Report of the Council for 2004

The Council is pleased to present its report for the period from 1 July 2003 to 30 June 2004.

The various activities and projects of the Council and its Committees, Working Groups and Task Forces were guided by the Institute’s Strategic Blueprint - Implementation Phase (SBIP), which was developed to ensure that the functions entrusted to the Institute under Section 6 of the Accountants Act, 1967 are carried out with the funds and resources available to the Institute. Support for these initiatives and activities was provided by the Secretariat.

To translate the strategic initiatives into operational terms and enable effective performance measurement, the Council has decided to adopt the Balanced Scorecard approach, and subsequently appointed a firm of consultants to guide and assist the Institute in developing the corporate strategy map and scorecards.

Meanwhile, there were some delays in implementing the e-MIA Total Management System (e-MIA TMS) to facilitate inter-connectivity among departments and enhance the Institute’s web portal. However, the Institute is committed to getting the IT infrastructure project back on track. Once the project is completed, it is envisaged that the Institute will benefit significantly from efficiency gains, while members can expect improved services via the new web portal.

Following the comments from members at the Institute’s 17th Annual General Meeting (AGM), the Council is pleased to present this report on the progress of the Institute in fulfilling its functions under Section 6 of the Accountants Act, 1967.

The Institute is empowered under the Accountants Act, 1967 to determine the qualifications of persons for admission as members. The objectives of the Institute in carrying out this function are to ensure that qualifications recognized under the Accountants Act, 1967 for eligibility to membership meet the requisite standards and quality desired by the Institute and to ensure that properly qualified, skilled and competent persons are admitted as members of the Institute.

The objective of accreditation by the Institute is to ensure institutions seeking accreditation demonstrate that their courses meet the Institute’s requirements for the purpose of admission as members of the Institute.

After conducting stringent accreditation exercises, three accounting programmes were recommended to members for recognition at the 17th AGM of the Institute last year. The three degrees, namely, Bachelor of Accounting (Honours) (Information Systems) of Universiti Utara Malaysia (UUM), Bachelor of Accounting (Honours) of Universiti Tenaga Nasional (UNITEN) and Bachelor of Accounting (Honours) of Universiti Multimedia (MMU) were gazetted during the year and included in Part I of the First Schedule to the Accountants Act, 1967.

The Institute also received two new applications for accreditation from Universiti Malaysia Sabah (UMS) and Kolej Universiti Sains dan Teknologi Malaysia (KUSTEM) in respect of their accounting programmes. Two Task Forces have been formed to undertake the accreditation exercise which is ongoing.

During the year, 1,741 persons were admitted into the three categories of membership (1,722 Chartered Accountants, 14 Licensed Accountants and five Associate members), bringing the total membership to 20,019 as at 30 June 2004. In addition, three Associate members were reclassified as Chartered Accountants upon obtaining the required qualifications.

On 28 May 2004, the Council approved the removal of 283 members pursuant to Rule 7 (1) of the Institute's (Membership and Council) Rules 2001 due to non-payment of annual subscription fees within six months from the due date. A total of 178 persons applied for readmission and were reinstated as members. 40 members resigned during the year. The Council noted with regret the demise of 12 members.

MEMBERSHIP GROWTH

(as at 30 June 2004)

GEOGRAPHIC DISTRIBUTION OF MEMBERSHIP
(as at 30 June 2004)

	CA	LA	AM
FEDERAL TERRITORY *	5,675	10	2
JOHOR	1,121	5	8
KEDAH	329	2	6
KELANTAN	104	-	-
MELAKA	299	2	1
NEGERI SEMBILAN	296	1	-
PAHANG	204	1	2
PERAK	662	5	-
PENANG	1,375	7	2
PERLIS	26	-	3
SABAH	634	-	-
SARAWAK	1,011	-	-
SELANGOR	7,308	11	6
TERENGGANU	132	-	-
OVERSEAS	769	-	-
TOTAL	19,945	44	30

Note: *Federal Territory includes Kuala Lumpur, Labuan and Putrajaya

The Institute’s (Membership and Council) Rules 2001 provide that a member shall not hold himself out as a member in public practice unless he holds a valid practising certificate issued by the Institute.

Since the introduction of the practising certificates in 2001, the Institute has issued a total of 2,203 practising certificates. During the review period, the Institute issued 265 practising certificates, of which two were reapplications.

During the review period, 54 new audit firms registered with the Institute. Of these, 49 were new audit firms and five were non-audit firms which converted to audit firms. Meanwhile, the Institute removed 20 audit firms from the register of member firms, as they had ceased operations. During the same period, the Institute registered 151 non-audit firms and removed 22 non-audit firms (17 firms ceased operations, while five firms were converted to audit firms) from the register.

As at 30 June 2004, there were 1,272 audit firms and 441 non-audit firms registered with the Institute, compared with 1,248 audit firms and 312 non-audit firms in the preceding year. The following table shows the distribution of member firms (audit and non-audit firms) registered with the Institute.

NO. OF MEMBER FIRMS BY STATE

(as at 30 June 2003 and as at 30 June 2004)

STATE	AS AT 30 JUNE 2003			AS AT 30 JUNE 2004
	AUDIT	NON AUDIT	TOTAL	AUDIT	NON AUDIT	TOTAL
	FIRMS	FIRMS		FIRMS	FIRMS
FEDERAL TERRITORY *	481	94	575	481	146	627
JOHOR	119	38	157	117	56	173
KEDAH	23	13	36	26	14	40
KELANTAN	13	0	13	14	0	14
MELAKA	29	10	39	28	12	40
NEGERI SEMBILAN	18	3	21	19	8	27
PAHANG	15	3	18	19	3	22
PERAK	54	27	81	54	34	88
PENANG	99	28	127	95	32	127
PERLIS	0	1	1	0	1	1
SABAH	73	9	82	78	12	90
SARAWAK	77	15	92	80	16	96
SELANGOR	236	70	306	250	106	356
TERENGGANU	11	1	12	11	1	12
TOTAL	1,248	312	1,560	1,272	441	1,713

Note: *Federal Territory includes Kuala Lumpur, Labuan and Putrajaya

The Institute is empowered under the Accountants Act, 1967 to provide for the training and education of members. The objectives of the Institute in providing training and education are to ensure that all members are able to develop and maintain professional competence necessary to provide high quality services to clients, employers and other stakeholders, and to enhance public confidence in the profession.

The Continuing Professional Education (CPE) operations of the Institute undertaken by the CPE Department achieved another year of commendable performance.

There was a record number of events (306) organised for members throughout the country and revenue from CPE events for the financial year ended 30 June 2004 has increased by 23% over the preceding year. This has been achieved without any increase in the prices of CPE events. Indeed, the prices adopted by the Institute have remained unchanged since 1988 and are lower than most training providers.

The Institute successfully organised the National Accountants Conference (NAC) 2003 at the Sunway Pyramid International Convention Centre on 6-7 October 2003, with the theme “The Transforming Profession – New Strategic Roles in the Organisation”. About 1,600 participants attended the NAC 2003. Over the years, the NAC has developed a unique brand name, given its strong following among many members who attend the event annually. The NAC has also generated a growing interest among non-members.

Beyond the NAC, the Institute also organised regional conferences and other CPE programmes to bring these events closer to where members are located. For example, the Sarawak Branch successfully organised the Regional Accountants Conference in Kuching on 18-19 June 2003, with the theme “Transforming Sarawak’s Economy - Challenges and Opportunity”. Members’ response was most encouraging, despite the SARS outbreak. Similarly, seminars and workshops held at the branch levels were well-supported. The initiative to organise CPE programmes outside the Klang Valley will enable many more members to benefit from the Institute’s training and education programmes.

In organizing its CPE events, the Institute has made every effort to cater to the varying needs of its members by organising not only technical programmes but also programmes that would enhance members’ professional development and promote members’ capacity to provide quality services. To this end, the Institute reviewed existing CPE programmes, and identified and introduced new CPE programmes which cover relevant, timely and topical issues for members to undertake in fulfillment of their life-long learning obligations. At the same time, the Institute is looking into the issue of assistance for member firms’ staff training, in response to appeals by practitioners at branch locations.

Meanwhile, the Institute undertook several CPE expansion operations to enhance efficiency and improve members’ services. The information technology (IT) integration exercise linking the CPE Department with the Membership and Finance Departments and branches is in the testing phase. This project will significantly enhance the event management process.

Apart from collaboration with the scheduled bodies, the Institute has embarked on CPE collaborations with universities and Government agencies, one result of which is the invitation for the Institute to manage the National Public Finance Conference 2004 organised by the Melaka State Government. The conference is scheduled for 26-27 August 2004.

The Institute is empowered under the Accountants Act, 1967 to approve, regulate and supervise the conduct of the MIA Qualifying Examination (QE). The objective of the Institute in providing the MIA QE is to provide eligible and qualified candidates with an alternative and credible route for admission to membership of the Institute.

Following the launch of the MIA QE in March 2003, two examination sittings were successfully organised on 23-24 September 2003 and 23-24 March 2004 respectively at five centres, namely, UiTM Shah Alam, UiTM Johor Bharu and MIA’s Branch Offices in Penang, Kuching and Kota Kinabalu. A total of 163 and 216 candidates sat for the examinations in September 2003 and March 2004, respectively.

The results for the September 2003 sitting announced in November 2003 were not satisfactory, with a relatively low pass rate and only 2 candidates obtaining distinctions. The results for the March 2004 sitting announced in May 2004 were better than the previous sitting, with a higher pass rate and a few candidates obtaining a distinction. Thus far, two candidates have fully completed the MIA QE.

Meanwhile, one applicant (representing 48 others) commenced legal proceedings against the Institute on 16 June 2003, seeking a declaration that she and the other 48 individuals were eligible to sit for the MIA QE and for a mandatory injunction to compel the Institute to allow them to sit for the MIA QE in September 2003 on the basis that they possessed the AIA (UK) qualification. This legal action was subsequently dismissed by the High Court of Malaya on 2 March 2004 on the ground that it was premature. No appeal was lodged against the decision.

The Institute is empowered under the Accountants Act, 1967 to regulate the accountancy profession. The objectives of its regulatory role are to ensure that all members comply with professional and ethical standards in discharging their professional responsibilities and to ensure that all members exhibit the highest standards of professionalism, competency and integrity expected of the profession.

During the review period, the Institute actively pursued its regulatory function through its various Committees by undertaking several initiatives and activities as follows:

The Institute adopted the following standards and statements issued by the International Auditing and Assurance Standards Board (IAASB):

In addition, the Institute revised the explanatory forewords to the approved standards on auditing for the purpose of harmonising auditing practices in Malaysia.

The Institute issued a new By-Law B-1 on Professional Independence and amendments to the Interpretation section of the By-Laws (On Professional Conduct and Ethics) based on Section 8 of the International Federation of Accountants Code of Ethics. The new By-Law is benchmarked against international standards whilst taking into account national laws and local circumstances. The new By-Law was issued on 28 May 2004 upon approval of the Council and comes into effect for assurance engagements for which the financial period commences on or after 1 July 2004.

The Institute also issued Transitional Provisions for transitional periods for compliance in respect of three areas, namely, rotation of lead engagement partner for audits of listed and public interest entities, provision of non-assurance services to audit clients, and financial dependency on any one audit client which is a listed or public interest entity amounting to more than 15% of the firm's annual total fees.

During the year, the scope of review of financial statements was revised by the Institute to 20% non-listed companies and 80% public listed companies (2003: 50% non listed companies and 50% public listed companies). The communication of the review findings was also extended to include members who are responsible for preparing the financial statements. In total, 24 financial statements were reviewed. Reviews and discussions were also undertaken on matters referred by the regulatory authorities, some of which were referred to the Institute's Investigation Committee.

The Accountants Act, 1967 provides for the establishment of the Investigation Committee as a statutory committee to investigate complaints against members. During the year, five cases were investigated and determined to be referred to the Disciplinary Committee while eight cases were investigated and dismissed. There are 29 cases currently under different stages of investigation.

Meanwhile, 218 cases were referred to the Investigation Committee in respect of members who failed to respond to the Institute’s audit on CPE compliance. Out of the 218 cases referred, 134 cases were resolved. The remaining cases are pending investigation.

The Accountants Act, 1967 provides for the establishment of the Disciplinary Committee as a statutory committee to carry out disciplinary proceedings in respect of cases referred by the Investigation Committee. During the year, disciplinary proceedings were held in respect of two cases, one of which was dismissed whereas in the other case, the member was found guilty of unprofessional conduct and sanctioned accordingly. The decision of the Disciplinary Committee was published in the Government Gazette, Accountants Today, as well as in two newspapers. The relevant authorities were also informed of the decision.

There were no appeals to the Disciplinary Appeal Board, which is another statutory committee established by the Accountants Act, 1967.

As for appeals against the Disciplinary Committee's decisions pursuant to the previous Accountants Rules 1972, one case is pending hearing before the High Court and two cases are awaiting appeal to the Court of Appeal. During the year, the Institute's appeal to the Court of Appeal in respect of one case was dismissed.

During the year, the Institute supported by the Practice Review Department continued to develop and refine the various practice review programmes, checklists, standard reports and correspondence for the purpose of the practice review programme.

The evaluation and short-listing of applicants for appointment to the Institute’s panel of reviewers were conducted during the year. Out of a total of 51 applicants, 25 candidates were short-listed based on their suitability and experience, and subjected to an interview process. Following the interview sessions, all the 25 short-listed candidates were recommended for appointment to the panel. The appointment of the 25 panel reviewers was completed with the signing of their respective appointment agreements.

Training was conducted for the internal and panel reviewers in November 2003. An experienced reviewer from Australia was engaged to conduct the two-day training for the reviewers to equip them with the necessary techniques and skills needed to carry out an effective review.

The inclusion of the Statement of Practice Review as an appendix to the By-Law on Practice Review was proposed to the Council. This was approved by the Council in January 2004. Subsequent to this amendment, a total of 30 notifications of review were sent to audit firms selected randomly and two notifications of review were sent to panel reviewers who have indicated their firms’ availability for review.

In March 2004, the Council approved another amendment to the By-Law on Practice Review to enable the appointment of former practitioners (who have retired within the last five years prior to their intended appointment) to the panel of reviewers, with a view to accelerate the implementation of the programme by increasing the pool of reviewers.

During the last quarter of the year, the Practice Review Department commenced the field reviews of audit firms previously notified of selection for review. As at 30 June 2004, the review of four audit firms were completed, while the signed review report for one of these completed review engagements was also issued.

The Institute is empowered under the Accountants Act, 1967 to promote the interests of the accountancy profession in Malaysia. The objective of the Institute in carrying out this function is to ensure that the interests of the profession are promoted as a whole, both at the national level and at the international level.

The Institute through its Standards, Taxation and Enforcement Departments actively participated in consultations, dialogues, reviews of pronouncements and proposed legislation by the local regulatory authorities, as well as regional and international organisations in respect of issues relevant to the accountancy profession in Malaysia including:

The Institute through its Standards Department was also involved in organising the National Annual Corporate Reports Awards (NACRA), an annual event which is co-organised with The Malaysian Institute of Certified Public Accountants (MICPA) and the Malaysian Institute of Management (MIM). The NACRA’s objective is to promote and maintain excellence in annual corporate reporting. The competition is open to all listed companies on Main Board, Second Board and MESDAQ market of Bursa Malaysia.

Through the various Committees, the Institute also actively promoted the interests of the profession as follows:

The Institute submitted a Memorandum to the Ministry of Housing and Local Governments, requesting amendments to Regulation 12A of the Housing Development (Housing Development Accounts) Regulations 2002. The Ministry agreed to review the said regulation and to accept the Auditor's Report prepared in compliance with the existing Regulation 12 or 12A until further amendment is made.

The Institute also commented on exposure drafts on International Auditing Standards (IAS) issued by the IAASB of IFAC.

In July 2003, the Institute issued an Exposure Draft on the proposed new By-Law on Professional Independence for transparency of processes and open consultation. Following comments from members, regulatory authorities and other public interest groups, including other professional bodies, amendments were made to the abovementioned proposed new By-Law.

Upon the issuance of the new By-Law B-1 on Professional Independence, the Institute disseminated information on the issuance of the new By-Law B-1 on Professional Independence and the amendments to the Interpretation section of the By-Laws (On Professional Conduct and Ethics) to the relevant regulatory authorities, public interest groups and the accountancy faculties in the local institutions of higher learning.

The Institute also submitted comments on the exposure draft issued by the Ethics Committee of the IFAC on the proposed new IFAC Code of Ethics in November 2003, and on the amendments to the provision on auditor rotation under Section 8 of the IFAC Code of Ethics in February 2004.

A Memorandum containing recommendations for improving the overall audit licensing process so as to benefit the accountancy profession was prepared during the year. The Memorandum entitled “Recommendations to the Ministry of Finance on Strengthening the Profile of Members in Public Practice through the Audit Licensing Process” was adopted by the Council and thereafter submitted to the Ministry of Finance (MOF) by the Institute in June 2004.

The Institute also undertook several specific initiatives to promote the interests of practising members as follows:

Having undertaken the review of the existing liquidators’ licensing framework during the year, a Memorandum entitled “Recommendations to the Ministry of Finance on Liquidators’ Licensing Framework” was submitted to MOF in June 2004 to propose amendments to Section 8(3) of the Companies Act, 1965 as well as to suggest a criterion of five years relevant insolvency experience for applicants of liquidator's licences.

Meanwhile, clarification from SC was sought on whether an investigative audit by an independent firm of accountants would still be required, before the restructuring of a PN4 company would be approved by SC, where a Special Administrator has been appointed and where the PN4 company has been liquidated and liquidators have been appointed. The response received from SC was disseminated to members via circular.

The Institute was actively involved as joint organisers of the Best Internal Audit Practice Award (BIAPA) 2004 with the Institute of Internal Auditors Malaysia (IIAM).

The primary objective of the award, which is open to companies listed on Bursa Malaysia, non-listed companies and public sector agencies with in-house internal audit departments, is to recognise and honour the company/agency with the most outstanding internal audit practice. Continuous development and promotion of best practice in internal audit, promotion of leadership and professionalism in internal audit, and enhancement of internal audit roles in corporate governance, risk management and internal control are the key criteria in determining the recipient of the award. The official launch was held on 20 April 2004, while the award presentation dinner has been scheduled on 29 September 2004.

The Institute also undertook to promote internal auditing by organising an essay writing competition for 2004, which is open to accounting students of all institutions of higher learning, private colleges and student members of professional bodies. Other initiatives to promote best practices in internal auditing for members’ benefit included publishing relevant articles and case studies in Accountants Today and conducting evening talks related to internal auditing.

The Institute attended two meetings of the IFAC Professional Accountants in Business (PAIB) Committee in September 2003 and March 2004 respectively, and was involved in the following IFAC projects:

The Institute also endeavoured to participate in future projects involving member bodies of the emerging economies.

Meanwhile, the Institute organised the inaugural National Award for Management Accounting (NAfMA) Best Practice 2004 with The Chartered Institute of Management Accountants (CIMA) - Malaysia Division. The organisations that provided the support for the event included CIMA-UiTM Asian Management Accounting Research Centre and National Productivity Corporation (technical expertise), Accountant-General’s Office and Bursa Malaysia. Public Bank Berhad is the main sponsor of the award.

The purpose of the award, which is open to companies listed on Bursa Malaysia including its subsidiaries and associates and the non-listed multinational companies, is to recognise and promote the use of best practice in management accounting towards world-class business performance amongst organisations in Malaysia. Indeed, the NAfMA Best Practice award is an important step towards answering the nation's call for corporate excellence and good corporate governance.

With regard to anti-money laundering, the Institute was actively involved in the following activities:

The Institute held regular dialogues with the Royal Customs Malaysia (RCM) and the Inland Revenue Board (IRB), as well as participated in the submission of comments relating to various guidelines.

The Institute’s magazine, which is now known as Accountants Today (previously Akauntan Nasional), was significantly revamped during the year in terms of content and feel. Based on members’ feedback received from the Readership Survey conducted last year, it was decided that the magazine should feature ‘easy reading’ articles on business and economy, accountants in business and their success stories, and other current and relevant issues of interest to readers.

Further, it was also determined that the magazine should carry fewer technical articles, since there is already a technical publication called the Malaysian Accounting Review (jointly published by the Institute and Universiti Teknologi MARA (UiTM)). Notwithstanding this, Accountants Today will continue to feature selected technical articles from time to time to cater for practitioners. Following its revamp in July 2003, Accountants Today has received encouraging response from readers. Meanwhile, a second Readership Survey was initiated in March 2004 to gather further feedback on the contents and direction of Accountants Today.

In November 2003, a project was initiated to change the Institute’s logo in an effort to enhance its corporate image and branding strategy. An “MIA Logo Design Contest” was organised. The logo design competition attracted good response with 132 entries received. The winning design will be unveiled to members at the Institute’s 18th Annual General Meeting in September 2004 and officially launched at the NAC 2004 in October 2004.

During the year under review, active steps were undertaken to promote the interests of the profession and the Institute through the press and other media. Concerted efforts were made to ensure that the various promotional activities that were undertaken by the Institute received considerable media coverage. Strategic measures were also undertaken to improve the image of the accountancy profession and to maintain the profile of the Institute as a respected regulatory body. Media interviews were arranged. The President, YBhg. Datuk Dr. Abdul Samad Haji Alias was featured on Malaysia 2020 (a documentary on the various professions in Malaysia produced by RTM) and YB Datuk Nur Jazlan Tan Sri Mohamed (Chairman of Public Relations Committee) on Astro News. The two interviews were aimed at creating awareness among the public on the accountancy profession in Malaysia.

The Institute conducted 19 career talks at various schools and institutions of higher learning during the year. The Institute participated in the National Association of Private Educational Institutions’ (NAPEI) 14th Malaysian Education Fair 2004 on 13-14 March 2004 in Kuala Lumpur.

Another project targeted at schools was also initiated to increase awareness of the profession among school-going students. Through the programme, the Institute hopes to create awareness among students and encourage them to pursue accountancy as a preferred career choice. In this regard a “Forum on the Accountancy Profession with School Counsellors” is scheduled to be held on 18 August 2004 to promote the profession to students through the school counsellors.

The Institute promoted the interests of the profession in Malaysia by actively engaging in dialogues and enhancing co-operation and collaboration with the various countries and accounting bodies at international and regional levels. The Institute also closely monitored the global trends and developments affecting the local accountancy profession such as the development of professional standards and ethics, compliance and education issues, adverse publicity arising from the accounting scandals globally, as well as the process of globalisation and liberalisation of trade in services.

In undertaking these important roles, the International Affairs and Special Projects Department, Standards Department and Education Department provided the Secretariat support to the various Committees involved in international matters, namely, Globalisation and Liberalisation Committee, IFAC Education Committee, and IFAC Professional Accountants in Business Committee. The Institute was appointed to the IFAC Public Sector Committee in January 2004.

The Institute is mindful of its responsibility to ensure the position and interests of members and member firms are not compromised in the face of the external pressures arising from the liberalisation of trade in services. The Institute worked closely with the Ministry of International Trade and Industry (MITI), National Economic Action Council (NEAC), Accountant General’s Office (AGO), National Professional Services Export Council (NAPSEC) and Professional Services Development Corporation (PSDC) during the review period by articulating its position and views on the accountancy profession.

The Institute endeavoured to provide updates for members and member firms on the key issues and international developments, as well as prepare them for the challenges ahead. This is reflected, for example, in the Institute’s initiative in developing a strategy paper on the challenges and direction of the Malaysian accountancy profession. The comprehensive strategy document, contained in a booklet entitled “Globalisation and Liberalisation of Trade in Services - Challenges and Directions for the Malaysian Accountancy Services Sector” was officically launched by the Minister of International Trade and Industry YB Dato’ Seri Rafidah Aziz in Putrajaya on 4 March 2004.

The booklet contains strategic responses and initiatives to the issues and challenges facing the Institute and the local accounting services sector. Specifically, the need for member firms to enhance their competitiveness and actively engage in capability and capacity-building were emphasised. It also outlined the agreements that govern the globalisation and liberalisation process such as the General Agreement on Trade in Services (GATS) and the various Free Trade Agreements (FTAs) that impact the domestic market. In view of the importance of the subject matter, the Institute decided to make the strategy booklet available to all member firms and other key stakeholders, as well as publishing it on the Institute’s website.

During the year, the Institute also engaged in the negotiation process pertaining to the liberalisation of trade in services at the multilateral, regional and bilateral levels.

Malaysia’s multilateral trade negotiations on trade in services under the GATS are being handled by MITI through the country’s chief trade negotiator in Geneva. Close co-operation prevailed between the Institute and MITI with regard to negotiations in the Accounting, Auditing and Bookkeeping Services (CPC 862) and Taxation Services (CPC 863) sectors. The Institute also watched with keen interest over the management consultancy services (CPC 865) and services related to management consulting (CPC 866) sectors.

The Institute was involved in the negotiations under the AFAS, which achieved commendable progress. These negotiations were conducted at the ASEAN Co-ordinating Committee on Services (CCS) meetings. Altogether, there were five CCS meetings during the period under review.

The CCS meetings focused on the identification of agreed modified common sub-sectors (which required a minimum of three Member Countries to table offers under the AFAS or GATS to enable all other Member Countries to table offers to liberalise the particular sub-sectors), sectors under the ASEAN-X formula at the 32ndand 33rd CCS meetings, and the finalisation of offers in the agreed modified common sub-sectors for the 3rd round of negotiations (4th package) under the AFAS at the 34th, 35th and 36th CCS meetings. These offers are expected to be formalised at the ASEAN Economic Ministers meeting (AEM) due to be held in September 2004. In the negotiation process, the Institute upon the request of MITI has indicated its willingness to improve its offers.

Meanwhile, at the ASEAN Leaders Summit in Bali, Indonesia in November 2003, the meeting agreed on the following measures and principles to accelerate the liberalisation of trade in services:

The ASEAN Federation of Accountants (AFA) was established to serve as the umbrella organisation for the national associations of accounting professionals of the member countries of ASEAN. Among its objectives are to establish a medium for closer relations, regional cooperation, and mutual assistance among ASEAN accountants, as well as to enhance the continuous development of the accounting profession in the region through the joint endeavours of ASEAN accountants.

The Institute continued to play an active role in the Council of the ASEAN Federation of Accountants (AFA). During the review period, three AFA Council meetings were held. The 13th AFA Conference was also held in Bangkok from 9-11 October 2003.

The Confederation of Asian and Pacific Accountants (CAPA) represents national accountancy organisations in the Asia-Pacific region. CAPA has a membership of 31 national accountancy organisations in 21 countries.

The Institute was re-elected to the CAPA Executive Committee (Excom) at the CAPA Assembly of Delegates which met in Dhaka, Bangladesh on 23 May 2004. As a member of the CAPA Excom and the CAPA Strategic Committee, the Institute’s representatives participate in the development of projects for the benefit of members of CAPA member organisations, and discussions on strategic issues which have an impact on the profession in the region.

The International Federation of Accountants (IFAC) is the worldwide organisation for the accountancy profession. IFAC’s mission is to develop and enhance the profession to enable it to provide services of consistently high quality in the public interest. Its current membership consists of 155 professional accountancy bodies in 113 countries, representing more than 2.4 million accountants in public practice, education, government service, industry and commerce.

The Institute has always supported the work of IFAC and continued to do so during the year under review. To promote the interests of the accountancy profession in Malaysia, it is important that the Institute keep abreast with global developments relating to the profession. Through its involvement in the IFAC Education Committee, IFAC Professional Accountants in Business Committee and IFAC Public Sector Committee, the Institute was able to participate and contribute to the various projects and activities undertaken by the Committees for the interests of the worldwide profession. At the same time, the Institute’s representatives on those Committees would, with the knowledge gained, be able to contribute more effectively to the development of the profession in Malaysia.

The review period also witnessed the historic occasion of the formalisation of closer co-operation between the Institute and Indonesian Institute of Accountants (IAI) through a Memorandum of Understanding (MoU), which was duly signed in Jakarta on 24 October 2003. The signing ceremony of the MoU was witnessed by the Malaysian Ambassador to Indonesia, H.E. Dato’ Hamidon Ali, and the Director of Accountants and Appraisal Supervision Department, Ministry of Finance (Indonesia), Mr. Mirza Mochtar.

The MoU was the result of the Institute’s ongoing participation in the negotiation process with the regional accounting bodies under AFA. In view of the difficulty of achieving multilateral agreements among ASEAN countries in the accounting sector, the Institute proactively pursued bilateral negotiations with fellow ASEAN countries, with Indonesia being the first one. Under the MoU, the Institute and IAI agreed to have closer co-operation in several strategic areas including Continuing Professional Education, Quality Assurance and Practice Review, development of the framework for the appropriate educational structure for Accounting Technicians, Public Sector Accounting and other knowledge-sharing initiatives.

The Institute is empowered by the Accountants Act, 1967 to render or provide assistance to members as it thinks fit, with a view to protecting or promoting the welfare of members. The objective of the Institute in carrying out this function is to provide assistance to members in specific areas so as to enable all members to further develop and fully realize their capabilities as accountants. This function was carried out during the year under review through a number of initiatives.

The Standards, Taxation, Practice Matters and Enforcement Departments provided support for enquiries from members, Committees and the Council, specifically on technical issues, interpretation of professional and ethical standards, and application and effect of new developments in legislation and other pronouncements affecting the accountancy profession. To facilitate this service, a set of Policies on Handling Technical Queries was developed and published in Accountants Today and on the Institute’s website so as to provide greater transparency of the processes involved in responding to technical queries. Frequently asked questions and answers pertaining to commonly raised queries were also formulated and posted from time to time on the Institute’s website.

The Institute also issued the Members' Handbook in CD-ROM format for its members containing the Accountants Act, 1967, the Rules made thereunder, the By-Laws of the Institute, Malaysian Approved Standards on Auditing, Recommended Practice Guides, Insolvency Guidance Notes, International Pronouncements on Management Accounting, Malaysian Management Accounting Guidelines and Internal Auditing Guidelines. Parts of the contents of the Members’ Handbook were made available on the Institute’s website for members’ easy reference and assistance.

During the year, the Institute organized Induction Courses for its new members, to provide them with an understanding of the Institute, its functions and processes, as well as a broad understanding of the By-Laws (On Professional Conduct and Ethics). The Institute intends to organize more specialized courses for those members intending to commence public practice, so as to assist these members on matters pertaining to public practice.

Through the various Committees, the Institute also undertook the following initiatives to provide assistance to members:

The Institute provided guidance to members through the issuance of the Sample Annual Report 2003 that incorporates the disclosure requirements of MASB standards Nos. 1-32.

A roundtable discussion on Auditor's Duty to Third Parties was also organised, attended by regulators, policy makers and professional bodies. The Council has approved the preparation of a guidance note for members in audit practice on this issue.

The Institute submitted comments and participated in the Joint Working Group between the Institute and MICPA to formulate the profession’s joint response on the Consultation Paper released by CCM on the proposed new business vehicle known as the Limited Liability Partnership (LLP).

In addition, the Institute carried out research and examined various issues affecting company secretaries in particular and members of the Institute in general such as the recent amendments to the Moneylenders Act 1951, the Exposure Draft on By-Law B-1 of the Institute's By-Laws (on Professional Conduct and Ethics) on Professional Independence, and technical queries on company secretarial practices.

Ethics

Members were provided with value added and timely information on the new By-Law B-1 on Professional Independence and the amendments to the Interpretation section of the By-Laws (On Professional Conduct and Ethics), and other relevant articles and updates through circulars, the Accountants Today and the Institute's website.

The Institute also organised a series of nation-wide briefings for members in public practice, their partners and employees on a complimentary basis regarding the new By-Law B-1 on Professional Independence and the amendments to the Interpretation section of the By-Laws (On Professional Conduct and Ethics). These briefings will be held from 7 July 2004 until 16 September 2004 in 17 locations throughout the country.

The Institute provided timely information to members through the publication of a summary on the IFAC PAIB publication called “Enterprise Governance”, IFAC Articles of Merit award winning article and a series of Shared Service Centres articles in Accountants Today. In addition, the Institute reviewed and recommended to its members, the Statements on Management Accounting issued by the Institute of Management Accountants, United States of America that were based on research done on actual case studies.

A number of specific activities and programmes were initiated for the benefit of practising members as follows:

The Institute also embarked on the project on “Digital Directory on Member Firms” to increase the profile of members in public practice by making available a digital directory, which will enable users to access member firms’ information such as member firm’s name, firm number, address, telephone and facsimile number, e-mail and URL address. The directory has been produced in a CD-ROM format and distributed to member firms. The directory is also available for sale at a nominal price to third parties.

The Institute submitted a Budget Memorandum for 2005 to the MOF in conjunction with the National Budget. In collaboration with MICPA and MIT, the Institute published the 2004 Budget Commentary and Tax Information booklet for the benefit of members and the general public.

To assist members as well as the public, the Institute jointly with MIT organized a Budget Hotline which was handled by a panel of tax consultants drawn from major accounting firms. The Hotline provided a convenient channel for members and the public to seek advice on the implication of any changes to the income tax law after the 2004 Budget was announced.

A detailed Guidance on Anti-Money Laundering for accountants and company secretaries who are members of the Institute was issued on 1 July 2004. The Guidance is designed to assist the affected members in understanding and complying with the new obligations under the Anti-Money Laundering Act, 2001 which will come into effect on 30 September 2004. The Guidance also contains Frequently Asked Questions, a flowchart on the compliance requirements, as well as other technical assistance for affected members.

As part of its CPE activities, the Institute has organized a series of nation-wide programmes to create awareness and provide information on the extension of the Anti-Money Laundering Act, 2001 to accountants and company secretaries who are members of the Institute. These programmes will be held from 6 July 2004 until 16 September 2004 in 17 locations throughout the nation.

The Institute also disseminated information and technical updates to members on the new developments pertaining to Anti-Money Laundering through circulars, articles in Accountants Today, and the newly created Anti-Money Laundering webpage on the Institute's website.

Substantial funds are required to enable the Institute to properly carry out its functions under the Accountants Act 1967, and the various projects, activities and initiatives. Although members’ annual subscriptions does provide the Institute with a steady source of income, the Institute is not able to solely rely on this source if it is to achieve its vision of being a globally recognized and respected partner committed to nation-building. For the Institute to develop, support and monitor quality and expertise consistent with global best practice in the accountancy profession for the interest of stakeholders as set out in its mission, additional funding is required.

During the year, the Council applied to the Ministry of Finance for a grant for the purpose of funding activities carried out under the regulatory function of the Institute. However, the application was rejected. As part of the application for funding, the Institute also requested for funds for its e-MIA TMS project but this request was also rejected. Nevertheless, the Institute has proceeded with this project and the Secretariat has put in much time and effort during the year to make the project a success.

The Institute did not allow the setback of the rejection on its application for a grant to deter the Institute from carrying out its functions. Besides the generation of income from CPE events, the Institute continued to adopt and implement cost-cutting measures. The Institute also explored and utilized other avenues of income generating activities including sponsorship for ad hoc events or projects as well as the NAC 2003. With this prudent approach, the Institute recorded another healthy surplus for this financial year.

The Council, in its efforts to promote and ensure better corporate governance within the Institute, established the Audit Committee of Council and an Internal Audit Department for the Institute. The Audit Committee of Council is part of the Institute’s governance structure and both the internal and external auditors have unrestricted access to the Committee which ensures that their independence is unimpaired.

During the year, the Committee reviewed the Institute’s management accounts on a quarterly basis and the financial statements for the financial year ended 30 June 2004 prior to presentation to Council. The Committee also reviewed the external auditor’s results of the annual statutory audit and management letter together with management’s response to their findings and observations.

The Internal Audit Department played a key role in assisting the Committee to oversee that management has in place a sound system of risk management, internal controls and governance. This was achieved through the review of and recommendations for improvements to current risk management, internal control systems and governance processes to provide reasonable assurance that such systems continue to operate satisfactorily and effectively. In addition, reviews on compliance with established policies, procedures, guidelines and statutory requirements were also carried out.

During the year, the Internal Audit Department worked closely with the Institute’s external auditors and Jabatan Audit Negara to review accounting and control issues to ensure that significant issues are effectively addressed by the management.

A Task Force has been established to deliberate on areas in the Accountants Act, 1967 which may require amendments. This is to ensure that the said Act remains relevant and dynamic to meet the challenges and requirements of the accountancy profession in Malaysia. The drafting of the proposed amendments to the Accountants Act, 1967 is currently ongoing.

The Institute jointly with MICPA participated in the Capital Market Graduate Training Scheme during the review period. The scheme was launched by the SC under MOF, with the objective of building a bigger pool of graduates skilled in capital market matters. The 12-month training scheme comprises one month full-time formal training conducted by SC, followed by 11 months of internship or attachment with the industry. Several member firms participated in the scheme.

The Council seeks to carry out the functions entrusted to the Institute under the Accountants Act, 1967 and to serve members not only within the Klang Valley but also in the other states throughout Malaysia. While most of the functions are undertaken from the Institute’s office in Kuala Lumpur, some of the functions are enhanced through the contributions of members outside the Klang Valley.

Towards this end, the Council established the following eleven (11) Branches of the Institute, each led by a Branch Committee:-

The Branch Committees at the above Branches assisted and supported the Council and Secretariat in carrying out the following functions:-

To meet the above functions, the Branch Committees organized CPE events and dialogues at their respective Branches. They also represented the Institute at meetings and dialogues with regulatory authorities such as the Inland Revenue Board, Royal Customs Malaysia and the Companies Commission of Malaysia.

To promote the profession, the Branch Committee members also delivered career talks on accountancy to students at schools and other institutions of learning located in their respective States.

The Branch Committees provide an important link between the Council and members of the Institute who are residing outside the Klang Valley. They play an integral role in the operations of the Institute and ensure that the interests of all members around the country are promoted and protected.

The Institute has had another eventful year as can be seen from the above report. The accountancy profession in Malaysia and the Institute continued to face challenges both from within the country and in the global arena. However, with challenges, there also comes opportunities, and the profession and the Institute must face up to the challenges and make full use of the opportunities.

One of the greater challenges which the Institute had to overcome during the year was the implementation of the e-MIA Total Management System (TMS) which required the Secretariat staff to perform substantial testing of the system to ensure that this customized integrated system met the objective of enhancing the efficiency of the Institute’s operations which in turn would result in better services for members. The Council would like to thank the staff and all parties involved for their efforts towards this project.

The Council would like to record its appreciation to all the members and other co-opted non-members who have participated in the various Committees, Task Forces and Working Groups of the Institute, including those at the Institute’s Branches. Without the contributions and commitment of these upstanding and dedicated individuals, the Institute would not have been able to progress as it did during the past year and achieve more milestones. The Council would also like to thank these individuals, and others who in their own way, have contributed to the development of the Institute and the profession by being role models in their chosen fields.

The Secretariat staff has always been a pillar of support to the Council, its Committees, Task Forces and Working Groups. Despite the numerous tasks and duties carried out by them, they also had to face new challenges such as the e-MIA TMS system and the implementation of the Balanced Scorecard management system during the year. The Council is happy to note that they have embraced these new challenges and continuously seek to improve their performance. The Council would like to extend its heartfelt appreciation to them.

Location	Total	Accounting & Auditing	Taxation	Management & Finance	IT	Personal Development
KLANG VALLEY	179	38	18	28	86	9
ALOR SETAR	2	1	1	-	-	-
PENANG	18	9	5	3	-	1
IPOH	5	3	2	-	-	-
SEREMBAN	2	1	1	-	-	-
MELAKA	1	-	1	-	-	-
JOHOR BAHRU	18	9	4	3	2	-
KUANTAN	5	3	2	-	-	-
KUALA TERENGGANU	3	1	2	-	-	-
KOTA BAHRU	3	1	2	-	-	-
KUCHING	20	7	9	2	2	-
SIBU	5	2	3	-	-	-
BINTULU	5	3	2	-	-	-
MIRI	3	1	2	-	-	-
KOTA KINABALU	20	8	8	2	2	-
SANDAKAN	6	3	3	-	-	-
TAWAU	6	3	3	-	-	-
LABUAN	5	3	2	-	-	-
TOTAL	306	96	70	38	92	10

	TAX	BCL	AFAR	AUD
FAIL	68	61	35	30
PASS	10	3	2	22
PASS WITH DISTINCTION	2	0	0	0
TOTAL	80	64	37	52

	(i)	End date for free flow of trade in services to be earlier than 2020;
	(ii)	Acceleration of liberalisation in specific sectors earlier than the end date through the ASEAN-X formula;
	(iii)	Completion of Mutual Recognition Arrangements (MRAs) for qualifications in the major professional services by 2008;
	(iv)	Establish professional exchange by 2008; and
	(v)	Economic Ministers to act as co-ordinator for services liberalisation across all sectors.

	(i)	organized and conducted CPE events at the Branches;
	(ii)	assisted applicants seeking to sit for the MIA QE;
	(iii)	promoted the interest of the accountancy profession; and
	(iv)	provided assistance to members and other stakeholders at the Branches.