy the full range of membership services and all other privileges of a qualified member with the exception of the right to vote in any general meeting of members, the right to carry out any duty reserved to members of the Institute, and the right to hold himself out as a principal or partner of an accounting firm. Services to Members To maintain and grow our position as a pre-eminent leading professional body, we must constantly improve the services and support provided to our members. The Institute demonstrates its commitment to this objective in various ways. As a member-based organisation, one of the Institute s key functions is to provide support and services that meet the needs of different segments of the membership. Over 45% of the members are involved in practices of all sizes and more than 45% work in all sectors of commerce and industry. Of paramount importance is to ensure that members maintain high professional standards and technical excellence in the performance of their work and services. The Institute maintains a network of committees to help identify and meet the various professional needs of different segments of the membership. The Institute provides members with technical updates and guidance on all aspects of CPAs work covering accounting, auditing and assurance, taxation, and insolvency practice. Continuing Professional Development (CPD) courses on a broad scope of topics are organised to meet the diversified needs of members. The Institute continues to take advantage of IT to improve the communication process with members. E-circulars and alerts are sent regularly to keep members updated on recent developments at the Institute as well as on technical updates. The MICPA website is constantly being enhanced to improve its service functionality and interactivity. A CPD on-line record functionality has recently been added to the website, which facilitates members to update their CPD records. The Institute constantly seeks to offer better services that support members in their careers and professional work. Continuing Professional Development As highlighted in the earlier pages of this report, the Council has approved the issuance of the Statement on Continuing Professional Development that prescribes the continuing professional development requirements with which members should comply for CPD reporting periods beginning on or after January 1, 2007. Members have a continuing duty to maintain their professional knowledge and skills at the level required to ensure that their clients, employees and other stakeholders receive the advantage of competent professional services based on current developments in practice, law and business. It is recognised that to achieve this needs more than just work experience, participation in a planned programme of CPD is the most effective way for members to maintain and enhance their professional competence. CPD programmes in the form of seminars, workshops, public forums and evening talks were offered throughout the year to help members meet their CPD requirements. A wide range of topics were covered including updates on accounting standards, financial reporting and changes in corporate law and tax legislation. For the benefit of members involved in taxation service, a series of workshops on tax audit and application of public rulings of the Director General of Inland Revenue were conducted. Page 25

With the introduction of the new and revised Financial Reporting Standards effective January 1, 2006, the Institute in collaboration with the Malaysian Institute of Accountants, the Association of Chartered Certified Accountants, the Chartered Institute of Management Accountants and CPA Australia, jointly organised a series of one-day awareness seminar on Financial Reporting Standards in the major cities. A panel of distinguished speakers from MASB and practitioners were invited to lead discussions in the seminars that have received overwhelming response from the accountancy profession. A two-day MICPA-Bursa Malaysia Business Forum 2006 was held in September 2006, featuring the theme Moving Up the Value Chain Innovation, Capacity Building & Competitiveness. YB Dato Seri Rafidah Aziz, Minister of International Trade and Industry, delivered the Opening Keynote Address. A panel comprising corporate leaders, senior Government officers, bankers, business advisors and tax consultants led discussions on a number of topical issues relating to the challenges and strategies in moving up the value chain. The Young CPA Group organised the inaugural Young CPA Malaysia Symposium in July 2006, featuring the theme Gearing Up Young Business Professionals for the Competitive World. The Vice President of MICPA, YBhg Dato Nordin Baharuddin delivered the Opening Keynote Address. Broadening the intellectual and professional horizons of the young genre of business professionals by highlighting contemporary issues and challenges impacting their professional and personal lives was the main objective of the symposium. Public Practice The Public Practice Committee is charged with the responsibility to identify the professional development needs of the members in public practice, especially the small and medium sized practices. The Committee also serves as a forum for consultation and discussion of issues relevant to members in practice. The major project of the Committee was the development of an Audit Guide for the audit of financial statements of limited companies which was published and available for sale at the end of 2006. The Audit Guide was intended to provide comprehensive guidance on the performance of audit of financial statements of limited companies in accordance with International Standards on Auditing, which have been adopted for application in Malaysia and to maintain quality control for audit work. The Audit Guide covers the development of an audit plan, audit programme and audit management. It also contains sample audit working papers, internal control questionnaire and checklists on disclosure requirements. The project, undertaken with the technical support from Deloitte KassimChan, Horwath KL and Monteiro & Heng, is for the benefit of small and medium sized practices. A series of two-day workshops on the usage of the Audit Guide has been planned in the major cities since January 2007. The objective of the workshops is to equip the participants with the technical knowledge and skills in conducting audits of financial statements in accordance with International Standards on Auditing, which have been adopted for application in Malaysia. Informal gathering of members were organised regularly to keep members stay abreast with current developments affecting members professional work. An informal gathering of members was held in conjunction with a Forum on Corporate Law Reform in Malaysia Key issues impacting Company Auditors, which was addressed by the Chairpersons of Working Groups B and C of the Corporate Law Reform Committee. The objective of the forum was to highlight the key issues and proposals in the corporate law reform that have an impact on the duties and responsibilities of auditors, particularly towards enhancing corporate governance and protection of shareholders interests. The Technical Reference Panel, which provides advisory services to members, received an increased number of enquiries during the year. The subject matter related largely to the application of the new and revised Financial Reporting Standards, tax legislations and company law. The Institute has relaunched the Technical Advisory Q&A in the February issue of The Malaysian Accountant 2007. The Committee is in the process of organising a Practitioners Forum, scheduled for October 2007. The event is intended to be held in conjunction with a study tour to Kunming and Lijiang, China. Commerce and Industry Almost half of the Institute s members are engaged in Commerce and Industry. The Commerce and Industry Committee is charged with the responsibility to identify and recommend Continuing Professional Development (CPD) needs of members in business to the Education and Training Committee for CPD activities to be organised. Page 26

The Committee had organised an Evening Talk on The Importance of Estate Planning in December 2006. The objective of the Evening Talk was to create awareness of the importance of estate planning in order to avoid family disputes and uncertainties. The Committee assisted in the organisation of the MICPA-Bursa Malaysia Business Forum 2006. The two-day Business Forum held in September 2006 was targeted at company directors and senior executives. YB Dato Seri Rafidah Aziz, Minister of International Trade and Industry, delivered the Opening Keynote Address focusing on the theme of the Business Forum, Moving Up the Value Chain Innovation, Capacity Building & Competitiveness. The Committee continues to undertake the review of winning articles published by IFAC, resulting from an annual competition held by IFAC under the Articles of Merit programme. The articles for the 2006 competition cover a wide variety of topics, ranging from performance measurement, lean accounting, risk management, corporate social responsibility to the future of finance. Where the Committee feels that the topics are relevant and beneficial to members, the articles will be published in The Malaysian Accountant. Government Relations One of the crucial activities of the Institute is to forge close working relationships with the Government and the regulatory bodies to enable the Institute to advance members views on policy and legislative issues. This is particularly important at a time when significant policy measures and changes to the securities law, companies law, taxation laws and other business legislation are under-going reforms to improve the efficiency of the public service delivery system so as to strengthen the nation s economy and capital market. The Institute made a number of submissions and representations to the Ministry of Finance, the Securities Commission, the Companies Commission of Malaysia, the Inland Revenue Board and relevant Government departments. The views and proposals provided by the Institute in response to proposed legislative reforms represent important perspectives from the profession and the business community it serves. The Institute also channels members concerns on regulatory guidelines relating to the operation of capital market, governance of companies and the income tax system. The Institute continues to participate in dialogue sessions held by the Government with the private sector. These include the annual dialogue with the Ministry of Domestic Trade and Consumer Affairs, the Companies Commission of Malaysia annual dialogue, half yearly meetings of the Customs-Private Sector Consultative Panel and regular dialogues with the Inland Revenue Board. The Institute also participates in technical level meetings with the various regulatory bodies to discuss implementation issues arising from legislative changes. The Institute continues to support the Capital Market Graduate Training Scheme implemented by the Securities Commission to enhance human resources for the Malaysian capital market since its introduction in 2003. It involves one month of intensive training conducted by the Securities Commission and eleven months of on-the-job training in participating organisations. The Institute also helps to place trainees in CPA firms to undergo practical training. Technical Activities Technical activities form a key component of the Institute s work programme, spanning over all major aspects of members professional work. In the area of accounting, the Institute continues to participate in the standard-setting process of MASB. The Institute serves on a number of MASB s project working groups and its Issues Committee. The Institute provides feedback on proposed new standards and discussion documents during the Minister of Finance II holding the Audit Guide for Practitioners. YB Dato Seri Rafidah Aziz, Minister of International Trade anad Industry, delivering the Keynote Address at the MICPA- Bursa Malaysia Business Forum 2006. Participants listening attentively at an Evening Talk. Page 27

consultation process and makes representations to MASB on interpretation issues. MASB standards are issued to members for compliance as soon as they are published by MASB. Corporate advisory, taxation and insolvency services have become increasingly important in the components of the members work. The Institute monitors changes to the policies and guidelines issued by the capital market regulators, revenue authorities and other relevant authorities. Technical updates and guidance are issued promptly to assist members carry out their work effectively. Setting standards and guidelines on auditing and other assurance services remains a core area of the Institute s technical activities. We must maintain high professional and technical standards to secure public confidence in the work performed by members. The Institute s commitment to promulgate International Standards on Auditing, Assurance Engagements and Related Services issued by the International Auditing and Assurance Standards Board (IAASB) of IFAC ensure that we are at par with global benchmarks. The Institute undertakes constant review of the standards and adopt the standards for compliance by members through a due process. The Institute maintains close working relationship with MIA in carrying out its technical activities. Previously, a Joint Working Group on Auditing (JWGA) was established to undertake the review of new/revised International Standards on Auditing (ISAs) and exposure drafts of proposed ISAs and other pronouncements issued by IAASB and to submit responses to IAASB. The JWGA also makes recommendations on the adoption of ISAs and other IAASB pronouncements for approval by the Councils of MIA and MICPA. However, the JWGA was dissolved in January 2007 and its terms of reference have been incorporated into the joint meeting of MIA s Accounting and Auditing Committee (AAC) and the Institute s Accounting and Auditing Technical Committee (AATC). A Joint Working Group on Securities Guidelines has also been formed to ensure that the two Institutes adopt a consistent approach in making representations to the capital market regulators and in providing technical guidance to members. Accounting and Auditing Standards The Accounting and Auditing Technical Committee (AATC) has overall responsibility for the development and review of accounting, auditing and reporting standards and guidelines. The Committee is supported by the Joint Working Group on Auditing (JWGA), three specialist working groups and ad hoc task force appointed to undertake specific projects. Based on the recommendation of the JWGA and the joint meeting of MIA s AAC and the Institute s AATC, the following IAASB pronouncements had been issued in September 2006 as MICPA Exposure Drafts for comment: ISA 230 (Revised) Audit Documentation ISA 700 (Revised) The Independent Auditor s Report on a Complete Set of General Purpose Financial Statements ISRE 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity The Council, upon the expiration of the exposure period, has approved ISA 230 (Revised), ISA 700 (Revised) and ISRE 2410 as approved auditing and assurance standards. ISA 230 (Revised) shall be effective for audits of financial information for periods commencing on or after January 1, 2008 and ISA 700 (Revised) shall be effective for auditor s reports dated on or after July 1, 2008. ISRE 2410 shall be effective for review of interim financial information for the periods commencing on or after July 1, 2007. The Council has also issued the following International Auditing Practice Statements (IAPS) during the year to members for guidance: IAPS 1005 The Special Considerations in the Audit of Small Entities IAPS 1014 Reporting by Auditors on Compliance with International Reporting Standards The IAASB has issued four final redrafted ISAs and eleven exposure drafts of revised and redrafted ISAs as part of its comprehensive program to improve the clarity and structure of IAASB standards. The four final redrafted ISAs are ISA 240 (Redrafted), The Auditor s Responsibilities Relating to Fraud in the Audit of Financial Statements, ISA 300 (Redrafted), Planning an Audit of Financial Statements, ISA 315 (Redrafted), Identifying and Assessing the Risks of Material Misstatements Through Understanding the Entity and its Environment and ISA 330 (Redrafted), The Auditor s Responses to Assessed Risks. Based on the recommendation of the joint meeting of MIA s AAC and the Institute s AATC, the Institute has issued the four final redrafted ISAs and eleven exposure drafts during the year as MICPA Exposure Draft for comment. Page 28

The Joint Working Group on Securities Guidelines (JWGSG) has had a busy agenda. It made several submissions and representations to the Securities Commission (SC) on issues relating to the proposed amendments to the Prospectus Guidelines and Securities Industry Act, 1983 (SIA). The Institute was also invited by the SC to discuss its recommendations to develop a more effective disclosure-based system of regulation. The JWGSG is in the midst of finalising the guidance on the preparation of pro forma financial information for purposes of submission of corporate proposals to the SC. The guidance is expected to be ready for publication by the third quarter of 2007. An amendment to section 49(1) of the Securities Industry Act 1983 (SIA) relating to the auditor s report for a fund manager and dealer gave rise to an issue of concern. This is a situation where the statutory financial reporting requirements are inconsistent with auditing and assurance standards. The Institute, jointly with MIA, have made representations to the SC regarding the matter. Pending the resolution of the matter with the SC, the Institute has advised members to comply with the relevant auditing and assurance standards in the performance of their reporting function. The following projects of the JWGSG are on-going: Development of guidance on auditor s duty to report breaches of securities laws and rules of the exchange to the relevant authorities (whistle blowing role) under the SIA. Development of guidance on the reporting accountants responsibilities relating to their participation in the due diligence working group in connection with the submission of corporate proposals to the SC. Development of guidance on the accounting treatment for Securities Borrowing and Lending transactions. Development of the revised guidance on the Accountants Reports for Prospectuses. During the year, MASB has issued FRS 6, Exploration for and Evaluation of Mineral Resources and Amendment to FRS 1192004, Employee Benefits Actuarial Gains and Losses, Group Plans and Disclosures, which are effective for annual periods beginning on or after January 1, 2007. The MASB has also issued the following exposure drafts of proposed MASB Standards and IC Interpretations for consultation: ED 52 Private Entity Reporting Standards ED 53 Framework for the Preparation and Presentation of Financial Statements ED 54 Amendment to FRS 121 The Effects of Changes in Foreign Exchange Rates Net Investment in a Foreign Operation ED 55 Proposed Amendments to Financial Reporting Standards Draft IC Reassessment of Embedded Interpretation 9 Derivatives Draft IC Interim Financial Reporting and Interpretation 10 Impairment The AATC has assigned a number of working groups to undertake a review of the exposure drafts and to provide comments to MASB. The Proposed Amendments to Financial Reporting Standards (ED 55) are intended to converge the 10 FRSs with the relevant International Financial Reporting Standards (IFRS). The Institute has, jointly with MIA, submitted the comments on the International Financial Reporting Standards on Small and Mediumsized Entities to MASB. At the International level, the Institute s nominee to the IAASB, Mr Sukanta K Dutt has completed his term in December 2006. During his term, he had chaired the Task Force that had completed the review Young CPA Group organised a talk on Image Power. MICPA s Publications. Participants at the MICPA-Bursa Malaysia Business Forum 2006. Page 29

and revision of ISA 800, Special Considerations Audits of Special Purpose Financial Statements and Specific Elements, Accounts or Items of a Financial Statement, and ISA 805, Special Considerations When Reporting on Summary Financial Statements. Mr Dutt had also been a member of the Task Force to review and revise ISA 620, Using the Work of an Expert, up to the time of completion of his term. Company and Securities Law The Corporate Law Reform Committee (CLRC), which was established by the Companies Commission of Malaysia (CCM) to undertake the review of Malaysia s corporate law with the objective to creating a more conducive legal and regulatory structure that will provide a cost effective, transparent and competitive environment for businesses in Malaysia, has issued five more consultative documents for public comment. The five consultative documents set out proposed reforms to the Companies Act 1965 relating to Capital Maintenance Rules and Share Capital: Simplifying and Streamlining Reduction of Capital, Share Buy Back and Financial Assistance; Members Rights and Remedies; Creating a Conducive Legal and Regulatory Framework for Businesses; Company Liquidation-Reforms and Restatement of the Law; and Clarifying and Reformulating the Directors Role and Duties. The Institute, jointly with MIA, have undertaken a review on four of the five consultation documents and submitted our comments and proposals to the CLRC. The Committee is still in the process of reviewing the consultative document on Simplifying and Streamlining Reduction of Capital, Share Buy Back and Financial Assistance. The Corporate Practice Consultative Forum (CPCF) was established by CCM, with the aim to providing a platform for professional bodies to provide feedback, views and proposals on the practices, regulations and programmes implemented by CCM pursuant to the Companies Act 1965. The Forum comprises seven professional bodies, including the Institute. The Institute had submitted a list of practical issues and proposals relating to the Companies Act 1965 for discussion by the Forum, which held two meetings in 2006. The Securities Commission (SC) continues to introduce and implement measures to enhance the framework for the enforcement of securities laws to allow for more effective action on corporate improprieties. Amendments were made to the securities law to create a more facilitative regulatory environment for capital raising and to meet future challenges from regional competition and globalisation. The Institute maintains an on-going consultative relationship with the SC to discuss practical issues relating to the existing regulations and proposals for change with the view to providing a more facilitative environment for capital raising. The Institute participates actively in the consultative process of Bursa Malaysia Berhad relating to changes to the Listing Requirements. In addition, the Institute is also involved in the various focus groups of Bursa Malaysia in relation to new measures or products being introduced by Bursa Malaysia. Insolvency The main activity of the Insolvency Practice Committee (IPC) during the year was to review the Consultative Document on Company Liquidation Reforms and Restatement of the Law, issued by the Corporate Law Reform Committee. The Committee held a joint meeting with MIA s Insolvency Practice Working Group to discuss on the Consultative Document. Mr Lim Tian Huat, Chairman of the IPC who is also the Chairman of CLRC s Working Group D, is responsible for the review of the laws relating to Insolvency and Corporate Securities. Four other members of the IPC also sit on the CLRC Working Group. The Committee is in the process of developing Insolvency Guidance Notes on a number of practical issues arising from the application of the Companies Act 1965 including the eligibility of auditors to act as liquidator of audit clients, effective date of cessation of office of liquidator, vacation of office of liquidator due to death and requirements on lodgement of Form 75, Liquidator s Account of Receipts and Payments and Statement of the Position of Winding Up. The Committee, as a special interest group, continues to be a member of INSOL International, an international organisation of insolvency professionals. The affiliation provides opportunities for members engaged in insolvency practice to keep up to date with the global changes and developments in insolvency law and practices. The INSOL journal serves as a useful source of reference on significant insolvency issues and developments. Taxation The Tax Practice Committee assumes the role as the key liaison between the Institute and the Government on taxation matters. The Committee makes regular representations to the Government and the revenue Page 30

authorities on behalf of members participates in the Government s consultation process on the development, revision and implementation of tax law and regulations. The Institute continues to work in close co operation with the Malaysian Institute of Accountants (MIA) and the Malaysian Institute of Taxation (MIT) in making submissions to the Inland Revenue Board (IRB) concerning practical issues encountered by members in the application of tax legislation, and the rules and regulations issued by the IRB. During the year, several dialogue sessions were held with the Revenue Management Department and the Deputy Director General of the IRB to arrive at practical solutions to the problems. The three Institutes have jointly submitted a memorandum to the IRB concerning tax audit and tax investigation in July 2006. A separate memorandum setting out the three Institutes comments on the IRB s proposed Framework on Tax Audit and Framework on Tax Investigation was submitted to the IRB in October 2006. A dialogue session was held in December 2006 between the IRB and the professional bodies to address issues raised by the professional bodies. One of the key issues of concern during the year was the new licensing requirements for tax agents issued by the Ministry of Finance. The Institute, jointly with MIA and the Malaysian Institute of Chartered Secretaries and Administrators (MAICSA) submitted a follow up memorandum to the Ministry highlighting concerns with the inconsistent practical experience requirements for applicants for tax agent license; the submission of client information together with applications for renewal of tax agent license; and the recognition of budget seminars organised by professional bodies recognised in the Accountant s Act. The Government has established a Taxation Review Panel to undertake a review of Malaysia s taxation system. The Institute, jointly with MIA and MIT, have submitted proposals on the tax treatment of the property development and construction industry to the Taxation Review Panel for consideration. The Tax Practice Committee continues to participate in the IRB s consultation process relating to the development of Public Rulings, which provides guidance on the interpretation of the Director General of Inland Revenue in respect of a particular provision in the tax law, and the policy and procedures that should be applied. The Public Rulings serves as a useful guide to both taxpayers and the IRB officers in the application of the law. Currently, the Institute is treated as trade association for tax purposes and its income is taxed at scale rates. In light of the Public Ruling 6/2005 on Trade Associations, the Institute, jointly with MIA and MAICSA, have submitted a memorandum on the tax treatment of professional bodies on the mutuality principle, under which all income derived from members activities and used for members benefits is exempt from tax and income derived from nonmembers activities is taxed at scale rates, to the IRB for consideration. The Institute, jointly with MIA, have submitted a number of proposals relevant to the 2007 national budget theme, Enhancing Competitiveness and Sharing Economic Prosperity, to the Ministry of Finance. The Committee continues to represent the Institute at the half-yearly meetings of the Customs-Private Sector Consultative Panel. The Committee is responsible for the publication of the CPA Tax and Investment Review, which contains annual updates on tax laws and regulations, Government policies and guidelines on investment and incentives, and other pertinent information on doing business in Malaysia. It also provides a summary of recent tax cases and an index of current amendments to the Income Tax Act and related legislation. The publication was undertaken with the technical support of six large accounting firms. The Committee also assumes the responsibility to oversee the publication of the annual budget commentary, which is undertaken on a joint venture basis by the Institute, MIA and MIT. A total of 112,000 copies of 2007 Budget Commentary and Tax Information were printed. Apart from the 28,000 copies sent to members of the three Institutes as part of the membership service and to the complimentary recipients, a total sale volume of 80,000 copies was achieved. The success of the project was the result of the team work of the three joint-venture partners and the contributions of the editorial board, consisting of more than 60 members drawn from seven large accounting firms. Communications and Public Relations The Institute continues to organise programmes to enhance and project the profile of the MICPA and the Malaysia CPA qualification. To maintain and grow our position as a leading professional body, we must be able to attract young, bright Malaysians to join the CPA profession. Therefore, our strategic focus was Page 31

to strengthen our brand name. The Institute s public relations activity for the year continued to focus on two main objectives to maintain the position of the Institute as a centre of technical excellence and to promote the quality and distinctiveness of the CPA qualification as a Number 1 Business Professional. Accountancy has become one of the most popular courses pursued by young Malaysians. A career in accountancy is both challenging and demanding and commands high rewards. The Institute continued to participate actively in career fairs and exhibitions across the country to promote accountancy as a career and in particular to create greater awareness of the Malaysia CPA qualification. With the support of the Young CPA Group and members of the Institute s Education and Training Committee, the Institute presented career talks at schools, universities and colleges of advanced education across the country. University students are a major source of our student intake. To foster closer relationship with this target group, during the year the Institute sponsored a number of student activities organised by the accounting clubs of a number of universities, including UiTM, UKM, USM, UM and UTAR. The Institute also actively maintained its media relations. Press releases were also issued during the year to keep the media informed of the Institute s on-going activities and programmes, which further reinforced the Institute s professional profile. The Institute continued to take advantage of the Budget Day with the aim to provide target audiences with MICPA s reaction to the Budget and to project the image of MICPA as a centre of technical excellence. We took part in a special radio programme to highlight the salient features of the 2007 Budget and answered phone-in enquiries from members of the public. We also participated in media interviews and live commentary on the Budget hosted by both the print and broadcast media. 48th Annual Dinner The MICPA held its 48th Annual Dinner on June 24, 2006 at Sheraton Imperial Kuala Lumpur. The Dinner was graced by YB Tan Sri Nor Mohamed Yakcop, Minister of Finance II and was attended by close to 500 members and invited guests. This year s Annual Dinner was also the occasion for a number of commemorative events. The Institute presented Anugerah Presiden 2006 to YBhg Tan Sri Dato Azman Hashim, Chairman of AmBank Group in recognition of his exceptional contributions to society, the accountancy profession and the Institute. The Institute also presented Long Service Awards to two Secretariat staff who have been in the employ of the Institute for over ten years, in recognition of their loyalty, diligence and dedicated service. The recipients were Mr Kenny Hooi Sai Onn, Accounts Executive and En Muhammad Ruzi, General Clerk. The dinner was also the occasion for the launch of the MICPA Audit Guide for Practitioners by YB Tan Sri Nor Mohamed Yakcop. Initiated by the Public Practice Committee, the Audit Guide is intended to assist members in practice, especially the smaller practices, maintain quality control for audit work in conformity with international benchmarks. The highlight of the evening was fund-raising for the MACPA Educational Trust Fund (ETF). The ETF offers scholarships and study loans to assist young Malaysians with outstanding academic record but who are financially disadvantaged to pursue a degree or higher professional qualification in accountancy. The ETF also offers research grants to encourage research and studies in current issues in accounting practice, accounting education and related areas. Md Ruzi Yaacob receiving Long Service Award. Guests at the Annual Dinner enjoying themselves during the entertainment. Kenny Hooi receiving Long Service Award. Page 32

MICPA Excellence Awards The annual MICPA Excellence Awards Presentation was held on September 16, 2006 at the Pan Pacific Hotel Kuala Lumpur. The presentation ceremony was officiated by YBhg Dato Zainal Abidin Putih, Chairman of Malaysian Accounting Standards Board (MASB) and a Past President of the Institute. The event was witnessed by students, their family members, friends and guests of MICPA. Launched in 1992, the objective of the Excellence Awards is to honour and public recognition to our young graduates who have achieved all-round excellence in the pursuit of an accountancy qualification. The recipients of the Excellence Awards are not only outstanding in their academic performance, but also in extra-curricular activities and in personal development. A total of 9 Excellence Awards for Best Accounting Graduates were presented to the top students in the Bachelor of Accountancy programme from IIUM, UKM, UM, UPM, USM, UiTM, UUM, MMU and UNITEN. The Most Outstanding CPA Student Award was presented to a CPA Student who has achieved allround excellence high distinction in the MICPA examination, exemplary career development and outstanding personal qualities. This year, the Award was won by Ms Hwang Wee Wee, who is currently attached to Ernst & Young. Joining the MICPA programme in 2004, she passed all the Modules of the Advanced Stage Examination at the first attempt and won the Gold Medal for best performance for every module. Entries for the Excellence Awards were by nomination and all the candidates were of very high caliber. In view of this, a Certificate of Meritorious Achievement was presented to all the finalists for the two categories of Excellence Awards. The ceremony was also the occasion for the presentation of Examination Certificates to registered students of the Institute who passed the November 2005 and May 2006 sessions of the MICPA examinations. A total of 6 examination prizes in the form of Gold Medals were presented to the top scorers. All successful students in these two examination sessions had the honour of receiving their examination certificates from the President of the Institute. An Appreciation Award was also presented to Bank Muamalat Malaysia Berhad in recognition of its commitment and support for the MICPA training programme under Stream II. En Mohamad Yasin Abdullah, then Head of Finance of Bank Muamalat, received the award on behalf of the Bank. 48th Anniversary Commemorative Lecture The Institute s 48th Anniversary Commemorative Lecture was held on December 5, 2006 at The Westin Kuala Lumpur. The function was graced by a very distinguished guest, YB Dato Shahrir Abdul Samad, Chairman of the Public Accounts Committee, who also delivered the Commemorative Lecture titled Public Accountability the Hallmark of Effective Governance Leading to Economic Success and Prosperity. The Lecture provided enlightening insights on the approaches to public accountability. In his speech, YB Dato Shahrir stressed that good governance practices in the public sector that encompass accountability, integrity and transparency will not only assist in business growth and development but also encourages a competitive private sector in a global world. Newly Qualified CPAs. Participation at Career Fair and Exhibition. Winner of the 2006 Most Outstanding CPA Student Award, Ms Hwang Wee Wee from Ernst & Young. Page 33

The Malaysian Accountant The Editorial Board has been making conscientious efforts to improve both the content and layout of the journal to ensure that it achieves its objectives. In this regard, the Institute appointed a new publisher for the production of The Malaysian Accountant. The intention is to improve the design, content and quality of publication of the journal, which serves as an important channel of communication with members as well as external audiences. The journal features a wide range of articles covering topics relating to accounting, taxation, information technology and the national economy, to cater to the interests of different segments of membership. It also carries regular columns including updates on MASB, IASB and IFAC activities, highlights on case law, and global professional and business news contributed by our overseas correspondent. Major events of the Institute are regularly featured in the Institute News column, which serves as an important means of communicating news on the Institute s activities to members. To add variety to the journal content, a lifestyle column, the Young CPA column and a People column featuring prominent CPAs were introduced during the year. The MICPA Website The website serves as an important tool in marketing the CPA brand and establishing links with fellow professional bodies all over the world. The Institute continues to increase the use of IT for communication and delivery of products and services to members and students. The website provides a comprehensive range of services and contains an information resource with search facilities. These include the MICPA Members Handbook on approved accounting and auditing standards, companies and securities laws and regulations, and an E-library with self-search and on-line requests and reservation facilities. Members and students can have secured access to the registers to update their personal particulars, register for Continuing Professional Development (CPD) programmes, examinations and workshops, as well as make event bookings on-line. A new functionality has been added to enable members to update their CPD records online. The e-mail broadcast functionality enables the Institute to issue prompt alerts to inform members of technical updates, events and new products. The CPA e-newsline, a monthly electronic newsletter designed to provide members, students and the public with quick updates on recent developments at the Institute and in the business environment, was introduced in January 2007. National Annual Corporate Report Awards The presentation ceremony for the National Annual Corporate Report Awards (NACRA) 2006 was held on November 30, 2006 at Sime Darby Convention Centre, Kuala Lumpur. Officiated by YB Datuk Hj Mohd Shafie bin Hj Apdal, Minister of Domestic Trade and Consumer Affairs, the presentation ceremony was attended by corporate leaders, representatives of the regulatory bodies, senior executives of publiclisted companies and members of the accountancy profession. More than recognition, NACRA strives to promote excellence in annual corporate reporting. It encourages transparency and corporate accountability through the publication of timely, informative, factual and reader friendly annual reports. This is the very cornerstone of NACRA s theme Towards Excellence. In his speech, the Minister stressed that the quality of annual reports is important as it provides valuable information about the company s financial position and past performance. In addition, it should give investors insights into the company s operations and future prospects. The annual report should En Mohamad Yasin Abdullah, then Head of Finance, Bank Muamalat Malaysia Bhd, receiving the Appreciation Award. Page 34 President of MICPA (left) ushering YB Dato Shahrir Abdul Samad, guest speaker for the 48th Anniversary Commemorative Lecture New Display Panels for Road-Shows.

serve not only as a valuable source of information for minority shareholders and investors but also as a useful means of influencing shareholder and public perception. He added that companies that subscribe to good standards of corporate integrity are not only helping to create a prosperous business climate in this country but also positively contributing to the achievement of the country s national agenda. A total of 21 awards were presented in 5 categories. This year, the Organising Committee introduced Platinum, Gold and Silver award rankings for the Overall Excellence Award, the Environmental Reporting Award and the Presentation Award with the hope of encouraging even greater competition amongst corporate Malaysia to strive for excellence in annual corporate reporting. Telekom Malaysia Berhad bagged the Platinum Award for the coveted Overall Excellence Award for the Most Outstanding Annual Report for 2006. The company also walked away with three other awards - the Industry Excellence Award for Companies Listed on the Main Board under the Trading and Services Sector, Gold Award for Best Designed Annual Report and Silver Award for Best Annual Report in Bahasa Malaysia. Shell Refining Company (Federation of Malaya) Berhad won the Platinum Award for Best Environmental Reporting whilst Malaysia Airport Holdings Berhad won the Platinum Award for Best Designed Annual Report. Public Bank Berhad won the Platinum Award for Best Annual Report in Bahasa Malaysia. The Award for Best Annual Report of Non-Listed Organisations was won by Cagamas Berhad. The Adjudication Panel, consisting of 76 members drawn from commerce and industry, public accounting firms, academic institutions and communications and advertising firms carried out a thorough assessment of the annual reports based on established criteria. The panel had a very challenging task in selecting the winners, as all the entries were of very high quality. A Certificate of Merit was presented to 13 finalists in recognition of the commendable high quality of their annual reports. This annual event is jointly organised by Bursa Malaysia Berhad, the Malaysian Institute of Accountants (MIA), the Malaysian Institute of Certified Public Accountants (MICPA) and the Malaysian Institute of Management (MIM). Professional Regulation Financial Statements Review Self regulation is one of the hallmarks of the accountancy profession. Monitoring members compliance with technical and professional standards is a crucial aspect of a self-regulatory regime. The Financial Statements Review Committee undertakes the important task of monitoring members compliance with technical and professional standards. The effective monitoring is done through an on-going programme of review of published financial statements audited by members. The objective is to determine whether there are any departures from approved accounting standards, listing regulations and statutory financial reporting requirements. Any observations of non-compliance will be communicated to the members responsible to seek explanation. In cases of significant departures, follow-up reviews will be carried out to ensure that these have been rectified. The thrust of the review process is to assist members maintain high standards in the performance of their work. However, in cases where significant shortcomings are discovered, a complaint may be made to the Investigation Committee. The Committee is pleased to report that members support the objective of the review process as evidenced by the positive response to matters raised by the Committee. Overall Excellence Award Most Outstanding Annual Report of the Year won by Telekom Malaysia Bhd. Young CPA Group s Visit to Shelter Home. Winners of NACRA 2006. Page 35