Report of the Council for 2007

The Council is pleased to present its report for the period from 1 July 2006 to 30 June 2007.

INTRODUCTION

During the review period, the Council met 9 times.

All initiatives carried out by the Institute during the review period were in accordance with the Strategic Blueprint document which was developed in the year 2001 to ensure that the functions entrusted to the Malaysian Institute of Accountants (MIA) under the Accountants Act, 1967 are carried out effectively.

As a follow-up to the meeting to formulate the blueprint, from 20-22 January 2006, the Council attended a Strategic Review Retreat (SRR) meeting led by the President to revisit the strategic direction of the Institute from 20 – 22 January 2006 at the Putrajaya Marriott Hotel. This was necessary to ensure that the Institute remained relevant amidst the constantly changing business environment within which it operates. The retreat was fruitful in its objectives in that many ideas and recommendations were aired at the meeting and later incorporated as ways to help the Institute achieve greater success in all its endeavours.

Presently being executed in its implementation phase, the Blueprint has been instrumental in the formulation of strategic and operational objectives and goals for the advancement of the accountancy profession in Malaysia. With the leadership of the Council Members and the support of the Management Centre, the Institute undertook many activities to further promote the interests of the accountancy profession and assist members in relevant areas during the review period.

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. This function is necessary to ensure that qualifications recognised under the Accountants Act, 1967 that set out the eligibility of membership (with the Institute), meet the requisite standards and quality desired by the Institute. It is via this function that the Institute admits qualified, competent and professional persons as members who are then able to effectively meet the needs of the public.

Accreditation

Education

Membership Affairs

During this financial year, the Council admitted 1,427 eligible persons into the three membership categories, namely 1,410 Chartered Accountants, two Licensed Accountants and 15 Associate members.

Pursuant to Rule 7(1) of the Institute's (Membership and Council) Rules 2001, the Registrar, as authorised by the Council removed 353 members who failed to settle the annual subscription within the stipulated time frame from the Register of Members. The Council received a total of 149 applications for readmission and those who made these applications were reinstated as members whereas 100 members resigned during the year. Among the main reasons for the resignations were: residing/employed overseas, no longer in the profession and retirement. The Council noted with regret the demise of 23 members. As at 30 June 2007, the total membership stood at 23,558. Within the membership, 70% are professional accountants in industries and business, 24% in public practice and the remaining 6% in the public sector as well as other sectors.

Membership Growth
As at 30 June 2007

GEOGRAPHIC DISTRIBUTION OF MEMBERS
(as at 30 June 2007)
 

The Institute regularly monitors advertisements placed in the local newspapers for positions such as an Accountant, Finance Manager, Financial Controller, Accounts Manager and other similar positions related to the profession. The Institute communicates with the advertisers in an effort to create awareness among the employers as well as to educate them on the need to recruit only MIA members for these positions as provided in the Accountants Act 1967.

Rule 9 of the Institute’s (Membership and Council) Rules 2001 requires members who are partners or sole-proprietors of member firms and who are directors/shareholders of tax companies registered with the Companies Commission of Malaysia to hold practicing certificates. As at 30 June 2007, 2400 members are practising certificate holders.

Within the financial year, a total of 119 members were issued practicing certificates, of which 6 were reapplications. The Institute cancelled 91 practising certificates whereby 23 certificates were cancelled due to non-payment of practising certificate fee and 68 were cancelled due to non commencement of public practice within 6 months from the date of issuance of the practising certificate as required by Rule(7)(a)(ii) of the Institute's Rules. In addition, 41 practising certificate holders voluntarily cancelled their practising certificates as they could not commence practice within 6 months from the date of issuance or they ceased to practise.

Every member in public practice is required to maintain a policy of professional indemnity insurance (PII) with a minimum coverage of RM 100,000 immediately upon commencement of public practice, as provided in the Institute’s By-laws. As part of the Institute’s effort in monitoring that this requirement is complied with at all times by practitioners, the Institute had sent letters to these practitioners to verify that they have in fact purchased PII and that the amount purchased is sufficient.

In this financial year, 45 new audit firms registered with the Institute whereby 36 were audit firms and 9 were non-audit firms which converted their status to audit firms. A total of 28 audit firms were taken off the register of member firms as they had ceased operations. During the year, the Institute registered 87 non-audit firms and removed 35 non-audit firms (26 firms ceased operations, while 9 firms were converted to audit firms) from the register.

For the year ending 30 June 2007, there were 1,373 audit firms and 657 non-audit firms registered with the Institute, compared with 1,356 audit firms and 605 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 2006 and 30 June 2007)
 

STATE	AS AT 30 JUNE 2006			AS AT 30 JUNE 2007
	AUDIT FIRMS	NON -AUDIT	FIRMS TOTAL	AUDIT FIRMS	NON -AUDIT	FIRMS TOTAL
FEDERAL TERRITORY*	517	184	701	541	192	733
JOHORE	125	73	198	123	80	203
KEDAH	26	16	42	25	16	41
KELANTAN	13	4	17	12	6	18
MALACCA	31	17	48	30	17	47
NEGERI SEMBILAN	20	12	32	20	17	37
PAHANG	22	6	28	23	5	28
PENANG	103	30	133	104	36	140
PERAK	53	43	96	53	48	101
PERLIS	0	1	1	1	1	2
SABAH	84	21	105	82	29	111
SARAWAK	81	23	104	81	26	107
SELANGOR	270	171	441	267	180	447
TERENGGANU	11	4	15	11	4	15
TOTAL	1,356	605	1961	1,373	657	2030

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.

Continuing Professional Education

The Continuing Professional Education (CPE) Department is entrusted with the duties of planning and organising conferences, seminars and training workshops on professional and technical areas as well as personal development and soft skills for MIA members. The department accepts participation from non-members at an increased programme fee. The primary objective of CPE activities is to enable the members to learn and master new skills, competencies and knowledge on a continuous basis to ensure they are able to discharge duties that are of a professional standard.

During the year under review, the CPE Department organised 451 programmes attracting some 11,500 participants. The programmes covered various topics in the areas of financial accounting, management accounting, corporate governance, taxation, auditing, working capital management, performance management, strategic planning, corporate finance, banking, corporate law, business and financial risk management, ICT and many more.

The Institute had once again successfully organised the National Accountants Conference 2006 (NAC 2006) which was held from 31 October – 1 November 2006 at the KLCC Convention Centre, Kuala Lumpur. Themed ‘Accountants: Generating Growth and Building Confidence’, the premier gathering of accountants and business leaders attracted a record-breaking 1823 participants.

In line with the strategic blueprint, the CPE Department also continues to enhance collaboration with various bodies such as the Malaysian Accounting Standards Board (MASB), Bursa Malaysia Securities Berhad, the Securities Commission, Bank Negara Malaysia, and the Companies Commission of Malaysia (SSM) and other accountancy professional bodies in producing a variety of topics that are current and relevant for MIA members.

The major challenge for the CPE Department is the pricing of its programmes. The existing pricing basis of RM350/ per day per person is insufficient to continue running programmes that are of high quality. Though the CPE Department still generated a net income on the existing pricing, this profit was achieved as a result of large class sizes that were way beyond the ideal size of 35 participants. One of the quality improvement measures that the department has planned to implement in the near future is to limit the class size of each programme to 35 participants to ensure training effectiveness. The Human Resources Development Board (HRDB) also recommends that the class size of training programmes do not exceed 35 participants if the programmes require their endorsement. Recently, the CPE Committee has expressed its opinion that the pricing of programmes must be in line with its perceived quality, which ultimately suggests that the fixed RM350/per day per person requires review.

Following the winning of the bid to host the prestigious 18th World Congress of Accountants (WCOA) in 2010 in Kuala Lumpur, the CPE Department has already commenced working on this project and has made progress in the following areas:

In addition, the department has also finalised its business plan for the next financial year ending 30 June 2008. The business plan consists of 465 regular CPE programmes and several significant projects as follows;

Going back to the Institute’s original vision on quality and professionalism, while staying in line with members’ interest, the CPE department aspires to achieve quality rather than quantity in organising its CPE Department for the new financial year as well as provide more variety in terms of topics. Some of the measures planned are:

Apart from these measures, the department will also identify best practices and institutionalise them in order to enhance the operational efficiency of the CPE Department. This includes close monitoring of strategy execution and progress, better management of the accounting information system within the department as well as regular department meetings focusing on the goals of the Department and its various Key Performance Indicators (KPIs).

Accounting and Auditing

During the year, the Council of the Institute approved:

The Institute also undertook the review of MASB ED 52 on Private Entity Reporting Standards, ED 55 on Proposed Amendments to Financial Reporting Standards and IASB’s draft IFRS for SMEs for the purpose of submission to MASB. The Institute also participated in public hearings and dialogue held by MASB on the above exposure drafts to present the views of the Institute.

Ethics

The Institute through its Ethics Committee undertook a review of the Institute’s By-Laws (On Professional Conduct and Ethics) [Revised 2002] to ensure convergence with the revised Code of Ethics for Professional Accountants (‘revised Code of Ethics’) issued by the International Federation of Accountants (IFAC). The Ethics Committee extensively reviewed the revised Code of Ethics with the intention of adopting and including the same in the Institute’s By-Laws, in so far as these provisions are not inconsistent with national laws and requirements.

As a result thereof, the Institute’s revised By-Laws were reissued as the Institute’s By-Laws (On Professional Ethics, Conduct and Practice) [Issued January 2007].

In July 2006, the IFAC issued Section 290 (Revised) of the Code of Ethics for Professional Accountants (‘revised section 290’). The revised section 290 included the amended definition of “firm” and “network firm” and introduced the concept of a “network”. The revised section also contained 13 additional paragraphs that provided elaboration of factors that would contributed to a firm being considered part of a network.

Due to the far reaching implications of the revised section 290, an Exposure Draft, with an exposure period of three months, was issued to obtain feedback from members, regulators and other stakeholders.

After an extensive review of the comments received, the Institute’s By-Laws (On Professional Ethics, Conduct and Practice) [Issued January 2007] was amended accordingly to include the revised section 290.

Financial Statements Review

Review exercises were undertaken by the Institute for the purpose of determining compliance with statutory requirements, approved accounting and auditing standards, and generally accepted accounting and auditing principles and practices. The review covered public listed companies, non-listed companies and government-linked corporations. The Institute also looks into matters referred to it by the regulators and may review the financial statements where there are public interest issues.

Review findings were communicated to the member responsible for the preparation of the financial statements, to the member who is reporting on the financial statements and also to the board of the directors of the relevant companies. During the year under review, the common review findings on non-compliance with applicable accounting standards and approved standards on auditing were issued to members as guidance and the review process was revisited for the purpose of expediting the review on matters referred by the regulators and other regulatory bodies. The penalty tariffs were in place to address different degrees of financial reporting deficiencies and discrepancies and issues relating to auditor or member’s conduct. In total, 34 financial statements were reviewed and 2 cases were referred to the Investigation Committee.

Investigation

The Accountants Act, 1967 provides for the establishment of the Investigation Committee as a statutory committee to investigate complaints against members. During the year, the Investigation Committee received 35 new complaints against members, bringing a total of 85 cases under investigation (including 50 cases from prior years). The Investigation Committee completed its investigations in respect of 11 of these cases. The Investigation committee determined to refer 3 of these cases to the Disciplinary Committee and dismissed 8 cases. There are 74 cases currently under different stages of investigation.

Disciplinary

During the year, the Disciplinary Committee received five cases to hear, four of which were referrals from the Investigation Committee and one case involving a bankrupt member. Out of the five cases, two cases have been heard fully by the Disciplinary Committee and the other three are pending hearing. Out of the two cases already heard, one case was dismissed by the Disciplinary Committee. In the other case, the member was found guilty of unprofessional conduct and sanctioned accordingly. The decision of the Disciplinary Committee against that member was published in the Government Gazette, Accountants Today and two newspapers. The relevant authorities were also informed of the decision.

There were no appeals to the Disciplinary Appeal Board during the year.

As for appeals against the Disciplinary Committee’s decisions pursuant to the old Accountants Rules, 1972, two cases are awaiting appeal to the Court of Appeal.

Membership Affairs and Continuing Professional Education

As in previous years, the Institute continues to monitor members’ compliance with the By-Law on Continuing Professional Education (CPE). The Institute views CPE compliance by members seriously and has over the years adopted an established set of procedures to audit members.

As the audit is based on the calendar year, there is an overlap of two audits during the review period. The Institute had completed a review of 1,700 members who fell in the 2003 – 2005 CPE cycle. 57% of the members had fully complied with the requirements, whereas 17.5% had a shortfall in the number of credit hours accumulated. The balance members had resigned, were removed from the membership or failed to submit the report.

For the 2004 – 2006 CPE cycle, a total of 1,525 members are being audited. From the total number of members audited, 5 members have resigned or were removed during the audit process. At the close of the financial year, 60% have complied with the CPE requirements whereas 13% were unable to provide adequate evidence to support their compliance or had a shortfall in the number of credit hours required. To date, 3% who received the audit notification failed to return their forms.

Practice Review

During the year under review, the Practice Review Department (“the department”) issued notifications of review to 99 member firms. This brings the cumulative number of member firms selected for review to 267 as at 30 June 2007.

As at 30 June 2007, the department has completed the review of 209 member firms, with 12 of these completed assignments being performed by panel reviewers. The department has moderated the draft reports submitted by the panel reviewers to ensure consistency on the basis of review opinion issued and the overall presentation of the draft reports. The 209 member firms which have been reviewed include 15 firms of current and former panel reviewers of the Institute.

During the financial year, the Institute recruited a Head of Department based in Kuala Lumpur and a manager based in Johor Bahru to conduct the review of member firms located in Johor.

Through the various Committees of the Institute, other specific initiatives taken to promote the profession include:

Accounting and Auditing

Company Law Practice

With regards to Company Law Practice, the Institute was actively involved in the following:

Ethics

In December 2006, an Exposure Draft was issued by IFAC on Section 290: Independence - Audit and Review Engagements and Section 291: Independence – Other Assurance Engagements for comments by member bodies.

In order to better appreciate the concerns and issues that may arise due to the changes proposed in the Exposure Draft, the Ethics Committee invited feedbacks from members, regulators, institution of higher learning and other stakeholders.

The Ethics Committee deliberated on the comments received from these interested parties and formulated a response to IFAC.

Professional Accountants in Business

The Institute supported the IFAC Professional Accountants in Business (PAIB) Committee in the global development and exchange of knowledge and best practices for professional accountants in business.

The Institute attended two meetings of the IFAC PAIB Committee in September 2006 and March 2007 and was involved in the following IFAC PAIB projects:

The Institute in collaboration with The Chartered Institute of Management Accountants (CIMA), Malaysia Division again successfully organised the NAfMA in 2006. There were 9 finalists for the NAfMA 2006, with 6 recipients of the award in different categories. The NAfMA 2006 presentation dinner was held on 7 December 2006 and was officiated by Y Bhg Dato’ Dr Ng Yen Yen, Deputy Minister of Finance 1, Malaysia. The NAfMA 2004 Case Studies book was launched by the Honourable Minister at the Presentation dinner.

During the year, great effort was put into promoting NAfMA locally and internationally. Workshops were held in Kuala Lumpur, Penang, Johor Bahru, Kota Bahru to brief potential participants on the assessment process and criteria for NAfMA 2007. Corporate visits were carried out extensively to promote participation in NAfMA 2007. In addition to the recognition already received by NAfMA locally and internationally NAfMA was awarded the bronze medal at the Malaysia Technology Expo 2007 for SME.

Public Practice

A Council member from the Institute has been elected to serve on the SMP Committee under the IFAC and had attended several meetings in Hong Kong, Italy, India and Tunisia. The Institute is now able to play a proactive role in identifying and representing the needs of SMPs and be involved in SMP/SME issues in order to keep itself abreast with the latest updates from the various organisations within IFAC working on relevant projects.
In December 2005, the MOF had announced the new audit and tax licensing requirements and procedures which will were to take effect on 1 January 2006. The Institute and other professional bodies such as The Malaysian Institute of Certified Public Accountants (MICPA) and The Malaysian Institute of Chartered Secretaries and Administrators (MAICSA) are continuously sending submissions on this issue to the MOF outlining and highlighting the various concerns and forwarding recommendations to simplify the process of applications and renewal of tax agent licence.

The Corporate Law Reform Committee (CLRC) under the Companies Commission of Malaysia had issued Consultative Document No. 7 entitled ‘Creating A Conducive Legal and Regulatory Framework for Businesses’ which affects members in public practice significantly. In this regard, a forum was organised to create awareness among members about issues that were raised in the document and gave members a platform to provide constructive views on the document.

The Institute had issued the International Standards on Quality Control (ISQC1) which has been effective since 1 July 2006. To assist member firms in implementing the standards in their firm, the Institute had organised a series of seminars nationwide, explaining and outlining the areas of quality control that the firms should have in place.

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

This is in addition to the Public Practice Programmes which were organised nationwide since January 2006.

Taxation

The Institute held dialogues with the Ministry of Finance, the Inland Revenue Board (IRB) and the Royal Malaysian Customs (RMC) as well as participated in the submission of comments/proposals relating to various issues/guidelines such as the draft framework for tax audits and investigations as well as the draft legislation for the Customs Rulings and Customs Appeal Tribunal.

During the period under review, the Institute had dialogues with the Revenue Management Department, Technical Department, Compliance Department and Investigation Department of the IRB to seek further clarification on the latest legislation/ guidelines issued and also to resolve the practical problems encountered by the members of the Institute. The Institute also expressed its views and proposals on various issues in promoting the interests of the accountancy profession in Malaysia. Among the issues raised during the Operations Dialogue on 4 April 2007 was the deadline for submission of income tax returns for companies with March and December year-ends, tax refunds, implementation of e-filing, loss of records due to the recent floods in parts of Johor, etc. In addition, the Institute also had a few dialogues with the Revenue Management Department of the IRB to resolve practical issues/problems related to the submission of income tax return Forms B and BE for YA 2006.

Post budget issues such as advance rulings, Investment Holding Company, review of company income tax rate and other technical issues were among the matters raised during the Technical Dialogue with the IRB on 5 October 2006. Besides this, the Institute also had a tax audit and investigations dialogue with the IRB on 14 December 2006 to clarify various practical issues such as time frame of tax audits, scope, imposition of penalties, request for audit working papers and other confidential information, proposed framework for tax audits and investigations, etc. The Institute also sought clarification on the establishment of the Customs Appeal Tribunal and the introduction of Customs Rulings during the Customs-Private Sector Consultative Panel Meeting 2/2006 held on 20 December 2006. The minutes of the above-mentioned dialogues can be viewed at the Institute’s website under the Technical-Areas-Taxation-Circulars site.

Public Relations

The Public Relations function of the Institute continued to be responsible for the delivery of the Institute's communications and public access strategy. The activities undertaken by this department during the period under review include:

Internal Audit Working Group

In an effort to promote the best internal audit practices, the Internal Audit Working Group has decided to collaborate once again with The Institute of Internal Auditors Malaysia (IIA Malaysia) in organising the Best Internal Audit Practice Award (BIAPA) this year. The Award is carried out by the Joint Task Force of MIA and IIA Malaysia which is co-chaired by Mr. Wee Hock Kee (MIA) and Mr. Madhu Marimuthu (IIA Malaysia).

The Award continues to focus on the same objective as previous years i.e. to recognise and award companies with outstanding internal audit practices that is being demonstrated by:

The award presentation ceremony for BIAPA 2007 is scheduled to be presented during IIA Malaysia’s 30th Gala Dinner on 23rd of November 2007.
 

Anti-Money Laundering

Initiatives pursued under this area include:

Public Practice

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

Taxation

The Institute jointly prepared and submitted a Budget Memorandum to the Ministry of Finance on 19 April 2007 together with The Malaysian Institute of Certified Public Accountants (MICPA) in conjunction with the 2008 National Budget. The Budget Memorandum contained a number of recommendations for the improvement of the taxation system and for fairer tax processes to be put in place. The Institute is pleased to confirm some of the recommendations submitted by the Institute in its Budget Memorandum for 2007 were either partly or fully accepted by the Ministry of Finance. These include the Institute’s recommendations in respect of the review of the corporate income tax rate, review of the imposition of penalties on short payment of withholding tax, advance rulings in income tax administration and framework for tax audits and investigations.

In collaboration with MICPA and MIT as well as with the support of the major accounting firms, the Institute published the 2007 Budget Commentary and Tax Information booklet for the benefit of members and the general public. The booklet contains relevant tax information with the latest amendments to the relevant legislation as proposed in the 2007 Budget as well as updates and other tax related information.

To assist members as well as the public, the Institute jointly with the MIT organised 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 the proposed changes to the income tax law after the 2007 National Budget was announced.

So as to protect and promote the interest of members, the Institute submitted a number of memorandums or submissions on tax matters to the relevant authorities, including the 2007 Post-Budget Technical Memorandum, comments/proposals on the draft framework for tax audits and investigations, 2008 Joint Budget Memorandum, Memorandum on Operational as well as Tax Audits and Investigations.
 

Financial Reporting Standards Implementation Committee (FRSIC)

FRSIC was launched by Y Bhg Dato’ Zarinah Anwar, Chairman of the Securities Commission (SC) on 30 January 2007. FRSIC is MIA’s initiative to provide assistance to MIA members on matters of common interest relating to accounting standards by way of providing implementation guidance to both preparers and auditors.

FRSIC consists of up to 7 members experienced in the technicalities of financial reporting. The membership includes four MIA Council members, one of whom is the Chairman; and three members from professional bodies recognised under Part II of the First Schedule to the Accountants Act 1967.

The involvement of the professional bodies is to provide FRSIC with technical support including access to their international technical department, pronouncements and guidance. This is to ensure our implementation guidance represents international best practice.

There are also five observers from regulators and standard setters, namely SC, BNM, Bursa Malaysia Securities Berhad, SSM and MASB. The involvement of the Regulators is to ensure that they are aware of issues arising in the profession and also for them to provide FRSIC views of the regulatory agencies which they represent. However, they are not voting members.

The involvement of the standard setter is to ensure that issues discussed are not those that are being considered by them and to provide FRSIC access to discussion by other standard setters on the issues raised.

Since its launch, the Institute has received 13 issues submitted by preparers and auditors. As FRSIC only deals with implementation of the standards, 3 issues relating to internal group reorganisation, accuracy of amortisation formula for the expressway development expenditure and application of FRS for MSC status companies have been referred to MASB as they relate to interpretation of the standard.

The Institute has decided not to take up two issues raised on share premium valuation and distribution in kind as they are being considered by the Corporate Law Reform and the International Financial Reporting Interpretation Committee (IFRIC) respectively.

Project managers have been appointed to look into the following other issues:

The first consensus to deal with deferred taxation rate in light of reduction in income tax rate for YA 2008 has been approved by the Council of the Institute and issued as the first guidance of FRSIC in May 2007.

Amendments to the Accountants Act 1967

The Taskforce on Amendments to the Accountants Act 1967 was established in 2004 to deliberate on areas in the Act which require amendments. This is to ensure that the Act remains relevant and dynamic to meet the challenges and requirements of the accountancy profession in Malaysia.

The Taskforce is currently reviewing the current framework of the accountancy profession under the Act with a view to proposing a new framework to ensure that the accountancy profession is transparent, accountable and effective yet flexible enough to cater to the fast changing financial and business environment of Malaysia and to protect public interest.

The Taskforce has held ten (10) meetings within the financial year to develop a consultative document on the establishment of a new framework for the profession, and has held three (3) joint meetings with the Council to seek its approval for the issuance of the consultative document to the members and stakeholders.

Development and Promotion

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 sources of income and a steady increase in membership over the long term are required. A number of development and promotional activities were undertaken by the Institute through its Development and Promotions Department, Public Relations Department, Membership Affairs Department and Education Department.

With regard to activities to increase membership, the Institute was actively involved and participated in the following activities:

In promoting the Institute’s membership, a more effective delivery of promotions through efficient branch machinery is targeted in the coming year. While most of the membership drive activities have been undertaken from the Institute’s office in Kuala Lumpur, some of the functions will be enhanced through the contributions of branch offices outside the Klang Valley.

Other promotional activities were undertaken in the year under review by the Institute. The Institute actively worked with strategic partners to offer a wider range of benefits for its members.

Administration

Throughout the year, the Management Centre continued to spearhead the execution of various initiatives towards fulfilling the Institute’s strategic objectives under the guidance of the Council.

To further improve upon its key performance indicators (KPIs) as set out in the Strategic Blueprint of the Institute, the performance of employees was also assessed based on the KPIs which are set out at the beginning of every year.

In order for the Management Centre to provide better services to members and to effectively carry out the regulatory functions of the Institute, certain key positions were filled during the year under review. This was in line with the Institute’s aspirations to strengthen the quality of its technical and operational teams to support its members and perform its regulatory functions effectively. As a service provider to its members, the Institute recognises that investment in quality personnel is crucial to the success of the organisation.

The Management Centre has been continuously encouraged and empowered to assume bigger role. A realignment of the governance and organisation structure of the Institute is currently in progress where the roles of Council, Committees and management centre staff will be more clearly defined.

Financial Review

The period under review, was marked by a significant milestone to the Institute as it received a RM10 million Government grant in support of the World Congress of Accountants 2010 (WCOA 2010). The support from the Government confirms the importance of WCOA 2010 as an event of national and strategic importance. Since the project is at the preliminary phase, the Government grant had been set aside in Institutional Trust Account and fixed deposit to leverage on the interest income from such placement.

On the operational level, the Institute’s revenue for the financial year ended 30 June 2007 is RM16.5million or 5% higher than the revenue of RM15.7million for the previous financial year, while the surplus before tax is reported at RM99,802 compared to the surplus before tax for the previous year of RM131,255.

The increase in revenue of 5% is mainly contributed by the admission and subscription fees received from new members of RM255,700 and income from Continuing Professional Education (CPE) events of RM597,796.

The drop in profitability as opposed to the increase in revenue is attributable to the higher cost of fulfilling membership service and lower profit margin from income generating activities such as CPE events and Development & Promotions activities.

As the Institute continues to seek ways to discharge its roles and functions effectively, it cannot be ignored that the cost of doing business is escalating and this has affected its ability to continue to generate surpluses. As such, the Institute strives to strengthen its income generating activities with the view to achieve self-sufficient funding.

Financial Summary

Governance

The Council, in its efforts to promote and ensure better 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 year ended 30 June 2007 prior to presenting it to the Council. The Committee also reviewed the external auditor’s results of the annual statutory audit and management letter together with the management’s response to their findings and observations.

The Internal Audit Department played a key role in providing assurance to the Audit Committee and management regarding the efficacy of controls, management of risk and effectiveness of corporate governance. The internal auditors deliver value by facilitating operational improvement and promoting best practices across the Institute. In addition, reviews on compliance with established policies, procedures, guidelines and statutory requirements were also carried out.

Public Practice

A strategic retreat was organised for the Public Practice Committee (PPC) to chart the direction of members in public practice for the next three (3) years. This includes identifying the needs and concerns of members as well as assistance that could be provided for them to better operate their firms.

The Institute had also created and maintained an on-line register known as the “Member Firms Mergers and Affiliations Listing” for members, especially practitioners in small firms who wish to consider looking towards merging or the possibility of affiliating with their peers. This listing comprises of member firms interested to merge or affiliate with another firm. Interested firms are given the opportunity to peruse through the listing and identify partners that meet their profile for alliances, mergers or affiliations.

The Council strives 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 other states throughout Malaysia. While most of the functions are undertaken from the Institute’s office in Kuala Lumpur, there is also a need to extend the Institute’s reach to other states in the country.

Towards this end, the Council established the following eleven (11) Branches of the Institute, each led by a Branch Committee:
- Johor
- Penang
- Kedah & Perlis
- Perak
- Kelantan
- Sabah
- Melaka
- Sarawak
- Negeri Sembilan
- Terengganu
- Pahang
.
Last year a new permanent office was set up in Johor to provide assistance for members in the southern region. It has proven to be a step in the right direction as the committee has ensured that the Institute’s members in the Southern region were given the support services they require.

The Branch Committees at the above Branches assisted and supported the Council and Management Centre in carrying out the following functions:-
- organised and conducted CPE events at the Branches;
- assisted applicants seeking to sit for the MIA QE;
- promoted the interest of the accountancy profession; and
- provided assistance to members and other stakeholders at the Branches.

To meet these functions, the Branch Committees organised CPE events and dialogues at their respective Branches. They also represented the Institute at meetings and dialogues with regulatory authorities such as the Companies Commission of Malaysia (SSM), the Inland Revenue Board,. They have also played an important role in promoting NAfMA in their respective states by organising workshops to create more awareness about the competition.

In September last year, the Penang Branch organised a Regional Conference, which was themed “Riding the Waves of Change”. The conference, which featured the latest topics on business, corporate and accounting trends in the local and global contexts, managed to attract the participation of approximately 300 people.

To assist member firms in implementing the International Standards of Quality Control (ISQC) a series of seminars on the topic were held nationwide including at the Branches. The purpose of these seminars was to explain and outline the areas of quality control that the firms should have in place.

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

Apart from that, the Branches also organised events which provided a platform for members to meet up, engage in networking activities and foster greater camaraderie. Some of these activities include the repective annual dinners organised by the Branches for members within their states and the various charity drives initiated by the Branches.

Essentially, the Branch Committees also 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.

Following the successful bid to host the 18th WCOA which will be held in the year 2010 in Kuala Lumpur, the Institute formed a WCOA 2010 Steering Committee which has been actively involved in the following projects:-

CONCLUSION

Overall, the Institute has had an exciting year, punctuated by various milestones and achievements and favourable developments within the profession. The Institute today is a very dynamic organisation that is the active voice for more than 23,000 members. Although challenges and constraints abound in the current operating environment, it has stayed true to its cause, maintaining a fixed determination to ensure the fruition of all its projects, the effective implement of its plans and strategic initiatives. This has proven to be instrumental in ensuring sustained growth in this dynamically evolving business climate.

The above report also records the Institute’s contribution towards the growth of the accountancy profession in Malaysia and globally. This is in sync with its vision to be a globally recognised and respected business partner committed to nation building.

We also note that the numerous conquests achieved during the period under review do not mean that we can sit back and be complacent. The Institute will continue to manage and utilize its resources efficiently and effectively to attain its goals.

The Council would like to take this opportunity to express its deepest appreciation to all members for their invaluable contribution to the various Committees, Working Groups and Taskforces of the Institute, including those at the Institute’s branches. It is with the support and commitment of these dedicated individuals that the Institute was able to progress during the past financial year and achieved greater milestones.

In closing, the Council would like to thank all the Management Centre staff for their continued support, dedication and commitment to the success and growth of the Institute.

On behalf of the Council

Abdul Rahim Abdul Hamid
President and
Chairman of the Council