Untitled - Malaysian Institute of Accountants

1Akauntan NasionalDecember 2002

F R O M T H E E D I TO R

CONTRIBUTION OF ARTICLES

The Akauntan Nasional welcomes original and previously unpublished contributions which are of inte-rest to accountants, executives and scholars. Manuscripts should cover domestic or international accountingdevelopments. Lifestyle articles of interest to accountants are also welcomed.

Manuscripts should be submitted in English or Bahasa Malaysia and range from 2,500 to 5,000 words(double-spaced, typed pages). They should be submitted in hardcopy and diskette (3.5 inch) form in MicrosoftWord or Lotus Wordpro. Manuscripts are subject to a review procedure and the Editor reserves the right tomake amendments which may be appropriate prior to publication.

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We want to hear from you on just about anything that appears ineach issue of Akauntan Nasional. Why not drop us a line now?

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AKAUNTAN MALAYSIAINSTITUT

The Malaysian Institute of Accountants is a statutorybody set up under the Accountants Act, 1967 to regulateand develop the accountancy profession in Malaysia.

The functions of the Institute are, inter alia :

(a) To regulate the practice of the accountancyprofession in Malaysia;

(b) To promote in any manner it thinks fit, the interestsof the accountancy profession in Malaysia;

(c) To provide for the training and education by theInstitute or any other body, of persons practisingor intending to practise the profession;

(d) To determine the qualifications of persons foradmission as members; and

(e) To approve, regulate and supervise the conduct ofthe Qualifying examination.

MIA COUNCIL

PRESIDENTAbdul Samad Haji Alias (Dr.)

VICE-PRESIDENT Wong Mun Sum, Albert

ACCOUNTANT-GENERALYBhg. Datuk Siti Maslamah bt. Osman

Y.M. Raja Dato' Seri Abdul Aziz Raja Salim; Datuk Nur Jazlanbin Tan Sri Mohamed; Dato' Abdul Halim Mohyiddin; Dato'Lee Ow Kim; Dato' Nordin bin Baharuddin; Dato' Syed AminAl-Jeffri; Prof. Dr. Takiah bt. Mohd Iskandar; Prof. Madya Dr.Mohamad Ali bin Abdul Hamid; Prof. Madya Dr. Nafsiah bt.Mohamed; Prof. Madya Dr. Noorhayati bt. Mansor; Prof.Madya Dr. S. Susela Devi Selvaraj; Abdul Rahim bin AbdulHamid; Beh Tok Koay; Lam Fu Wing; Lam Kee Soon; LiewLee Leong, Raymond; Manjeet Singh s/o Santokh Singh; MohdNor bin Ahmad; Muhammad Ibrahim; Tuan Haji Muztazabin Mohamad; Nazlan Ozizi bin Ibrahim; Nik MohdHasyudeen bin Yusoff; Quek Jin Fong; Sudirman bin Masduki;Yeo Tek Ling; Zahrah bt. Abdul Wahab Fenner.

REGISTRARMohammad bin Abdullah

EXECUTIVE DIRECTORHo Foong Moi (Ms)

EDITORIAL BOARD

COMMITTEE : Raymond Liew, Chairman; Assoc. Prof.Dr. Jeyapalan Kasipillai; Chia Kum Cheng; Ghazalie Abdullah;Zahrah Abd Wahab Fenner; YM Raja Datuk Seri Abdul AzizRaja Salim; Prof. Madya Dr. Nafsiah Mohamed; Lam KeeSoon; Sudirman Masduki; Adelena Lestari Chong; TongChin Hoo

EDITORIAL TEAM : Iszudin Mohd Amin (Editor),Nirmala Ramoo (Asst. Manager), Rosliani Shafie(Communications/Admin. Assistant.)

PUBLISHING CONSULTANTExecutive Mode Sdn Bhd (317453-P)Tel : 03-7118 3200, 3205, 3230 Fax : 03-7118 3220e-mail : [email protected] : http://www.executivemode.com.my

PRINTERUltimate Print Sdn Bhd (62208-H)40 Jalan Penchala, 46050 Petaling JayaTel : 03-7787 5688 Fax : 03-7787 5609

PUBLISHED BYMalaysian Institute of AccountantsRegistered Office and AddressDewan Akauntan2 Jalan Tun Sambanthan 3, Brickfields50470 Kuala LumpurTel : 03-2279 9200 Fax : 03-2274 1783, 2273 1016e-mail : [email protected] : http://www.mia.org.my

Malaysian Institute of Accountants(Established under the Accountants Act, 1967)

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After decades of working quietly behind the sceneS, accountants who have been stereo-typed as boring bean counters suddenly found themselves shot into the public spotlightthis year. But it was publicity they neither desired nor sought. In the explosion of corpo-

rate scandals at giants like Enron and Worldcom, accountants were portrayed by the media asthe villains of the corporate world and accused of cooking the books.

The repercussions of these developments have been felt worldwide, and the accounting pro-fession in Malaysia has not been spared. Many questions have been raised about the ethicalconduct of accountants in commerce and industry as well as the profession as a whole. Much ofthe criticism centred on the perceived failure of accountants and external auditors to dischargetheir fiduciary responsibilities competently and to demonstrate the highest ethical practices.The accounting profession suffered serious damage to its reputation

But what got lost in all the publicity is the fact that it is an honourable profession bound by ethicsand morals. To be fair to accountants, the critics failed to focus on the internal factors as well as tounderstand how the process of financial disclosure is done. One of the primary misconceptionsprevalent, including within the Malaysian corporate sector and the media, is that the company’sexternal auditor is responsible for the financial statements of the company. If we go beyond themedia frenzy, a different picture emerges; the collapse of some of America’s corporate entities canbe blamed on a cast of characters. It is a corporate drama that has more than one villain.

As part of the corporate financial reporting team, accountants must always remember thatwe are the guardians of truth, fairness and due-diligence standards. To look at due diligencemerely as a compliance responsibility to fulfil legal obligations would be missing the point; duediligence practices should bring about higher professional standards, greater disclosure ofinformation and more accurate representations, without which the integrity of our professionwill be seriously undermined.

The core of a transparent and accountable corporate sector is the commitment to ethicalbehaviour by everyone involved in the financial reporting framework.

Future opportunities for the accounting profession depend very much on the maintenance ofpublic confidence. The profession has reached a critical period, being under constant publicscrutiny. This critical atmosphere should be understood by the accountants who must adjusttheir approach and attitude to it if their worthwhile contribution to society is to be maintainedand strengthened.

The task of upholding the reputation and well-being of the profession should not be left onlyto the Malaysian Institute of Accountants (MIA) but shared by all members equally. Upgradingthe code of ethics for accountants is but one way to attain this goal. More importantly, profes-sional survival must also rest on continuous educational training programmes.

Under such circumstances, the Institute with its vision of becoming ‘a globally recognisedand respected business partner committed to nation building’ has increased its efficiency andspeed to respond with flexibility to changes in the industry. In particular, we have bolstered ouroperations, improved our services, enhanced our Information Technology capabilities, as wellas strengthened our public relations activities. In short, we have strengthened our foundationfor service with excellence, while demonstrating MIA’s unique professionalism.

Over the next few years, it is expected that global competition will accelerate at an evengreater pace, due to many changes in business conditions, especially in the wake of globalisation.With the mission ‘to develop, support and monitor quality and expertise consistent with globalbest practice in the accountancy profession for the interest of stakeholders’ our focus will be ontaking the profession’s global expansion to a new level, by capitalising on members’ commit-ment, while achieving increased competitiveness in quality, cost and delivery.

As the year draws to a close, let us put our actions this year in perspective and act upon ourshortcomings, so that we are ready to take on the challenges of the future, a little wiser, a littlebolder.

Merry Christmas and A Happy New Year.

Editor

Accountants Speak Up

2 Akauntan Nasional December 2002

From the Editor

Notice to Practising Members

C O V E R

MIA Practice Review : Setting HighProfessional Standards

Statement on Practice Review,Review Procedures and Conduct ofMembers

Summary of Practice ReviewProcedures

M A N AG E M E N T A C C O U N T I N G

The BCP Budget and Business ImpactAnalysis

It’s Time Local Companies CameClean on Their EnvironmentalRecord

B U S I N E S S & A C C O U N T I N G

The Role of the Chief Financial Officerin 2010

Dividend Policy : Does it Matter?

Strategic Planning of AdvancedManufacturing Technology

TA X AT I O N

The Assessability of Interest Incomeas a Business Source

M A N A G E M E N T

Reviving Entrepreneurship in YourBusiness

K-Accountants — A HumanResource Perspective

M O N E Y T R E E

The Integrated System of FinancialPlanning — Total WealthManagement System

B U S I N E S S W AT C H

Doing Business in the USA (Part 2)

I N T E R N AT I O N A L

IFAC Technical News

FASB & IASB Technical News

T R AV E L A N D L E I S U R E

Seoul’s Old and New

B E T T E R L I F E

Good Posture Prevents Backache

I N S T I T U T E N E W S

Penang Branch News

Sabah Branch News

Sarawak Branch News

MAAA News

C O L U M N S

Malaysian CFOs Have GreatestConcerns Over Non-Executives,Survey Shows

CIMA Graduation Joy

M E M B E R S ’ U P D AT E

MIA Resource Centre

Request for Address Update

Registration of Accountants

Readmission of Accountants

Reclassification of Accountants

Resignation of Accountants

CPE Calendar

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The Akauntan Nasional is the official publication of the Malaysian Institute of Accountants (MIA) and is distributed to all members of theInstitute. The views expressed in this journal are not necessarily those of the MIA or its Council. Contributions including letters to the Editor andcomments on articles appearing in the journal are welcomed and should be sent to the Editor as addressed below. All materials appearing in theAkauntan Nasional are copyright and cannot be reproduced in whole or in part without written permission from the Editor.

Editor, Akauntan NasionalDewan Akauntan, 2 Jalan Tun Sambanthan 3, Brickfields, 50470 Kuala Lumpur, Malaysia

Tel : 03-2279 9200, Fax : 03-2274 1783, e-mail : [email protected] Homepage : http://www.mia.org.my

Seoul’s Old and New Pg 52

CONTENTSVolume 15, Number 11 DECEMBER 2002

The BCP Budget andBusiness Impact Analysis

Pg 16

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The Role of the CFO in 2010Pg 24


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VISION ANDMISSION

MIA’s Vision

• To be a globally recognised

and respected business

partner committed to

nation-building

MIA’s Mission

• To develop, support and

monitor quality and expertise

consistent with global best

practice in the accountancy

profession for the interest

of stakeholders


MIA BRANCHES

State : JohorLocation : Johor BahruChairman : Soh Siong Hoon, Sam

State : MelakaLocation : MelakaChairman : Lee Hin Kan

State : Negeri SembilanLocation : SerembanChairman : Chan Siew Tong

State : PahangLocation : KuantanChairman : Foo Tui Lee, Joseph

State : PenangLocation : PenangChairman : Teh Eng Hin, Steven

State : PerakLocation : IpohChairman : Soo Yuit Weng

State : SabahLocation : Kota KinabaluChairman : Alexandra Thien

State : SarawakLocation : KuchingChairman : Tiang Kung Seng, David

MIA CENTRES

State : Kedah & PerlisLocation : Alor SetarChairman : Por Lee Tee

State : KelantanLocation : Kota BahruChairman : Billy Kang

State : TerengganuLocation : Kuala TerengganuChairman : Su Lim

NOTICE TO PRACTISING MEMBERS

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SMP. The good news about this ERP scheme is

that it allows various SMPs to come togetherto offer a tailored scheme to the respectivegroup of employees coming from differentpractices with minimum outlay but maximumpotential.

Besides financial incentives, the scheme alsooffers a free RM25,000 accidental death insur-ance coverage to seven employees for everyRM20,000 invested.

b Professional IndemnityInsurance (PII)

We have also invited a broker from State In-surance Broker Sdn Bhd to come and sharewith our practitioners on the various factorswhich should be considered when buying Pro-fessional Indemnity Insurance. Since 1998, ourInstitute has made it mandatory for all practi-tioners (both audit and non-audit) to have aminimum coverage of at least RM100,000 perpartner per practice.

EVENING TALK —INNOVATION SHOWCASE

As part of the innovation within the local ac-countancy profession, member firms are in-

vited to submit to the Practice Matters Depart-ment of the Institute, various innovative propos-als and schemes for the benefit of other practi-tioners or MIA members in commerce and in-dustry for our consideration. It can be in theform of new products or services that have al-ready been commercialised or are in the pro-cess of commercialisation. Once your innovativeproposal or scheme is accepted, it will be allowedto be demonstrated to fellow practitioners orother MIA members on a ‘free of charge’ basisat any one of our future evening talkprogrammes. Submission should be made toJohnny Yong (e-mail : [email protected]) fromthe Practice Matters Department with as muchdetails as possible to enable the Institute to makean informed decision. At minimum, the follow-ing information must be made available :

a) A synopsis of the proposal and/or scheme;

b) The possible benefits to the community andbusinesses;

c) Member’s name and contact details;

d) Firm’s name and contact details;

e) MIA membership number;

f) Ownership and claims of rights for the prod-ucts or services must be disclosed up-front.

CLARIFICATION ONSUBMISSION OF THE

ACCOUNTANTS’ REPORTFOR SOLICITOR’S

CLIENTS ACCOUNTSFur ther to our Notice in Akauntan

Nasional on Solicitor’s Clients Accounts, wewish to inform members of the following :

The Bar Council, in its letter to our Insti-tute dated 27 October 2002 (Ref.: BC/S/30/2002) clarified that, so long as solicitorshave branch offices of their practice/firmlocated in Peninsular Malaysia, they arerequired to submit the Accountants’ Reportfor their clients’ accounts irrespective ofwhether the clients’ accounts are operatedin East Malaysia only.

CALLING ALLPRACTITIONERS IN THE

KLANG VALLEY

As per our earlier announcement, we arelaunching our first evening talk for 2003

in the Klang Valley on 10 January (Friday). Thetalk will be held at the Main Boardroom,Dewan Akauntan, 2 Jalan Tun Sambanthan 3,Brickfields, Kuala Lumpur. It is scheduled tostart at 5.00 p.m. Members are required toregister with Janet Leong at Ext. 250 or SharonKoh at Ext. 125.

For the first in the series of evening talks,we are going to cover the following topics :

a Employee RetentionProgramme (ERP)

It is very common for small and medium-sized practices (SMPs) to suffer from highstaff turnover. Apart from the fact that somestaff may not see much potential in the SMPsdue to the limited scope for possible expan-sion, the lack of a financial incentive schemeto attract the staff’s loyalty could be anotherreason for such a vicious circle. For this pur-pose, fellow practitioners, especially from theSMPs sector should come forward and findout how an ERP programme can be imple-mented in the practice as a form of financialrewards for their loyal employees. We are for-tunate to get an expert from BHLB PacificTrust Management Bhd and its agent HazelOng to explain how unit trust can be used as aflexible instrument to retain employees of a


C O V E RP R AC T I C E R E V I E W

Through our involvement with the Inter-national Innovative Network (please seethe article in January/February 2003 issueof Akauntan Nasional), members in pub-lic practice may eventually be able to mar-ket their products and services in overseasmarkets through the local accountancyorganisation.

DEVELOPINGCONFIDENCE THROUGH

PUBLIC SPEAKING

Whether a practitioner is negotiatingan increase in his chargeable fees

with a difficult client or having to do a busi-ness presentation with the hope of secur-ing an important consultancy engagement,the ability to speak with confidence is ofparamount importance. On another level,an individual who is being interviewed fora new job also needs to outshine his poten-tial rivals in the department of confidence,all things being equal. And one of the sur-est ways to develop your confidence in frontof your clients and other VIPs is to masterthe skill of public speaking. It has beenquoted that people would prefer death thanto speak in public. However, public speak-ing like any other skill can be developed.For this reason, the Institute would like togauge members, especially the practitio-ners’ interest in this area. We will beorganising a series of ‘demo’ meetings atthe Institute’s premise to determine if thereis a need to cater for a special interest groupin public speaking. Members in Klang Val-ley are invited to join our first few demomeetings as scheduled below :

a) 6 March 2003 (Thursday) ;

b) 20 March 2003 (Thursday) ; and

c) 3 April 2003 (Thursday).

All meetings will start at 6 p.m. and willend at about 8.30 p.m. Should there beenough members keen in this area, thenthe Institute will consider setting up thisspecial group to promote the art of pub-lic speaking. Registration can be madethrough Sharon Koh at Ext. 125 (e-mail :[email protected])

Participation in the demo meeting isfree of charge and all sessions will carrytwo CPE hours.

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Come 1 January 2003, theMalaysian Institute ofAccountants (MIA) willimplement the PracticeReview Programme that

will change the realm of public practice forall auditors in Malaysia. This initiative isnot new, having been on the drawing boardsince 1998, but recent events both locallyand internationally have fast tracked itsimplementation. The Institute believes thatthe launching of this important initiativeto cover all audit firms registered with it istimely and relevant in light of develop-ments in the international arena.

Since its activation in 1987, the Institutehas exercised its regulatory role through theinculcation of the ethical and professionalpractice of accountancy by continuous andlifelong education programmes as well asthrough the initiation of disciplinary proceed-ings against unethical members pursuant tothe powers conferred under the AccountantsAct, 1967. The Institute has since expandedits regulatory role, initially through the es-tablishment of financial statements reviewsand now, through the Practice Review.

What is Practice Review? To understandthe concept of Practice Review, we need torecognise the concept of auditing. In broadterms, auditing is a systematic process of

MIA Practice Review :

SETTINGHIGHPROFESSIONALSTANDARDSAudit firms are to be subject to practice review from 1 January2003. The move is aimed at maintaining, applying and observingstandards of the local auditing profession.

objectively obtaining and evaluating evi-dence on assertions about an entity’s eco-nomic actions and events. It ascertains thedegree of correspondence between thoseassertions and establishes the criteria andcommunicates the results to interested us-ers. Users of financial statements in mostcircumstances will not have access to first-hand knowledge about the entity and thus,depend on the opinions of independent au-ditors to give justified credibility to finan-cial statements. As such, the quality of anaudit is fundamental to ensure that accurate,complete and unbiased audited statementsare used for decision making by the users.Just as auditing is carried out in companiesto determine the state of their finances andoperating procedures, Practice Review is aprocess in which the activities of a practis-ing accountant are reviewed by anotherqualified member within the profession.Specifically, it is a process where the stan-dards and procedures of a member’s audit-ing practice are assessed by an independentmember of the same profession.

Impor tantly, the objective of thisProgramme is 3-pronged :(a) Firstly, to confirm members’ obligation

to follow the standards promulgated bythe Institute;

(b) Secondly, to undertake the regulatory


role as provided under the AccountantsAct, 1967 as well as to be aligned withsome of the latest international devel-opments; and

(c) Thirdly, to enhance the confidence ofthe business community in our mem-bers’ standard of professional work.

Since August this year, various forumsinvolving members from different stateshave been conducted to enable them to of-fer their views in respect of the PracticeReview Programme. It is indeed encourag-ing to note that a significant number of mem-bers clearly see the value of implementingthis quality assurance programme.

The Practice Review Programme is a pro-active measure, which is intended to ensureall audit firms registered with MIA operateat least to the required minimum standards.It has to be pointed out that no new opera-tional and/or auditing standards are beingimplemented following the introduction ofPractice Review. Since the standards ex-

process that has led to significant fee de-pression) can be effectively addressed andrectified. By eliminating such illegal prac-tices, the Institute believes that its bona-fidemembers in public practice who operatetheir practices in accordance with the re-quired standards will eventually be able togenerate reasonable returns in terms of feesin their auditing practices. In addition, on15 November 2002, the Council approvedthe By-Law on Quality Assurance and Prac-tice Review as well as the Statement on Prac-tice Review, both of which have been dis-seminated to members. With a definitiveframework in place, the Institute is ready toset up a Practice Review Department. Apartfrom engaging in-house reviewers, the In-stitute will appoint suitably qualified practi-tioners to a panel of reviewers who will actas the Institute’s sub-contracted reviewersalongside those installed within the Prac-tice Review Department. A charge-out ratewill be imposed on the audit firms and basedon earlier estimates, a charge-out rate of RM200 per hour (still estimated only) is con-sidered as reasonable bearing in mind thatthe cycle of review is once every five years.

A Practice Review Committee (PRC) com-prising experienced practitioners has beenestablished to oversee the implementationprocess of the Practice Review Programme.Apart from Council members Dato’ NordinBaharuddin and Lam Kee Soon, who is alsochairman of the PRC, six non-Council mem-bers from large, medium and small firmshave been appointed to the PRC, whichwould be expanded in the future.

For details of the By-Law on Quality As-surance and Practice Review as well as theStatement on Practice Review, members ofthe public can download this informationfrom the Institute’s website atwww.mia.org.my. The PRC will be makingthe necessary disclosure on the detailedprocedures and processes of the PracticeReview Programme upon implementationthereof with effect from 1 January 2003.Further information will be released by thePRC from time to time. To date, the Insti-tute has held several talks in Kuala Lumpurfor members to explain the implementationprocess of Practice Review and to helpclear their doubts. The Institute plans tohold a series of similar talks in other statesin the near future.

pected of our members have always beenthere, the process of Practice Review is moreof a validation process undertaken by MIA.For firms which are found to be operating ata less than satisfactory level, the educationalside of this programme will help these firmsto improve their quality of work so as to raisestandards to that of the Institute’s minimum.This is an appropriate approach to generalrisk management within the auditing profes-sion. The commitment of the Council of MIAto the educational facet of the Practice Re-view programme is thus understandable. Inthe various forums with members, the inten-tion of the Institute to complete at least theinitial cycle of reviewing all firms within thenext five years with the emphasis on educat-ing members in public practice, has been wellreceived.

The Council of MIA foresees that throughthis programme, instances of MIA memberscollaborating with unqualified persons of-fering accounting and auditing services (a

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C O V E R

BY-LAW B-11 : QUALITY ASSURANCE AND PRACTICE REVIEW

Inserted : 15 November 2002; With ef fect from : 1 January 2003

B-11.1Every member in public practice shall ensure that hisfirm complies with all relevant professional standardsfor the purposes of assurance as to the quality of thepublic practice services provided by his firm whetherthrough himself, his partner(s) and/or his employees.In doing so, every member in public practice shallensure that his firm adopts and applies policies andprocedures designed to maintain adherence to pro-fessional standards.For the purposes of this by-law, the professional stan-dards required to be maintained, observed and ap-plied by a member in public practice to the extentapplicable to the type of public practice services pro-vided by that member or his firm, include:

(a) all standards and statements of professional conductand ethics in the form of the Institute’s By-Laws (OnProfessional Conduct & Ethics) in issue from time totime;

(b) all approved standards whether issued by the Councilor otherwise, and all guidelines, statements and/orcirculars of best practices issued or prescribed by theCouncil and/or the Institute from time to time.

B-11.2

All members in public practice and/or member firmsshall submit to the Institute’s Practice Reviewprogramme as established by the Council pursuant tothe Council’s Statement on Practice Review issued on15 November 2002 together with its supporting ap-pendices.Explanatory Note :

(i) The objectives of the Practice Review programme are :(a) to ensure that all members in public practice main-

tain, observe and apply the relevant professional stan-dards, so as to assure that those members in publicpractice, their firms and their employees are compe-tent, ethical, and exercise due professional care intheir professional work;

(b) to assist members in public practice to improve theirprofessional standards where necessary; and

(c) to identify areas where members in public practicemay require assistance in maintaining and observingprofessional standards.

(ii) The Practice Review programme does not set new pro-fessional standards. Rather, the professional standardsthat the members in public practice and/or their firms

are expected to maintain are those already pre-scribed by the Institute and which are summarisedfor convenience in by-law B-11.1(3) above.The Practice Review programme shall be conductedby the Institute through its Practice Review Com-mittee in accordance with the Statement on Prac-tice Review issued on 15 November 2002 with itssupporting appendices, any other directions issuedby the Council from time to time and in accor-dance with any other procedures and processes asmay be determined by the Practice Review Com-mittee.Each member in public practice and/or his firm shallcomply with the requirements contained in theStatement on Practice Review issued on 15 Novem-ber 2002 with its supporting appendices, any otherdirections issued by Council from time to time andwith any other procedures or requirements imposedby the Practice Review Committee for the purposesof carrying out the practice review pertaining tothat member’s firm.The Practice Review programme shall initially beconducted over a cycle of not more than five yearsin respect of member firms which are selected atrandom from the Institute’s records.Each member in public practice and/or his firmshall settle in full, the fees if any, in respect ofthe practice review conducted pertaining to hisfirm including any interim fees, as may be chargedand determined by the Practice Review Commit-tee for his firm. Such fees shall be due and pay-able within 30 days of the date of the bill raisedfor this purpose.

Explanatory Note :(i) The fees, if any, that are charged for the practice

review shall be based on hourly rates as approvedby the Council on the recommendation of the Prac-tice Review Committee.

(ii) The fees, if any, that are charged for the practicereview, shall be in respect of the time involved inthe planning, execution and reporting of the prac-tice review.

B-11.3

This by-law shall, unless otherwise determined bythe Council, only operate in respect of members inpublic practice and/or member firms who provideamong others, audit services.

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STATEMENT ON PRACTICE REVIEW

Review Procedures andConduct of Members

(Issued 15 November 2002)

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7IntroductionParagraph (c) of Section 6 of the Accountants Act, 1967 (the

“Act”) provides for the Institute, as one of its objectives, to regulatethe practice of the profession of accountancy in Malaysia. Paragraph(f) of Section 6 of the Act further states that the Institute shall begenerally able to do such acts as it thinks fit for the purpose ofachieving its objectives, including that of regulating the profession.

In pursuance of the above, the Council of the Institute herebyissues this Statement on Practice Review for the purposes of imple-menting a practice review programme applicable to all membersin public practice as defined pursuant to the Rules and the By-Laws of the Institute.

The objective of the practice review programme is to ensure thatall members in public practice maintain, observe and apply the rel-evant professional standards. Primarily, the practice review programmeis intended to be educational and to help members in public practiceimprove their professional standards where necessary. Essentiallythrough a review of current engagement files, the practice reviewprogramme will identify areas where a member in public practice mayrequire assistance in maintaining professional standards.

The practice review programme does not set new standards.Rather, the standards that the member in public practice is expectedto maintain are those already prescribed by the Institute pursuantto the Act, the Rules and the By-Laws of the Institute including allethical standards in the form of the Institute’s By-Laws (On Profes-sional Conduct and Ethics), auditing standards in the form of theMalaysian Approved Standards on Auditing as well as the variousguidelines issued by the Institute in the form of RecommendedPractice Guides (RPG) and statements and circulars on best prac-tices issued by the Institute from time to time.

This Statement and its supporting appendices set out the con-duct and procedures of the practice review programme in gen-eral terms. This Statement also provides details of the require-ments of the practice review programme, what is expected of amember during the conduct of a practice review, and a brief de-scription of the practice review process.

This Statement comes into operation on 1 January 2003 andunless otherwise stated by the Council of the Institute, shall onlyoperate in respect of members in public practice and/or memberfirms who provide, among others, audit services. Compliance withthe requirements in this Statement is mandatory.

Definition of termsMember in public practice — a chartered accountant who, as asole proprietor or in a partnership, provides or is engaged in publicpractice services (as defined in the Malaysian Institute of Accoun-tants (Membership & Council) Rules 2001) in return for a fee orreward for such services otherwise than as an employee, and holdsa valid practising certificate. For the purpose of this Statement,this includes a member firm.

Practice review —9in relation to a member firm, means an exami-nation or review undertaken pursuant to this Statement and thesupporting appendices to determine whether professional standardsare being or have been observed, maintained and applied.

Practice Review Committee —9a committee established by theCouncil of the Malaysian Institute of Accountants (the Institute) toconduct practice reviews to determine whether professional stan-dards have been maintained, observed and applied.

Member firm —9for the purpose of this Statement, a firm of char-tered accountants where the sole-proprietor or all the partnersare members of the Institute, which is registered with the Insti-tute and which offers among others, audit services.

Professional standards — all those professional standards that arerequired to be maintained, observed and applied by members inpublic practice from time to time, and which are for the purposesof this Statement, set out in paragraph 11 below.

Reviewer —a. A member of the Institute who is appointed or engaged as an

employee by the Institute for the purpose of carrying out prac-tice reviews;

b. A member of the Institute having a valid audit licence and practis-ing certificate who is appointed to the Panel of Reviewers by theRegistrar for the purposes of carrying out practice reviews; and

c. Any other expert as the Practice Review Committee deems fitand who is appointed on an ad hoc basis to carry out the as-signment of practice reviews or any part thereof.

Practising certificate 9—the practising certificate issued pursuantto Rule 9 of the Malaysian Institute of Accountants (Membership &Council) Rules 2001.

Panel of Reviewers —9any member of the Institute having a validaudit licence and practising certificate, who is not an employee ofthe Institute and who has since been appointed by the Registrar tosuch a panel for the purposes of carrying out practice reviews onbehalf of the Institute.


C O V E R

ScopeMembers subject to review

All members in public practice offer-ing audit services are required to adhereto the standards prescribed by the Insti-tute. All members in public practice and/or member firms so engaged, must thussubmit to practice review, subject to para-graph 9 below.

ExemptionWhere a member in public practice

holding a practising certificate completesa declaration in prescribed form certifyingthat he/she is not engaged in public prac-tice services in so far as it pertains to auditengagements during the preceding 12months and does not intend to so practisefor the foreseeable future, or that he/shewill be discontinuing public practice in sofar as it pertains to audit engagements inthe immediate future (a maximum of threemonths from the random selection date),he/she may be exempted from practicereview at the discretion of the PracticeReview Committee.

Establishment and appointment ofPractice Review Committee

The Council of the Institute has man-dated the establishment and compositionof the Practice Review Committee to over-see the conduct of practice review as fol-lows :

a. The Practice Review Committee shallconsist of such number of members,being not less than 8, as the Councilshall determine and of whom, not morethan 2 shall also be members of theCouncil.

b. All the members of the Practice ReviewCommittee shall be members of theInstitute and a majority of them musthold a valid practising certificate andan audit licence currently in force.

c. A person shall not be a member of thePractice Review Committee and theInvestigation and Disciplinary Commit-tees as well as the Disciplinary AppealBoard at the same time.

d. The quorum for any meeting of thePractice Review Committee shall not beless than half of the total number of

members of the Practice Review Com-mittee for the time being.

e. The Practice Review Committee mayappoint sub-committees of its membersand may delegate to any such sub-com-mittee, with or without restrictions, anyof its functions or powers except thepower to make a complaint against amember in public practice or a mem-ber firm to the Investigation Commit-tee.

f. Members of the Practice Review Com-mittee are not eligible to be appointedto the Panel of Reviewers and vice-versa.

g. The Chairman of the Practice ReviewCommittee shall be a Council Memberof the Institute with a valid practisingcertificate and audit licence.

h. Subject to the provisions, if any, underthe Accountants Act, 1967 and any di-rections issued by the Council fromtime to time including those containedin this Statement and supporting ap-pendices, the Practice Review Commit-tee or any sub-committee thereof mayregulate its own procedures and pro-cesses as it thinks fit.

Directions of CouncilProfessional standards

The Council has from time to time, is-sued or specified the professional stan-dards which are to be maintained, ob-served and applied by members in publicpractice who offer, among others, auditservices. These professional standardsform the subject matter of the Institute’spractice review programme as herein con-tained. Practice review however, does notseek to redefine the scope and authorityof these professional standards but ratherseeks to enforce them within the param-eters so specified. For the time being andfor the purposes of this Statement, the pro-fessional standards which will be examinedunder practice review are as follows :a. all standards and statements of profes-

sional conduct and ethics in the formof the Institute’s By-Laws (On Profes-sional Conduct & Ethics) in issue fromtime to time, in so much as these ethi-cal standards and statements relate to

the conduct of audit engagements and/or that of the member firm;

b. all standards and statements of ac-counting in the form of the approvedstandards and pronouncements issuedby the Malaysian Accounting Stan-dards Board (MASB) from time to timein so far as significant departures there-from may affect the requirement for fi-nancial statements to give a true andfair view; and

c. all approved auditing standards, andguidelines and statements of best prac-tices in issue from time to time. Thiswill also include recommended prac-tice guides (RPG), statements andcirculars issued in relation to audit en-gagements and the practices of a mem-ber firm.

ScopeThe Council has directed the Practice

Review Committee to conduct practice re-views pursuant to this Statement and itssupporting appendices, in order to deter-mine that the professional standards speci-fied in paragraph 11 above are observed,maintained and applied by all memberfirms, subject to paragraph 9 above.

Extent of powersPractice reviews will be performed by

reviewers employed by the Institute and/or those who have been appointed to thePanel of Reviewers by the Registrar. In or-der to ensure proper administration of thepractice review process, the Practice Re-view Committee is allowed to exercise itsfull powers as provided in this Statementand pursuant to any other directives issuedby the Council without restriction.

Panel of ReviewersA Panel of Reviewers will be estab-

lished by the Institute to undertake thefunction of practice review in addition tothe reviewers so employed by the Instituteto conduct practice reviews. A person whois a member of the Institute and who holdsa valid audit licence and practising certifi-cate shall be eligible to be appointed to thePanel of Reviewers subject to the follow-ing provisions :

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a. The person must have successfullypassed an interview process conductedby the Practice Review Committee andsubsequently been recommended tothe Registrar by the Practice ReviewCommittee to be appointed to the Panelof Reviewers.

b. A person shall not be a member of thePanel of Reviewers and the Investiga-tion and Disciplinary Committees aswell as the Disciplinary Appeal Boardat the same time.

c. The tenure of the panel member shallnot be for a continuous period of morethan three years from the date of hisor her first appointment to the panel.Subsequent appointments cannot ex-ceed a continuous period of more thanthree years from the date of his or hersubsequent appointment.

d. A person currently under investigationby the Institute’s Investigation Commit-tee is not eligible to be appointed to bea member of the said Panel of Review-ers. An existing panel member who hasreceived a notice of complaint in re-spect of such an investigation must re-sign from the Panel of Reviewers assoon as practicable but in any event,within one month from the date thenotice of complaint is served on him/her at his/her last known registeredaddress with the Institute.

e. Each member of the Panel of Review-ers must undergo the process of prac-tice review within a year of his or herfirst appointment to the panel. Al-though member firms are selected ona random basis, the person who sits onthe Panel of Reviewers shall volunteerhis or her firm for the practice reviewwithin 6 months after the expiry of thefirst year of his or her appointment tothe Panel of Reviewers should his orher firm fail to be selected under thenormal random selection process.

f. The appointment to the Panel of Re-viewers must be validated by a letterof appointment signed by the Registrar.

g. All appointments to the Panel of Re-viewers shall automatically lapse on 31December of each calendar year unless

a letter of re-appointment issued underthe hand of the Registrar is sent to thepanel member’s last known registeredaddress with the Institute one monthor earlier before the expiry date of 31December of that calendar year.

h. As stated in paragraph 10 of this State-ment, a person cannot be a member ofthe Practice Review Committee and thePanel of Reviewers at the same timeand vice -versa.

i. Subject to sub-paragraph d. above, anadvance notice of one month should begiven to the Registrar prior to any res-ignation from the Panel of Reviewers.Any notice period of less than onemonth shall be accepted at theRegistrar’s own discretion.

Conduct of Practice ReviewsObjective

Essentially, a practice review entails,among other things, a review of currentaudit engagement files and related finan-cial statements to ascertain that the mem-ber firm is adhering to professional stan-dards. Where a member firm is not fol-lowing professional standards in certainsituations, suggestions and recommenda-tions for improvement may be made, andpossibly followed by a further review, inkeeping with the educational thrust ofpractice review. The number of currentaudit engagement files to be revieweddepends on:

a. The degree of reliance, if any, to beplaced on internal quality controls ofthe member firm; and

b. The size of the member firm being se-lected for review.

A summary of the practice review pro-cedures designed to meet the above objec-tive is contained in Appendix A herein.

Selection of member firms for reviewThe Registrar will randomly select

member firms for review and will deter-mine the order of review. A member firmwill not be selected until at least 18months have elapsed since the com-mencement of the member firm basedon the Institute’s records.

Upon the selection of the member firmto undergo the practice review process, themember firm will be duly notified within aweek in writing via registered post by theInstitute. The member firms will be givenan option to decide whether they wouldprefer to be reviewed by a reviewer em-ployed by the Institute or by a member ofthe Panel of Reviewers.

The member firm thus selected willhave to respond to the Registrar in writingwithin two weeks from the date of notifica-tion of selection as to which of the optionsthe firm intends to exercise. Once this op-tion is exercised, it cannot be reversedunless otherwise allowed by the Registraron the recommendation of the PracticeReview Committee.

In cases where a response to theInstitute’s notification of selection is notreceived within the stipulated time frame,the Registrar can proceed to assign suchreviewer at his discretion to the memberfirm that has been selected for the prac-tice review process.

The identity of the member firm shallbe kept confidential from all parties includ-ing the Practice Review Committee andthose staff of the Institute not directly in-volved in practice review, save for thoserelevant reviewers or members of thePanel of Reviewers (as the case may be)who are directly involved in the review ofthat member firm.

Where the member firm selected hasbranch offices or associated practices un-der more than one name, in so far as pos-sible, the practice review will be conductedto cover all these branches or associatedpractices at the same time. Members inpublic practice should ensure that the In-stitute is aware of all modes of practiceconducted by them in order that this canbe facilitated.

NotificationsMember firms will be notified by letter

as to whether their selected option hasbeen accepted. The option for reviewwhether by a reviewer employed by theInstitute or by a member of the Panel ofReviewers will be clearly stated in the no-

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tification letter. In the latter case, thename of the member of the Panel of Re-viewers who has been appointed to dothe review as well as the firm which he/she is currently practicing under will bementioned in the notification letter. En-closed with the notification letter will bea Practice Review Questionnaire (theQuestionnaire). The member firm shouldcomplete the Questionnaire and returnthe same through the member firm’sdesignated practitioner (the sole practi-tioner, the senior partner or other part-ner designated as responsible for prac-tice review), along with all informationrequested, to the Institute within the re-quired period as may be stipulated in thenotification letter.

The reviewer assigned to the memberfirm will be responsible for arranging theon-site practice review visit, which will nor-mally be scheduled within six weeks ofsuch notification. The member firm shallnotify the Institute immediately if they con-sider the timing of the visit to be inconve-nient and shall specify the reasons thereto.Another date will be arranged by mutualconsent such that the review will be heldwithin four months of such notification.Any further extension is at the reviewer’ssole discretion and shall only be grantedfor valid reasons.

The member firm shall be given rea-sonable notice of the selection of clientfiles for inspection. The selection of cli-ent files is made by the reviewer from themost current client listing as provided bythe member firm. Such listing must becertified as complete by the member firmprior to the selection of sample files. As arule of thumb, the member firm shouldalways ensure that all current auditengagements which are representative ofthe operations of the firm should bereadily retrievable during the on-sitepractice review. For the purposes of thepractice review, such current audit en-gagement files refers to engagementswhich have been signed off in the past 18months up to the date of the on-sitepractice review or any other dates that canbe reasonably accepted by the revieweras a practical alternative.

Arrangements for reviewOn-site practice review visits will be

conducted at the member firm’s registeredoffice or other registered place of business.The member firm should ensure that thereviewer is given access to all offices ifthere are more than one and is given allreasonable assistance for the proper con-duct of the practice review. It is expectedthat the reviewer will be provided with ad-equate office facilities for him/her to per-form his/her work effectively and effi-ciently.

Access to documents(1) The following provisions shall

apply as regards to any practice review :

a) Any person, to whom this paragraph ap-plies, and who is reasonably believedby a reviewer to have in his/her pos-session or under his/her control anyrecord or other document which con-tains or is likely to contain informationrelevant to the practice review shall :

(i) produce to the reviewer or afford him/her access to, any record or documentspecified by the reviewer or any recordor other document which is of a classor description so specified and whichis in his/her possession or under his/her control being in either case arecord or other document which the re-viewer reasonably believes is or maybe relevant to the practice review,within such time and at such place asthe reviewer may reasonably require;

(ii) if so required by the reviewer, give tohim/her such explanation or furtherparticulars in respect of anything pro-duced in compliance with a require-ment under sub-paragraph (i) as thereviewer shall specify;

(iii) give to the reviewer all assistance inconnection with the practice review,which he/she is reasonably able togive.

b) Where any information or matter rel-evant to a practice review is recordedotherwise than in a legible form, anypower to require the production of anyrecord or other document conferredunder paragraph (a), shall include the

power to require the production of areproduction of any such informationor matter or of the relevant part of it ina legible form.

c) A reviewer may inspect, examine ormake copies of or take any abstract ofor extract from a record or documentwhich may be required to be producedunder paragraph (a) or (b). However,the making of copies should not beextended to cover those of the mem-ber firm’s current or previous clients’listings.

d) A reviewer exercising power under thisparagraph shall, if so requested by aperson affected by such exercise, pro-duce for inspection by such person acopy of the appointment furnished tohim/her prior to the commencementof the review.

2) Subsection (1)(a) applies to any mem-ber of the Institute employed or in-volved in the member firm to which theparticular practice review relates or toany person employed by or whose ser-vices are engaged by such firm.

Normally the reviewer will require acopy of the financial statements relating tothe client file reviewed. The financial state-ments will be used as a reference for thePractice Review Committee to assess theadequacy of auditing procedures in rela-tion to the materiality of the items con-cerned. Before the copy of the financialstatements is submitted to the PracticeReview Committee for consideration, allreferences to the client’s name or namesand references within the financial state-ments which could reveal the client’s or themember firm’s identity will be concealedby the reviewer.

Where it is considered necessary forthe proper completion of the review, a re-viewer may request copies of other docu-mentation. In such circumstances, theidentity of the client or references whichwould reveal the identity of the memberfirm will be concealed by the reviewer priorto the submission of these copies to thePractice Review Committee for consider-ation.

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Reporting

At the conclusion of the practice review,a reviewer is required to make a report tothe Practice Review Committee. In doingso, the reviewer shall not name any indi-vidual in the report except in a suitablycodified manner.

A reviewer shall, before making thereport required herein, send a dated draftof the reviewer’s report to the member firmconcerned, and to each individual (if any)who is named in the report by registeredpost or recorded delivery addressed to theregistered office or registered address ofthe member firm or the individual, as thecase may be.

The member firm, following the receiptof the draft report has 21 days beginningthe day after the day the dated draft is sentto make any submissions or representa-tions, in writing to the reviewer, concern-ing the dated draft of the reviewer’s report.

The reviewer is required to attach anywritten submission or representationmade, to the reviewer’s report in its finalform before submitting it to the PracticeReview Committee. The reviewer will de-lete any reference to the member firm’sidentity in these written submissions orrepresentations to preserve anonymity.

The reviewer will subsequently send tothe member firm a copy of the final reportas submitted to the Practice Review Com-mittee, by registered post or recorded de-livery.

Powers and Procedures of thePractice Review Committee

GeneralThe Practice Review Committee shall :

a. determine the practice and proceduresto be observed in relation to practicereviews to the extent not set out in thisStatement and supporting appendices;

b. issue instructions to any reviewer onany matter relating to practice reviewsor a particular practice review;

c. do or perform any other thing or act asmay be incidental to or which it con-siders necessary or expedient for the

performance of its functions or exer-cise of its powers under this Statement.

Review and ReportAfter completing the draft report pro-

cess, the reviewer will forward a copy ofthe reviewer’s report, any submissions orrepresentations from the member firm(suitably summarised and codified) to thePractice Review Committee for its review.

Follow-up actionOn receiving the report from a re-

viewer, the Committee, having regard tothe report and any submissions or repre-sentations attached to it, may:

a. make recommendations to the memberfirm concerned regarding its applica-tion or observance of (or lack thereof)professional standards;

b. i. issue an instruction to a reviewerto carry out, within such period as maybe specified in the instruction (whichperiod shall not commence earlier thansix months after the date on which theinstruction is issued), a further prac-tice review as regards the member firmto which the report relates; and

ii. specify in the instruction, thematters as regards which the review isto be carried out;

c. if it is of the opinion that any one ormore or all of the partners in the mem-ber firm subject to practice review mayhave failed to observe, maintain or ap-ply, as the case may be, professionalstandards, then subject to paragraph 37below, the Practice Review Committeemay make a complaint regarding suchpartner concerned or, in case there ismore than one such person concerned,a separate complaint in respect of eachof them, to the Investigation Commit-tee of the Institute.

Where :

a. there exists a potential complaint; and

b. immediately prior to the commence-ment of the relevant practice review

i. the proprietor or partner to whom thecomplaint relates had not previouslybeen a partner in any firm at any timewhen a practice review was carried out

as regards that firm; and

ii. a practice review had not previouslybeen carried out as regards his prac-tising on his own account, the PracticeReview Committee shall NOT refer thecomplaint to the Investigation Commit-tee UNLESS it is decided by a majorityof three quarters of its members for thetime being that, had the grounds ofcomplaint or any such ground or anymatter or matters complained of beenestablished, the relevant act or omis-sion by such proprietor or partnerwould have amounted to unprofes-sional conduct within the meaning pre-scribed pursuant to Rule 2 of the Ma-laysian Institute of Accountants (Dis-ciplinary) (No. 2) Rules 2002.

The Practice Review Committee shallmake recommendations to the memberfirm where :

a. it considers that the member firm hassatisfied all key control objectiveswhich the Practice Review Committeedetermines are required to maintainprofessional standards but where fur-ther improvements could be made tointernal quality control systems; and

b. it considers that the member firm hassatisfied the major key control objec-tives but some weaknesses exist in oth-ers. The member firm is then expectedto consider the recommendations forrectifying the weaknesses in controlsand take all necessary action to ensurethat all key control objectives areachieved. A follow up meeting will beconducted after 12 months or if pos-sible, even earlier to enquire about theprogress of the implementation of therecommendations.

A follow up review will be requiredwhere the member firm has not satisfiedthe Practice Review Committee that all thekey control objectives have been main-tained and where the deficiencies are likelyto materially affect the overall quality of anaudit engagement. In such cases the Prac-tice Review Committee will also make rec-ommendations, which it expects the mem-ber firm to implement in order to ensurethe maintenance of professional standards.

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The implementation of these recommen-dations will be examined during the followup review.

It is clear that where a potential com-plaint relates to the first ever review of theindividual concerned, whether in the mem-ber firm which is the subject of the report,or in any other member firm previouslyreviewed, no complaint can be lodged withthe Investigation Committee unless theconditions set out in paragraph 41 beloware fulfilled. This provision is in line withthe educational thrust of practice reviewand the Council’s commitment to workwith members to improve professionalstandards.

The Practice Review Committee will,even on a first review, make a complaintagainst a member where the weaknessesin the performance of audit engagements,or the disregard of professional standardsamounts to, in its opinion, unprofessionalconduct within the meaning prescribedpursuant to Rule 2 of the Malaysian Insti-tute of Accountants (Disciplinary) (No. 2)Rules 2002. In subsequent reviews, thePractice Review Committee can make acomplaint where it is of the opinion thatthe member has failed (or has shown nocredible intention) to maintain, observe orapply the professional standards as ex-pected of him or her.

Where the Practice Review Commit-tee refers a complaint to the InvestigationCommittee, the reviewer shall disclosethe identity of the member(s) in publicpractice or the member firm as the casemay be, as well as submit all reports andfiles including working papers and corre-spondence pertaining to the review, to theInvestigation Committee for its investiga-tion.

Referral of disputesWhere a dispute arises over the pow-

ers of reviewers as regards to the accessto the documents etc. of the member firm,the reviewer or member firm or both mayrefer the dispute to the Practice ReviewCommittee. A member firm should refer adispute to the Practice Review Committeein writing via the Registrar.

Normally, the Practice Review Commit-tee will delegate the determination of sucha dispute to a sub-committee chaired by theChairman of the Practice Review Commit-tee. As far as possible the anonymity of themember firm will be maintained. The Reg-istrar will delete any references to themember firm’s identity from written com-munications before passing these on to thePractice Review Committee.

Where a dispute is referred, after con-sidering any submissions or representa-tions (which shall be in writing) made bythe relevant member firm and/ or the rel-evant reviewer, the Practice Review Com-mittee :

a. shall determine the dispute and com-municate such determination to eachof the parties to the dispute; and

b. may issue directions relating to thematter in dispute to such member firmor the reviewer concerned and requiresuch member or reviewer to complywith them.

Where a member firm or a member inpublic practice is required to comply witha direction given by the Practice ReviewCommittee and fails to comply with the saidrequirement, the Practice Review Commit-tee may make a complaint to the Investi-gation Committee regarding the memberfirm or member in public practice con-cerned on a simple majority basis.

ConfidentialityStrict confidentiality provisions shall

apply to all those involved in the practicereview process, namely the Registrar, re-viewers, members of the Practice ReviewCommittee, or any person holding a posi-tion who assists any of these parties.

Each person referred to in paragraph47 above shall :

a. at all times after his/her appointmentpreserve and aid in preserving secrecywith regard to any matter coming tohis/her knowledge in the performanceor in assisting in the performance ofany function;

b. not at any time communicate any suchmatter to any other person; and

c. not at any such time suffer or permitany other person to have any access toany record, document or other thingwhich is in his/her possession or un-der his/her control by virtue of his/herbeing or having been so appointed orhis/her having performed or havingassisted any other person in the per-formance of such a function; providedthat the above provisions do not applyin relation to disclosures made in rela-tion to or for the purpose of any inves-tigation and disciplinary proceedingsor criminal proceedings.

In order to enhance confidentiality andimpartiality, neither the identity of themember, the member firm or themember’s clients will be made known tothe Practice Review Committee. Any re-port prepared by the reviewer for the Prac-tice Review Committee will only identifythe member firm and its clients by codenumbers.

Where the final practice review reporthas been issued by the Practice ReviewCommittee and no further action is re-quired, the report, work papers and corre-spondence pertaining to the review shallbe destroyed after one year. Data requiredfor administration purposes shall be re-tained in order to evidence that a reviewrequiring no further action has been com-pleted and to identify the members and thefirm reviewed. Where the Practice ReviewCommittee decides that further action isnecessary, all files shall be retained untilsuch further action has been completed tothe satisfaction of the Practice ReviewCommittee.

Completeness of ReviewFor practical reasons, not all partners

of a member firm that have been selectedfor practice review will be reviewed indi-vidually as regard to the current audit en-gagement files.

However, in most circumstances, thesample of files selected for on-site practicereview should be reflective of the firms’overall operations and size. Appendix B onpage 15 sets out a flow chart of a generalindication of such file selection.

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considers necessary to facilitate the selec-tion of a sample of audit engagements, rep-resentative of the member firm’s clientportfolio, for review.

� Confirmation of visitIn consultation with the member firm, a

date will be set for the on-site review to becarried out. Flexibility will be permitted toensure that members in public practice arenot inconvenienced at especially busy peri-ods. The on-site review date will be arrangedby mutual consent such that the review willbe held within four months of notification.Further extension beyond four months willbe at the sole discretion of the reviewer.

ExecutionIt is estimated that at least a full day will

be needed to complete an on-site review fora member firm of a smaller size. However,this is based on the assumption that the mem-ber firm concerned hasmade all the necessary in-formation and documen-tation available to the re-viewer for his review. Re-views of larger firms maytake longer to complete.

� Initial meetingAn initial meeting will

be held between the re-viewer and a partner ofthe member firm desig-nated to deal with the re-view (designated part-ner). The primary pur-pose of this meeting is toconfirm the accuracy ofthe responses given onthe Questionnaire. Thedescription of the systemin the Questionnairemay not fully explain allthe relevant proceduresand policies adopted bythe member firm and

Summary ofPractice Review Procedures

IntroductionThe Practice Review Committee shall,

among other things, determine the de-tailed practice and procedures to be ob-served in relation to practice review. Theframework for the review procedures ascontained herein have been endorsed bythe Council and shall act as supplementalto the Statement on Practice Review issuedby the Council on 15 November 2002 andwhich comes into effect on 1 January 2003.These procedures are summarised belowand can be categorised into three stages— planning, execution and reporting.

Planning� Selection of member firms by Registrar

The Registrar will select member firmsrandomly from the register of member firmsmaintained by the Institute. Each memberfirm shall have an equal chance of beingselected. All member firms selected will becodified so as to ensure the identity of thefirms concerned remains confidential.

� Notification — Choice of ReviewersA member firm will be notified in writ-

ing about an impending practice reviewand will be required to state their prefer-ence — to be reviewed by a reviewer whois a staff of the Institute or by a person ap-pointed from the Panel of Reviewers.i) Notification — Enclosure of

QuestionnaireA Questionnaire will subsequently be

sent to the member firm for completionafter the option of review (see above) hasbeen confirmed by the Registrar.

� Return of completed QuestionnaireThe member firm should complete and

return the Questionnaire within one monthof receipt. The information will be used forthe planning of the review.

In addition, member firms are requiredto prepare a complete list of their audit cli-ents, suitably codified if desired, and toprovide any other information the reviewer

this initial meeting can provide additionalinformation. The reviewer should have afull understanding of the system and beable to form a preliminary evaluation of itsadequacy at the conclusion of the meeting.

Larger firms which have extensive docu-mentation regarding their practice and pro-cedures (i.e. formal of fice proceduresmanuals and audit manuals) will find it un-necessary to document all the controls andwill just cross reference the Questionnaireto the relevant sections of their manuals.For firms like these, an additional planningvisit will be arranged before the on-sitereview to review the relevant manuals.

� Compliance review — general controlsThe reviewer may carry out a compliance

review of the general controls of the mem-ber firm and evaluate the degree of relianceto be placed upon them. The degree of reli-ance will, ultimately, affect the sample size


of audit engagements to be reviewed.The following five key controls are in-

cluded in the Questionnaire :

● Independence;

● Maintenance of Professional Skill andStandards;

● Outside Consultation;

● Staff Supervision and Development; and

● Office Administration.

Member firms are expected to addresseach of the five key control areas.

In each key control area of the Question-naire, there are supplementary questionsand matters to consider. These are in-tended to indicate the kind of controls thatare expected to be installed and operatedwithin each firm.

All questions are not necessarily relevantto particular types of member firms be-cause of their size and culture etc. How-ever, member firms should still assess theirinternal control systems to ascer tainwhether they address the objectives underthe five key control areas.

� Selection of audit engagements to bereviewedThe number of audit engagements to be

reviewed depends upon :a. the number of partners involved in audit

engagements in the firms selected; andb. the degree of reliance placed, if any, on

general quality controls.

For the number of audit engagements tobe actually reviewed, please refer to theflowchart in Appendix B as provided hereinas a general guideline.

From the clients list as provided and certi-fied as complete, the reviewer, in consulta-tion with the member firm, will proceed toselect an actual sample of audit engagementsfor review. The engagements reviewedshould be a balanced sample from a varietyof different sized clients covering variousindustries so that they reflect the “overallperformance” of the said firm under review.Accordingly, if the reviewer considers thatthe actual sample is not representative of themember firm’s audit client portfolio, he mayproceed to choose an additional number offiles in excess of those as depicted in theenclosed flowchart in Appendix B.

The population from which files are se-lected for review will be audits completed

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at least 6 months preceding the date of thenotification letter but not earlier than 18months prior to the selection date.

� Review of filesThe reviewer may adopt a compliance ap-

proach or substantive approach or a com-bination selection of both in the review ofaudit engagement files.

� Compliance approach —audit engagementsThe compliance approach is to assess

whether proper control procedures havebeen established by the member firm to en-sure that audits are performed in accordancewith approved Auditing Standards andGuidelines and such control procedures areconsistently adhered to by the member firm.

The following six key controls are in-cluded in the Questionnaire :

● Audit File Administration;

● Financial Statements Presentation;

● Review and Evaluation of System of In-ternal Controls;

● Substantive Tests;

● Audit Conclusion; and

● Audit Report.

� Substantive approach — audit engagementsA substantive approach will be employed

if the reviewer chooses not to place relianceon the member firm’s specific controls onaudit engagements or is of the opinion thatthe standard of compliance is not satisfactory.This approach requires a detailed review ofthe audit working papers in order to estab-

lish whether the audit work has been car-ried out in accordance with approved Audit-ing Standards and Guidelines. Such a reviewis similar to the type of review performed bythe engagement partner/manager duringnormal audit engagement procedures. Thisapproach is likely to take longer than thecompliance approach.

� Closing meetingAt the end of the on-site review, a draft re-

port of factual findings will be prepared fordiscussion with the designated partner of thefirm being reviewed or the sole practitioner.During the closing meeting, the designatedpartner/practitioner has the opportunity tomake representations, suggestions and rec-ommendations in relation to the matters

raised. The reviewer has the duty of explain-ing to the designated partner/practitionerthe advantages and benefits of implement-ing suggestions and recommendations forimprovements. At the conclusion of the clos-ing meeting, the designated partner/practi-tioner and the reviewer are required to signon the draft report of factual findings to sig-nify their agreement of its factual accuracy.

ReportingThe reviewer will prepare a report to the

Practice Review Committee (the reviewer’sreport), incorporating the report of factualfindings as discussed with the member firm.After review by the Practice Review Direc-tor (or Senior Manager) of the Institute, adated draft of the reviewer’s report will besent to the member firm for comments. Thisprocess should not take more than two


Notes : i) The reviewer will decide how many audit engagements will be reviewed within a range at the planning stage. ii) The above table only gives a general indication of the number of audit engagements to be reviewed. The exact number and extent of review will be dependent on the individual firm's circumstances. iii) As a minimum guide, it is envisaged that the review of one audit engagement file per partner involved in provision of auditing services is to be conducted.

No. of No. of Audit No. of Audit No. of Audit partners in firm Engagements Engagements Engagements

1 3 ≥ 3 ≥ 42 - 5 ≥ 4 6 ≥ 8

6 and above ≥ 6 ≥ 10 ≥ 12

High

Degree of reliance to be placed on general controls

Compliance Review on generalcontrols. Do the results of the review indicate reliance can be placed ongeneral controls?

Medium to low

NO

YES

Have general controls been documented?

NO

NO

NO

YES

YES

Will the review be more efficiently executed by relying on general controls?

Is there any system of general controls?

YESYES

FILE Selection PROCESS

A P P E N D I X B

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months after the closing meeting. Any com-ments made must be submitted in writingwithin 21 days. The reviewer will finalise his/her report upon the receipt of the submis-sions. In finalising the report, the reviewermay make changes to the dated draft he/she considers appropriate in the light of thesubmissions. The submissions will be at-tached (after properly codified) to thereviewer’s report before it is sent to the Com-mittee for consideration. A copy of thereviewer’s report will be sent to the memberfirm for its information and record.

The member firm will be allowed the op-por tunity to make its representationsthroughout the review process. It is ex-pected that the on-site closing meetingbetween the reviewer and the firm willprovide an excellent channel for thecommunication of views concerning thefindings and recommendations. In ad-dition, the member firm has 21 days toconsider the dated draft report andmake its formal submissions and rep-resentations to the Practice ReviewCommittee through the reviewer.

A meeting of the Practice Review Com-mittee will be held to consider thereviewer’s report and the member firm’ssubmissions. The Committee may issuea final report to the member firm and in-struct the reviewer to perform any follow-up action considered appropriate. The fi-nal report can be categorised as follows :

Such report may contain minor rec-ommendations for improvements tothe systems. The member firm mayexercise its discretion in consider-ing what course of action to betaken. The Institute will not performany follow-up procedures to ensurechanges are made.

A variation to the type of report asmentioned in (1) above is issuedwhere the member firm is found tohave achieved the major control ob-jectives but some weakness are foundin certain control areas which are con-sidered material enough to bring tothe attention of the firm. The said firmshould seriously consider the sugges-tions and recommendations and takeall necessary action (implementingnew procedures) to ensure the objec-

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tives of the particular control areas areachieved. A brief review/meeting will bearranged with the member firm about 12months after the issue of the final reportto establish whether changes have beenimplemented.

Finally, there is also a report where amember firm is deemed to have failedto satisfy the Practice Review Commit-tee that it has sufficient controls to en-sure its audit work is consistently car-ried out in accordance with applicableprofessional standards. In such case,the Practice Review Committee will

order the reviewer to perform anotherpractice review no earlier than sixmonths after the issue of the final re-port. This will allow time for the mem-ber firm to take steps to improve itscontrols system as suggested.

It is possible that where the third type ofreport reveals extensive weaknesses amount-ing to unprofessional conduct within themeaning prescribed pursuant to the Malay-sian Institute of Accountants (Disciplinary)(No. 2) Rules 2002, the Practice Review Com-mittee can make a complaint to the Investiga-tion Committee for its investigations. AN


The Budget for Cost of RecoveryOften the daunting questions that haunts

a BCP Manager or BCP Project Team is :

does my organisation have a BCP bud-get?

if it does what is the amount and is itadequate?

what does my organisation invest itsdisaster recovery money in?

what is expected of my organisationfrom that kind of investment?

Total disaster recovery investments aresometimes obscure and hard to identify.The expenses can be hidden in normal pro-duction or operation and service support.The human resource cost portions may not

M A N A G E M E N T A C C O U N T I N GB C P & C R I S I S M G M T

The BCP BUDGETand BUSINESS IMPACTANALYSIS By Dr. Josef Eby Ruin

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be properly tracked, or they are buried inother HR and department costs. Very of-ten it is not unusual to come acrossorganisations that are not able to meet their‘time-to-recover’, data protection objectivesor plain business recovery let alone conti-nuity with their current level of BCP ex-penditure-allocation. As a percentage oftheir budgets, financial institutions andservice providers like telecommunicationscompanies and airlines tend to be gener-ous in their investment on their disasterrecovery or business continuity. Othertypes of industries may not be that gener-ous or committed. One simple rule-of-thumb may be for an organisation to setaside about 10 per cent of its IT budget to

be dedicated as to its disaster recovery andbusiness continuity programmes.

The Many Costs orPrices of Crisis

A surprised power outage can causeorganisations to halt operations for an in-definite period of time. Some empiricalstudies reveal that nine out of 10organisations repor ted that during asystem’s failure they :

encounter productivity losses;

have bigger incidence of end-user andmanagement dissatisfaction, and

are confronted with deluge of customerdissatisfaction (and this is in fact verydamaging for the long-term survival ofthe organisation).

The costs of a disaster includes the costof :

replacing the malfunctioning equip-ment or service;

(PART 2)

“… financial institutions and service providers liketelecommunications companies and airlines tend to

be generous in their investment on their disaster recoveryor business continuity.”


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restoring the premises/structural fa-cilities;

re-constructing or re-keying in the lostdata;

productivity loss;

opportunity loss or notional income cost;

revenue loss;

customer attrition due to their dissat-isfaction.

BCP Recovery Strategy CostAnother way of looking at BCP recovery

and crisis expenditure is by looking at twolevels of cost, which are :

pre-event costs; and

the event (moment of truth) costs.

Pre-crisis event costThese are costs incurred in either :

implementing risk mitigation strategiesor,

allocation of resources and this in-cludes both human, financial and thecapital expenditure needed to developthe necessary infrastructure for theBCP recovery strategy.

‘Moment of truth’ orcrisis event costs

These are expenses incurred during the‘moment of truth,’ that is, when the crisisactually crops up. They include costs ininvoking the BCP and implementing theBCP strategies to address the crisis. Thesecosts are estimations of the probable coststo be incurred if the BCP were to be acti-vated for some definite period, say, one-day,seven days, 10 days, or three weeks.

These costs can include any or all of thefollowing :

activation of service level agreement(SLA). This is sometimes time cost,plus on-going expenses until servicesor products are no longer needed (endof crisis);

HR and people’s expenses like over-time, temporary workers and contrac-tors;

logistics for transportation and deploy-ment of resources and people, couriersand removers;

accommodation costs for hiring HR,leasing of temporary offices, accommo-dation for staff and relevant para per-

sonnel;

procurement of non-IT resources suchas cubicles, desks, chairs, tables, safes,cabinets, photocopiers, stationar yitems, news and PR releases;

compensation payments, and liabilitiesthat are not claimable from insurance;

IT resources including faxes, hand-sets, phones, printers, desktop PCs,notebook computers, terminals, scan-ners, data wiring and cabling;

HR costs to train new hirers or otherstaff to replace victims;

Other miscellaneous costs like insur-ance deductibles, security, salvage andrepairs of assets, clean up of disastersite, and emergency services costs.

BCP Cost Decision MatrixAn organisation likes to look at alterna-

tive decisions of :

whether it is prepared to accept higherrisks with lower event costs or,

lower risk strategy with higher eventcosts.

In many ways, it is sometimes a ‘trade-of f ’ between (1) the risks that anorganisation is prepared to accept and (2)the justifiable costs. Where two strategieshave equal risks and costs, then a third el-ement is brought into the equation. Thisthird element is the so-called ‘benefit’. Thebenefit(s) of each strategy are evaluatedagainst the risks associated with the recov-ery strategy. After that the benefits are fur-ther considered in (1) the short and (2)the long-term for the added-value thesebenefits accrue to an organisation that op-erates in a competitive and dynamic mar-ket.

The Right Recovery Strategyand Cost

After careful debate and analysis, themanagement and Board usually will imple-ment the BCP with the agreed-to budget.The reality is that there could be a situa-tion where the wrong choice of recoverystrategy will actually exacerbate the disas-ter. These turn of events can even causeorganisations to go out of business. Witha good BCP Team and supported by IS/ITpersonnel, there is always the favourable

outcome of that one right recovery strat-egy being selected. This reduces the po-tential exposure to further disaster that cangive an organisation a double whammy.

BUSINESS IMPACTANALYSIS (BIA)Developing the BIA

Having a good disaster recovery strat-egy (DRS) for IT/IS systems is half thebattle won for a reliable BCP. Usually theprime question an organisation has to an-swer, when deciding to implement its re-covery programme, is “what kind of DRSto implement?”. It must be understood thatthe recovery point objective (RPO) is a keyelement or characteristic of a credible DRS.

To arrive at an organisation’s RPO thefundamental issues that the BCP Team hasto address first would be :

how long can our organisation go onwithout a computer environment?

how much data can our organisationafford to lose if our organisation en-counters a crisis or disaster?

The BCP Team will have clues for theabove questions by undertaking the BIA.BIA is tailored to identify :

business processes and systems thatare critical to conducting business, and

resources essential to supporting thosemission-critical functions.

Processes and systems are generally di-vided into three critical classifications of :

a) those that support the product or ser-vice delivery and are essential to thebusiness (mission critical);

b) those that are business-support func-tions and are necessary to run the corebusiness (major or key activities);

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the wrong choice of recoverystrategy will actually

exacerbate the disaster.These turn of events can

even cause organisations togo out of business.”

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M A N A G E M E N T A C C O U N T I N G

c) and those that are deferrable (need nothave BCP documented).

The BIA looks at :

operational and intangible impact thatrevolve around public confidence,managerial control, image and reputa-tion, and regulatory liability; and

financial impacts that revolve arounddirect financial loss, extra cost of work-ing, and regulatory penalty.

Critical analysis of the BIA can help theBCP Team to establish the RecoveryTime Objective (RTO) and Data Recov-ery Objective (DRO) of any businessor support functions.

Business Survival and BIAIf a business is to survive a crisis, it has

to select the right strategy. Developmentof BCP strategies starts with knowing theoutcome of the BIA studies. A comprehen-sive BIA :a) identifies an organisation’s core busi-

ness and service processes; and

b) maps out critical dependencies likecomputer systems and informationtechnology; or

c) critical third party service providers.

In BIA, the four key questions oftenasked by the BCP Team are :

What functions are critical to our

organisation’s business operations andwhy?

What resources do our organisation’scritical functions employ or resort towhen those critical functions are beingperformed?

What is the duration, or how long willbe the interruption that these functionscan withstand?

How much does it cost for ourorganisation to establish its recoverycapability to restores the resourcesneeded by those critical functions in thestandard time frame that ourorganisation has agreed upon?

BCP Strategies for OrganisationsThe table below summarises the advan-

tages and disadvantages of each of the BCPstrategies that an organisation can adoptor implement.

Internal redundancy — Activation is fast,cost can be medium while reliability isgood.

Outsourcing — Activation is fast but costcan vary, while reliability is excellent.The problem sometimes is the ‘queuingsystem’ since the provider could be ex-tending services to many applicants orsubscribers; thus the availability ofspace and facility could be on a FirstCome First Serve basis.

Hot site — Activation can be fast but costis high, though reliability is excellent.

Cold site — Activation is slow, cost is ofcourse rather low, while reliability isquite poor.

Warm site — A halfway point betweenhot and cold site.

Reciprocal agreement — Activation maybe slow, cost is low, while reliability is poor.

Mobile data or recovery centre — Acti-vation is medium, but its cost is lowwhile reliability is good.

Addressing Crisis is PartOperational Risk ManagementWhen any one talks about operational

risk management (ORM), there are sevenrisk areas to study or seven groups whereany one can classify operational risks by.

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“Having a good disaster recovery strategy (DRS) for IT/ISsystems is half the battle won for a reliable BCP.”

“If a business is to survive a crisis,it has to select the right strategy.”


Business — logistics, accounting, hu-man resources and functions.

Tactical — peculiar or specific actionsteps or work processes applicable onlyto the individual operations or businessactivity.

Global — action steps or work pro-cesses that can be applied generally toall the operations or business activities.

Coming to Terms with BCPNomenclature

In discussing any BCP study, it is usefulto be at home with two terms and they are :

the likelihood of event (disaster/crisis)happening, and

the consequences (impact or effect)when that event (disaster/crisis) hasoccurred on an organisation.

The likelihood of event to happen

Rare occurrence : For a disaster/crisis that mayoccur only in very exceptional circumstances.

Unlikely to occur : For a disaster/crisis thatcan occur at some time only.

Moderate occurrence : This disaster/crisisis, or should be, occurring at any time.

Likely to occur : For a disaster/crisis thatis, or will probably be, occurring in mostcircumstances.

They are :

strategic risk;

legal and regulatory risk;

product and customer service risk;

human resources risk;

IT/IS and computer systems risk;

crisis management risk;

operational errors risk;

internal and external fraud risk.

BCP is not a Privilegeor Luxury Today

BCPs nowadays are not an option any-more. It has to be in place if an organisationwants to move forward and prosper. Theyare a critical and essential subset of opera-tional risk management. As can be seenabove, crisis management risk is one of theeight groupings or types of operationalrisks. Why is BCP a much talked-of topicthese days? Simply because for manyorganisations, the decision to invest in aBCP is being forced upon them throughrequirements by regulatory bodies likeSecurities Commissions, Central Bank, etc;or by changing forces in accountability bylegislation and other vested parties andstakeholders.

The Recovery orContinuity Phase

The three operational recovery or busi-ness continuity phases are :

To make the scene safe to work in;

To preserve evidence in the ‘scene ofcrime’ place;

To get business to continue on the‘business as usual’ or at least the ‘busi-ness survival’.

All aspects of recovery/continuity needto be documented and learned from. Somelearning points have to be identified forposterity as well as for ‘lessons learnt’ ex-amples for the sake of posterity in the eventthat a disaster strikes again in the future.

The ‘Lessons Learnt’ ChecklistAn organisation can look at these admin-

istrative issues so that its BCP awarenessenvironment is in top gear :

Ensuring that plans are in place;

Ensuring that key data are accessible;

Ensuring that the facts are communi-cated;

Ensuring that the hot staff are broughtin only when they can work or help,(staff are categorised as hot, yellow andgreen with hot being the crucial andneeded staf f, while the yellow andgreen can stand by);

Ensuring the identification and usageof back-up storage;

Ensuring the operation of a clear deskpolicy;

Ensuring controls and display of lead-ership;

Ensuring prioritising, focusing and notgetting distracted;

Ensuring that key or ‘red’ staff do taketime off after the initial recovery/con-tinuity process;

Ensuring the learning of critical humanbehaviour and experience from thestaff involved.

Generic Recovery FrameworkThe recovery and continuity framework

can be in four dimensions, namely :

Technical — information technologysuch as desktop, client/server, mid-range, mainframe and personal com-puters; data and voice networks.

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“BCPs nowadays are not an option anymore. It has to be in placeif an organisation wants to move forward and prosper. They are a

critical and essential subset of operational risk management.”

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M A N A G E M E N T A C C O U N T I N G

Almost certain to occur : This disaster/crisisis expected to occur in most circumstances.

Consequences (impact/effect) ofevent (disaster/crisis)Minor impact : The consequence or im-pact is readily absorbed, but managementeffort is needed to minimise the effect oroutcome of the crisis.

Moderate impact : The impact of the crisiscan be managed with the appropriate pro-cess.

Major impact : The impact of the crisis canonly be endured with substantial manage-ment involvement.

Catastrophic ef fect : There will be completedisaster, and the potential to destroy isgoing to collapse or bring about the demiseof any activity or operation.

What is Deemed‘Vital or Critical’?

At one extreme, it could be misleading,if not mischievous, to assert that the im-pact of any interruption of a business pro-cess justifies some initiatives for BCP. Atthe other extreme, significant impacts neednot, on their own, provide sufficient incen-tive to justify BCPs. The fact remains how-ever that vital business functions do fallwithin certain categories. Thus manyorganisations define and see critical areasin their business environment to be thosethat involve :

revenue generation;

tarnished image/reputation;

customer service; or

regulatory compliance.

Areas such as quality control, payroll, orinventory management could also com-prise broad groupings of criticality formajor operations and business activities,while in some others they may not be re-ally so.

The assessment of criticality or vitalityis made by the leadership in anorganisation (normally the BCP team withendorsement of the Management/Board).Such assessment reflects the perspectiveof what an unacceptable interruption in abusiness or operations process would beand is very co-related to the overall busi-ness and operational objectives of thatorganisation.

Obvious Minefields to AvoidIt is difficult, in today’s ever-changing

business climate, to justify expensive andlong BCP efforts. An organisation’s BCPTeam can avoid the more obvious planningminefields by observing the following :

The BCP Team should not, at the out-set, anticipate solutions and then slantits investigation to suit them. Be warythat data centre hot sites, work groupsand mobile recovery units are all solu-tions that are in search of problemsthemselves.

The BCP Team should spend time de-fining what its organisation’s businessissues are. The right solution canemerge out from that definition.

The BCP Team must always bring inthe business groups in its workshopsand discussions. Listen to what thebusiness groups have to say about theiroperations and business. They knowbetter. Having the business group’ssupport early and consistently is goingto help the BCP Team in the long run.

The BCP or recovery strategy tool isnot the BCP plan. To spend time andargue on the selection of planning soft-ware before the BCP Team has a clearidea of what it wants the tool to do isindeed unproductive, non-focussed aswell as premature. The tool the BCPTeam needs for the BCP purposesshould be familiar and user-friendly toeveryone in the organisation. Only af-ter the BCP Team has a plan that iscompleted in a familiar format can asensible business decision regardingBCP software be selected.

A Recap and SummaryAn organisation’s recovery or continu-

ity strategy is developed with the focus onthe recovery of the core business and op-erations processes. Usually in the event ofa disaster/crisis, it is business survival andnot business as usual. Once an

organisation’s board and management has

signed-off the BIA report,

endorsed the recovery of the recom-mended core business processes and

prioritised the recovery,

The logical follow up action is for theBCP Team to develop the BCP recovery/continuity strategies for each of the criti-cal or major/key business and operationsprocesses. Ideally, initiating the BCP recov-ery strategies ought to include inputs fromall the relevant business and operationsunits, because experienced staff in theseunits understand many specific and pecu-liar business management controls and op-erations processes that are mission-critical.It is useful therefore that the BCP Teamget the involvement and commitment of allusers and business/operations owners inthe workshops to arrive at the risk-conse-quence model (the BIA or business impactanalysis matrix).

Business continuity planning is an ongo-ing process of ensuring the continual op-eration of critical business processesthrough :

the evaluation of risk and resilience,

the implementation of mitigation mea-sures and

the establishment of a set of tested re-covery outlines and strategies.

Business continuity is about (a) protect-ing the interest of an organisation, (b) en-suring that an organisation is able to bounceback from a disaster in an efficient mannerwith minimum disruptions to its customers/stakeholders’ needs and expectations, or torecover and resume operations in theshortest time frame possible.

Note : The writer is General Manager/Head of Op-erational Risk Management for a commercial bank.He was a Fulbright Professional Exchange scholarand is a fellow member of ACCA (UK) and Char-tered Accountant (M’sia). He has MSc (Bus Admin)and Doctor of Letters postgraduate degrees. He canbe reached at [email protected]

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“An organisation’s recovery or continuity strategy is developedwith the focus on the recovery of the core business and

operations processes. Usually in the event of a disaster/crisis,it is business survival and not business as usual.”

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M A N A G E M E N T A C C O U N T I N GE N V I R O N M E N T

In the business world conven-tional wisdom has it that compa-nies can’t afford to be environ-mental do-gooders. Environ-mentally responsible behaviour

— like donating money to ‘green’ causes,investing in ‘clean’ technology and cuttingenvironmentally damaging emissions fromindustrial facilities — shrinks a company’sbottom-line, it is argued. Good deeds in-cur a cost with no corresponding financialreturn. To maximise profit, therefore, andcreate shareholder value, companies arebest advised to just get on with the task ofmaking money, legally, and not give a jotfor environmental responsibility.

A number of influential commentators dis-agree. Strongly. They point to recent trendsand events in the US and Europe — like theexponential growth in socially responsibleinvestment and ballooning concern for thestate of the natural environment — as a signthat conventional wisdom is about to getturned on its head. Increasingly environ-mentally friendly behaviour on the part ofcompanies does earn credit, while environ-

mental sins do get punished.Before long environmental responsibil-

ity will, its advocates say, have to form anintegral part of a company’s strategy andcore values. If not for all companies thenat least those companies whose activitieshave a direct and obvious impact on theenvironment, such as those from ‘smoke-stack’ industries, those from extractive in-dustries like minerals and oil, and utilitieslike water and electricity. Companies willfind they can ill afford not to embrace it.And by the same token can ill afford not totell us how they have embraced it.

Now the purpose of this article is not to as-sess how environmentally responsible localcompanies are. Rather it is to assess whetherthey tell us much about their environmentalcommitment and record. Before doing so let’sfirst consider why the telling — demonstrat-ing, explaining, reporting, call it what you will— what one does is so important.

Many commentators and think tanksreckon that the emerging environmentalagenda — fuelled by growing public con-cern for ecology and the environment — will

culminate in many, if not most, companieshaving to legitimise their existence. Thiswill have to be done by providing an ac-count, to wider society, on their environmen-tal performance. Failure to convince soci-ety of their environmental responsibilitymay cause them to lose their ‘licence to op-erate’ — an unwritten permit that societybestows on companies granting them theright to operate. That would trigger censure,boycott, hijacking and eventual closure. Theupshot of all this is that environmental re-sponsibility is, they say, vital to the long-runsurvival and prosperity of many companies.

So how do companies communicate theirenvironmental ‘credentials’? Well typically itis done by way of corporate environmentalreporting (CER), so called because it is theprocess of communicating externally theenvironmental effects of an organisation’seconomic actions. In a nutshell, CER is asummary of the company’s environmental‘footprint’. It can be done either through theannual report or a separate stand-alone pub-licly available environmental report. CERmay get lumped together with social issues

It’s time local companiescame clean on their

ENVIRONMENTALRECORD By Paul Thompson


and labelled a ‘sustainability’ report.Before addressing the state of CER in Ma-

laysia let’s look at the norm elsewhere. Ear-lier this year KPMG published its Interna-tional Survey of Corporate Sustainability Re-porting 2002. The survey — which looks atthe reporting practices of the top 100 compa-nies in 19 countries — finds that 72 per centof Japanese companies, 49 per cent of UK com-panies and 36 per cent of US companies issueenvironmental, social or sustainability reportsin addition to there financial reports. Health,Safety and Environment (HSE) are the mostcommon types of reports.

For an example of international best prac-

tice in the field of social, environmental andsustainability reporting one need look nofurther than the Royal Dutch/Shell Groupof companies. Shell operates in acutely en-vironmentally sensitive sectors — namelyoil and chemicals — and as such is at thesharp end of mushrooming societal concernfor the environment. Shell, therefore, feelsthat communicating its ‘environmental foot-print’ to the wider community is critical todemonstrating that it is doing its best topreserve the environment. That way it main-tains its ‘licence to operate’.

Shell is a seasoned exponent of social, en-vironmental and latterly sustainability report-ing. It has scooped numerous awards for thequality of its reporting, including that of JointBest Sustainability Report in the Associationof Chartered Certified Accountant’s (ACCA)UK Sustainability Reporting Awards. To geta feel for what Shell does go to its website(www.shell.com) and download its People,planet and profits. The Shell Report 2001.

What then is the state of CER among lo-cal companies? According to an ACCA re-port entitled The State of Corporate Envi-

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ronmental Reportingin Malaysia pub-lished earlier thisyear the CER in Ma-laysia is in its in-fancy stage. Thesurvey looked atthe annual re-por ts and anystand-alone en-vironmental re-por ts, including aninternet search, of all companies listed onthe Kuala Lumpur Stock Exchange (KLSE)main board between 1999 and 2001.

The survey found an increasing numberof companies engaging in CER. From 1999to 2001 the number increased from 25 to 40representing 5.3 and 7.7 per cent respec-tively of the KLSE Main Board. All report-ing companies used their annual report forcommunicating environmental informationto their stakeholders. Some 95 per cent ofthose using CER devoted less than a pageto it in the annual report. Of those doingsome form of CER, few have started to in-clude environmental performance data toprovide an indication of their impacts andprogress, or to provide quantifiable environ-mental objectives and targets. Environmen-tal management and achievements were thetwo most commonly reported areas.

A somewhat cursory survey of the latest(2001/2002) annual reports and any stand-alone environmental reports of the top 10local companies (by market capitalisation)conducted by Nottingham University Busi-ness School Malaysia Campus the author,reveals that seven companies made refer-ence to the environment. Unfortunately,most of these seven companies devoted justhalf a page of the annual report to the envi-ronment. And the substance was typicallyjust a policy statement and some unsubstan-tiated declarative statements along the linesof “Company X has taken a proactive stancein pursuing a policy of environmental man-agement at several levels”.

Leading the way in the area of environ-mental reporting is the tenth largest com-pany on the KLSE, British American To-bacco (Malaysia) Berhad. In May of thisyear it published its stand alone Social Re-port 2001-2002. The report is essentially a‘sustainability’ report — it summarises boththe social and environmental effects of its

business activi-ties — and is

modelled onwhat its UK par-

ent does.To view the re-

por t visit thecompany’s web-

site : http://www.batmalaysia.com/

CorporateInformation/Corporate Responsi-

b i l i t i e s / d o w n l o a d s / B A T M S o c i a lReport.pdf. Incidentally, the parent companydonated some US$6 million to NottinghamUniversity Business School in the UK to fundthe setting up of an International Centre forCorporate Social Responsibility (ICCSR).ICCSR will be hosting its inaugural confer-ence in Singapore in February 2003 entitledCorporate Social Responsibility in Asia.

All told the evidence is somewhat sober-ing. It suggests that CER in Malaysia is lowin quantity and quality. The implication isthat Malaysians have little idea how the ac-tivities of local companies affect their natu-ral environment, such as the quality of theair they breathe and the seas they swim in.

So what steps is the accounting profes-sion taking to help boost the profile of CERin Malaysia? Well in July 2002 the ACCAlaunched the Malaysian Environmental Re-porting Awards (MERA). The scheme ismodelled on the ACCA’s UK Awardsscheme that’s been running for some yearsnow. The main objective of the awardscheme is to encourage voluntary environ-mental repor ting practices amongorganisations in Malaysia.

Perhaps most significantly both schemesappear to have the backing of the Malay-sian government. The MERA scheme hasthe endorsement of the Department of En-vironment.

Government endorsement suggests thatthe Malaysian government want their do-mestic companies to take CER more seri-ously. This endorsement will surely makethe schemes more effective. We can, there-fore, look forward to much improved CERin Malaysia.

Note : The writer is an Assistant Professor ofAccounting and Finance, Director of MBAProgrammes, Nottingham University BusinessSchool Malaysia Campus. He can be reached [email protected]

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For the majority of his careerTony Isaac was a finance man.This culminated in his role asGroup Finance Director at the

BOC Group in England. Then in the year2000, he became the company’s CEO. Hebrings a different perspective to how therole of the CFO will have changed by theyear 2010. From his background and ex-perience, he knows how solid and neces-sary an effective finance function must be.But he also knows that strategically, thingsare changing fast for the finance role.

The first change he pointed to was themerging of parts of dif ferent disciplineswithin a company into a shared servicescore. “Potentially, we will see not only fi-nancial services centres,” he said .”Butalso customer services, IT and human re-sources all joined together.” Like someother CFOs in this project, he sees thevalue of creating separate entities to pro-vide the ser vices that a companyrequires. “BOG has moved towards thatin the last four years,” he pointed out.“Financial ser vices centres bring to-gether all the transactional work.” Andhe sees no reason why all four of theservice disciplines he mentioned shouldnot be combined by 2010, bringingtogether people with transactional skillsas well as people skills.

The benefits are clear. The future willmean that service centres will provide allof the servicing skills. And that, in Isaac’sview, will include basic management ac-

B U S I N E S S & A C C O U N T I N GC F O

counting. “The role of the business financemanager will be that of a finance directorwithin their own business unit,” he said,“and they will provide help with the strate-gic thinking. The translation of financialaccounts into management accounts willdisappear.”

This is the first of the big changes thatIsaac foresees by the year 2010. “We willhave only one set of data,” he said. “Manymanagers will be very computer literateand will get their day-to-day needs from da-tabases within the company. So they won’tneed the management accounting whichgoes on in a company at the moment.”

But the biggest change of all is going tobe the operation of companies in a trulyglobal market. This will provide challengesfor the CFO who will need wider and widerknowledge of markets and cultural issues.And the means of doing business will be-come more complex. Most companies findthat a lot more of their business will bedone in areas like Asia and South America,where they will operate in joint ventureswith local partners, and again the culturalissues will be important.”

This also connects with the place of in-ternal controls and risk management in theCFO’s portfolio by the year 2010. “Riskmanagement will be a major item for theiragenda,” he said. “Line managers will be-come more pro-active. Management teamswill realise that it is not a burden. They willbe working on eliminating or managingrisk. And that means that the old financial

stewardship role changes. There will betwo areas: the facilitation role for risk man-agement; and the risk assurance workchecking internal controls on a selectivebasis.”

But Isaac thinks that globalisation of datawill crack much of this problem. “By 2010,”he said, “we will have moved towardssingle instant data, using common dataaround the company. Then the chance oferror and the need for some basic finan-cial control should reduce significantly. Youare already getting more robust systemswhich are all-embracing. So progressively,it is improving. Combined with the idea ofshared services covering everything fromhuman resources to the financial functionthat in itself should ensure quality and com-monality of data.”

Quality of the PeopleFor Isaac, the main challenge in achiev-

ing this is the quality of the people work-ing for the company. “There will need tobe a continual development of people forthe finance function. You will need a con-tinuing flow of good people who you havedeveloped in- house, have come througha graduate scheme, or have come fromoutside. “And the changes which will flowfrom shared services will have an effecthere as well, “Splitting the role betweenfinance and services will be difficult forthe people developed in-house,” he said.“Finance service centres could be seen asthe less exciting areas and the businessfinance manager roles will be the popularones because people there would bedealing with the total business team andall the business issues.” How this will beresolved is a question for the future. Thisis not a fair view. Isaac believes it will re-

THe role of theCHIEF FINANCIALOFFICER in 2010Strategic changes to the finance role : An Interview with TonyIsaac, Chief Executive Officer of the BOC Group, one of theworld’s largest industrial gases companies based in the UK..


main absolutely critical to have both highquality financial information provision andfinance management input to the busi-ness.

There is also the challenge of investorrelations. “Anyone who becomes a CFOhas probably not had experience of inves-tor relations before,” he said, “and it’s apretty steep learning curve.” Isaac seesthis as becoming evermore complex acrossthe next decade. “Companies,” he said,“will go to many different marketplaces forequity or debt. More and more, UK com-panies have American listings and are alsotrying to grow a set of relationships withFrench, German and Dutch shareholders,for example. This trend will accelerate.”

This development will go hand-in-handwith changes in financial reporting. “Therewill be some harmonisation of financial re-porting,” he said.

Environmental ReportingAnother area which will become much

more important is environmental report-ing. “There is no alternative to substantiallymore environmental reporting,” he said.“Safety statistics, for example, bring theirown issues in making sure that the data is

correct”. And concept is still in its infancywhen it comes to comparable figuresacross even industry sectors. All that willchange by 2010.

“Trying to get commonality in a particu-lar industry or across the FTSE 100, forexample is very hard,” he said. “But get-ting and understanding a commonality ofdata is very important.”

The driver of this change, of course, isinvestment. “The potential investors in2010 will be looking at environmental andethical reporting as well as good corporategovernance and risk management, “hesaid. “By then, we will find that executivemanagement teams will really understandthe risk issues for themselves,” he said.“They will have regular risk reviews and itwill be high on the agenda. Risk, safety andenvironmental issues will be significantagenda items for the board. They will de-mand much more frequent reporting andreview.”

“Executive directors have to accept theresponsibility for the assets and the wholewell-being of the organisation.” He seeschange coming in the way that remunera-tion is set. “There is a gathering momen-tum for major companies to agree to re-

muneration structures at annual generalmeetings and debate it in advance with sig-nificant numbers of the shareholders. Thatwill be significantly formalised. Investorswill demand it and I expect that to happenbefore 2005, let alone 2010.”

Active CFO’sThe role of the CFO in strategy will con-

tinue to increase towards 2010. “ManyCFOs are already active members of thestrategy team,” said Isaac. “Many are al-ready involved in mergers and acquisitionwork, in how the business should beshaped, or in the debating of investmentdecisions. Lots of organisations find thatfinancial and strategic planning hasmoved into the CFO’s arena. In the future,much of the CFO’s role will includestrategic planning, financial planning andrisk management, for example, thoughthe CFO could potentially also lose directauthority over the financial services func-tion if the shared ser vices conceptprogresses.”

The CFO in 2010 will continue to have asignificant role. “The CFO will probably beprivy to more information than any othersin the executive team,” said Isaac.

Isaac, having moved from Finance Direc-tor to CEO knows more about this thanmost. “The relationship between the CEOand the CFO should be a close one, butthen so should the relationship of the CEOwith all of his director reports,” he said.

“In terms of knowledge and informa-tion, the relationship between the CEOand CFO is an exceptionally close one,”said Isaac. “The CFO should be privy toall of the main discussions. But it is notonly the CFO, but the senior financebusiness management within the businessunits.”

Note : The above article is extracted from thebook issued by the International Federation ofAccountants ([FAC), The Role of the Chief Fi-nancial Officer in 2010. The book features in-terviews conducted by Robert Bruce, accoun-tancy editor of The Times, London with 10 CFOsfrom companies across the world to glean theiropinions on how financial management is chang-ing and their perspective on the future of theCFO.The Book can be downloaded free from IFAC’swebsite at www.ifac.org/store. Hard copies canbe purchased for US$25.00 either throughIFAC’s online bookstore or its publications de-partment (Tel : 1-212-286-9344)

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B U S I N E S S & A C C O U N T I N GD I V I D E N D S

DIVIDENDPOLICY : By Rosiatimah bt Mohd Isa

DoesIntroduction

Dividend policy refers to the payoutpolicy that managers follow in decidingthe size and pattern of cash distri-bution to shareholders over a pe-riod of time. Many theoreticalmodels have been developedto describe the factors influ-encing dividend policy de-cisions. Miller andModigliani (M&M,1961) and Black (1996)provided a hypothesisthat dividend policyhas no effect on thevalue of the firm in a perfect capital market. Miller (1986) andMartin et al. (1991) supported the dividend policy irrel-evance hypothesis. However, models based on the pres-ence of market imperfections suggest that dividendsare relevant. Some explanations for dividend rel-evance include agency costs, signalling, and clien-tele effect.

The purpose of this paper is to gain some un-derstanding of dividend policy and its controver-sies by looking at both the shareholders’ and man-agement perspectives. In the latter part of the pa-per, the author discusses some relevant theoriesand past empirical evidences on the dividend pay-ments.

Types of DividendsThe term dividend usually refers to distribu-

tion of a certain portion of a firms’ current oraccumulated earnings to shareholders. Mostcompanies pay cash dividends. The distributionof cash dividends can be regular or irregulardepending on the firm’s dividend policy. Irregu-lar dividend is appropriate for a firm in a cycli-cal industry because earnings fluctuate overtime and the firm may be hard pressed to main-

tain a higher level of regular dividend. Pay-ing a cash dividend reduces the cor-

porate cash and retained earn-ings.

Another type of dividendis paid out in shares of

stock. This type isknown as a stock divi-

dend and there is nocash outflow fromthe firm. A stockdividend increasesthe number ofshares outstanding,thereby reducing thevalue of each share.

Stock dividend is verymuch like stock split.

The main difference is astock dividend is shown in

the accounts as a transfer fromretained earnings to equity capital,

whereas a split is shown as a reduction inthe par value of each share.When a corporation wants to pay cash to its

shareholders, a cash dividend is not the only means.The alternative way is to repurchase its own stock.Shareholders who sell their shares receive a pre-

mium price, and pay capital gains taxes rather thanordinary income taxes. Non-participating share-holders experience a large unrealised capital gain,since there will remain fewer shares outstandingafter the repurchase is completed and their frac-tional ownership has increased (Megginson, 1997).

Companies repurchase shares when they haveaccumulated more cash than they can invest prof-itably or when they wish to increase their debtlevels. A study by Comment and Jarell (1991)found that on average share repurchase resultedin an abnormal price rise of two per cent.


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2

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“… cash dividends received are taxed asordinary income. Dividends are taxable

when distributed, but taxes on capital gainsare deferred until the stock is sold. Thus,

for individual stockholders, the effective taxrate on dividend income is higher than the

tax rate on capital gains.”

Stock repurchases may also be used tosignal a manager’s confidence in the future.Senior management and directors usuallyhold onto their stock when the companyoffers a repurchase of its stock at a pre-mium. Many researchers have found thatannouncements of offers to buy back sharesabove the market price have prompted alarger rise in the stock price, averagingabout 11 per cent (Comment & Jarell, 1991).

However, share repurchase is prohibitedin some countries. In others, firms can holdrepurchased shares only for a limited pe-riod of time, after which they must be ei-ther resold or cancelled, and this results ina nett reduction of the company’s capital.

Shareholders’ Perspectiveon Dividends

Stocks produce a combination of divi-dend cashflow and capital gains. Share-holders preference on this matter shouldhave significant influence on decisions re-garding dividend payout.

Earnings that are not paid as dividendscan be reinvested and the potential forhigher future earnings and capital gainmay induce investors to accept a low divi-dend payout. Low yield may represent themarket’s collective belief that earning pros-pects are promising.

On the other hand,cash dividends re-ceived are taxed asordinar y income.Dividends are tax-able when distrib-uted, but taxes oncapital gains are de-ferred until the stockis sold. Thus, for in-dividual stockhold-ers, the effective taxrate on dividend income is higher than thetax rate on capital gains. If the tax rate in-duces shareholders to favour capital gainsover cash dividends, then managementshould reinvest rather than pay out earn-ings. Those shareholders with a need forimmediate cash can always liquidate a por-tion of their investment portfolio to satisfycash needs. But doing so can be costly toshareholders because they have to pay abrokerage fee and other transaction costsin order to sell their shares.

In developing countries, investors seemto be willing to forego dividend paymentsin return for possible future capital gain,as dividend yields declined over the lastdecade due to market liberalisation (Glenet al., 1997).

Management’s Perspectiveon Dividends

Theoretically, management makes deci-sions with the objective to increase thewealth of shareholders. This includes em-ploying the lowest cost of capital as well astaking whatever actions needed that will en-hance share value. By increasing dividendpayout, firms reduce their access to retainedearnings which is a relatively lowcost sourceof equity. For this reason, management mayprefer lower dividend payout ratios, butmust accept the realities of shareholderpreferences for at least some payment ofdividends. Firms that pay a lower percent-age of earnings as dividends have to sourceout more capital from outside which by com-parison is more costly.

Retained earnings as a source of capitalis also determined by the growth rate offirms. It is expected that firms with highgrowth rates will choose a lower dividendpayout rate in order to finance growth. Theavailability of external sources of capital

would also be a possible influence on theuse of retained earnings. Firms are will-ing to use them if the alternative sourcesof capital become more readily availableand are reasonably cheap.

However, firms sometimes pay high divi-dends to their shareholders. The argu-ments for this policy by Benjamin Graham,David Dodd, and Sidney Cottle (Ross et al.,1999) are :

� The discounted value of near dividendsis higher than the present worth of dis-

tant dividends.

� Between ‘two companies with the samegeneral earning power and same generalposition in an industry, the one payingthe larger dividend will almost alwayssell at a higher price.

� The two factors favouring firms thatadopt a high dividend payout are the de-sire for current income and uncertaintyresolution.

Theories and Evidences ofDivident Payments

Researchers have proposed many differ-ent theories about the factors that influencea firm’s dividend policy. Some theories in-volve agency costs, asymmetric informa-tion (signalling), residual, taxes andbehavioural explanations. Others have de-veloped and empirically tested differentmodels proposed to explain dividendbehaviour.

Lintner (1956) conducted a classic studyon how US managers make dividend deci-sions. He concluded that the most impor-tant determinant of the size of a company’sdividend is a change in the company earn-ings that results in a payout ratio, ratherthan making dramatic changes in the cashdividend paid. Management is reluctant toeither increase or decrease dividend pay-ments until they believe that future earn-ings will support these changes. This is inline with the shareholders preference fora steady stream of dividends to a fluctuat-ing one. Smoothing dividend payments arebased on the assumption that the share-holders are unable to gather the informa-tion they need to forecast future earningsfrom data the firm makes public.

From Lintner’s Model, March & Merton(1987) summarised his description of howdividends are determined in four stylisedfacts (Breadley & Mayer, 2000 ):

Firms have long run dividend payoutratios. Mature companies with stableearnings generally payout a high pro-portion of earnings whilst growingcompanies have a low payout.

Managers focus more on dividendchanges than on absolute levels.

Dividend changes follow shifts in longrun, sustainable earnings. Transitory



4

earnings changes are unlikely to affectdividend payouts.

Managers are reluctant to make divi-dend changes that might have to be re-versed.

The styles may be explained by the Re-sidual Theory of dividend payments. Theword ‘residual’ means the cash left overafter corporations have funded all theirpositive NPV investments. From the value-maximising strategy perspective, firms inrapidly growing industries tend to retainalmost all of their profits while firms inmature, slow-growing industries tend tohave generous dividend payments.

The residual theory can also be ex-plained in terms of capital structure policy.If a company decides that it wishes to main-tain a 50 per cent debt-to-total-capital ratioover time, then in each period it will financehalf its new investment needs with loansand half with retained earnings. Any re-maining corporate profits will be paid outto shareholders as dividends.

The residual theory of dividends suffersfrom one massive empirical problem. Divi-dend payments are not as variable as re-siduals. In fact, dividend payments are themost stable of any cash flow into or out ofa firm. Corporate managers are very cau-tious about changing established dividendpayout levels.

Brittain (1964, 1966), and Fama andBabiak (1968) re-evaluated Lintner’smodel. Their results supported Lintner’sview that managers prefer paying a stabledividend and are reluctant to increase divi-dends to a level that the firm cannot sus-tain. They also concluded that Lintner’sbasic model performed well relative to al-ternative specifications. This view has beensupported by Benar tzi, Michealy andThaler (1997) in their comprehensivestudy about dividends.

Another model that can explain regulari-ties of dividend policy is Agency Cost orContracting Model of Dividends. Thismodel assumes that dividend paymentsarise as an attempt to overcome the agencyproblems that result when there is a sepa-ration of corporate ownership and control(Megginson, 1997). In other words, themodel explains cash dividend payments asvalue maximising attempts by managers to

minimise the deadweight costs of theagency conflict between managers andshareholders that arises in large publiccompanies. Obviously, corporate managerswho pursue a dividend payment policy thatis in the shareholders’ best interest will berewarded by the increasing share pricesand greater professional tenure.

The stakeholder theory developed byCornell and Shapiro (1987) that comple-ments the work of Titman (1984) createsthe link between the investment and financ-ing decision of the firm such as dividendpayout ratios. Empirical research that ex-amined the relationship between the divi-dend policy and stakeholder theory byHolder et al. (1998) revealed that :

� More focused firms (with fewer lines ofbusiness) tend to have lower dividendpayout ratios.

� Larger firms tend to have higher payoutratios than do smaller firms.

When they consider the influence ofagency costs on payouts, their findings are :the greater the degree of insider owner-ship, the lower the payout; the larger thenumber of shareholders, the higher thedividend payout ratio; and the greater thefree cash flow, the higher the payout ratio.Managers consider more the claims ofstakeholders other than debt and equityholders when choosing a target dividendpayout ratio.

The other model, Dividend SignallingModel assumes that dividends are neededto convey positive information from well-informed managers to poorly informedshareholders in capital marketscharacterised by asymmetric information(Megginson, 1997). In other words, cashdividend payments serve as transmittersof information from corporate manage-ment to the company’s shareholders.When a firm pays dividends, it conveys thatmanagement has confidence in the firm’sprofitability that is enough for both its in-vestment projects and dividend payout. Inaddition, a dividend initiation also impliesthat management is confident that futureearnings will be large enough to supportnewly adopted payment levels.

The empirical study conducted byAharony and Swary (1980), has docu-mented the pattern of stock market inves-

tors reaction to dividend increases, de-creases, and continuation. They show thatdividend increases result, on average in a0.35 per cent positive stock price change,while dividend continuations are financialnon-events causing essentially no measur-able change in stock prices. On the otherhand, dividend cuts yield statistically sig-nificant average stock price declines of be-tween 1.13 and 1.46 per cent on the an-nouncement day and cumulative stockprice declines between 4.62 and 5.36 percent over a two-week period preceding andincluding the day the dividend cut is an-nounced. Therefore, the markets react toannouncement of dividend changes in sys-tematic and predictable ways. Indeed, divi-dend is a transmitter of information as de-scribed by the Signalling Model.

Fama and Babiak (1968) documents thatmanagers do in fact have target payout ra-tios in mind and that dividend payment pershare tracks the course of corporate prof-its quite closely over time. They also foundthat managers employ a partial adjustmentstrategy in adjusting dividend payments tochanges in corporate profits. An increasein profit levels will not fully reflect a higherequilibrium dividend per share until sev-eral quarters have elapsed. This allowsmanagement to become confident thatprofits have permanently increased beforefully committing to higher dividend pay-ments.

With regard to the Tax PreferenceTheory, Bernheimand and Wantz (1995)measure the relationship between dividendtaxation and the stock market reaction todividend announcement. A higher tax rateon dividend income makes paying divi-dends more costly. Thus, smaller payoutis suggested when tax rates are high be-cause any dividend increase causes inves-tors to receive a smaller fraction. There-fore, a given dividend will have a dimin-ished effect on the firm’s share price. Intheir research, they found that dividendshave stronger effect on stock prices in ahigher tax regime, which is consistent withdividend signalling.

Instead of building models or develop-ing theories about dividend policy, someresearchers have attempted to study ‘cul-tural phenomenon’ by surveying corporatemanagers (Baker et al., 2001). Several stud-


“… the only important determinant of a company’s value isits future earnings power … whether companies choose to

pay low dividends and finance themselves with retainedearnings or pay high dividends and retrieve the capital with new

stock or debt, is largely a matter of indifference to investors.Investors care only about total returns, not about whether they

receive it in the form of dividends or price appreciation.”

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ies attempted to identify factors that finan-cial managers consider to be most impor-tant in determining their firm’s dividendpolicies. According to a survey of 318NYSE firms conducted by Baker, Farrelly,and Edelman (1985) and Farrelly, Baker,and Edelman (1986), they concluded thatthe major determinants of dividend pay-ments are the anticipated level of futureearnings and the pattern of past dividends.These factors are consistent with thoseidentified by Lintner (1956). Their resultsalso revealed that managers believe thatdividend policy affects share value and themanagers are very concerned with divi-dend continuity.

Does Dividend Policy Matter?Let us look at the scenario reported in

Economist (1992) :

When British Petroleum (BP) halvedits dividend on 6 August 1992, theshares lost five per cent of their value.On 8 June of the same year when Gen-eral Dynamics (an American defencefirm) announced that it would buy back30 per cent of its shares, their price roseby nine per cent. When a Swiss choco-late maker, Nestle, made an announce-ment of a ten-for-one share split, itsshare prices jumped too.

The examples given relate obviously tothe signalling effect of dividend that arisesfrom asymmetries between managers andoutside investors. Investors are aware thatmanagers are likely to have a clearer viewof their companies’ prospects than outsid-ers. Thus dividend policy provides a sig-nal to the market.

A dividend cut suggests that the insid-ers think profits are likely to languish foryears. On the other hand, a share-buy-backsignals that management feel that the

shares are undervalued and are not aboutto waste the capital either over investingin core businesses or diversifying throughacquisitions. A share split is taken as a signthat managers expect a sustained rise inprofits.

Shareholders receive returns throughboth dividends and capital gains as acompany’s share price rises. Investors careabout how their total returns are appor-tioned between dividends and price appre-ciation primarily because of the tax code.If dividends are taxed lower than capitalgains, investors collectively prefer gener-ous dividends. Dividend is preferred tocapital gains due to the investors doubtabout the ability of the firm’s managementto use its earnings profitably. In this case,dividend is perceived as more reliable andless risky.

However, according to ‘dividend irrel-evance’ formulated by M&M, the only im-portant determinant of a company’s valueis its future earnings power. Thus, whethercompanies choose to pay low dividendsand finance themselves with retained earn-ings or pay high dividends and retrieve thecapital with new stock or debt, is largely amatter of indifference to investors. Inves-tors care only about total returns, not aboutwhether they receive it in the form of divi-dends or price appreciation.

From the management perspective, themain aim of changing of dividend policy is toestablish the right financial structure for amore competitive environment, not to pro-vide accurate signals to the market. Accord-ing to Barclay, Smith, & Watts (1995) acompany’s dividend payout ratio should re-flect primarily the following considerations :

� its expected capital requirements

� the riskiness of its business

� the company’s target capital structure

and

� the availability and cost of external capi-tal.

They concluded that mature companieswith few promising investment opportuni-ties tend to have significantly higher divi-dend yields and leverage ratios than grow-ing companies. Mature companies payhigh dividend to prevent themselves fromwasting their excess cash or becoming atakeover target as a consequence of hav-ing to much cash. Conversely, growth com-panies tend to have lower dividend payoutsdue to high-risk and difficulty of raisingexternal capital at a reasonable cost. There-fore these companies tend to use equitydominated capital structures by retainingrather than paying out earnings.

ConclusionDividend policy involves the decision to

pay out earnings or to retain them for re-investment in the firm. The reality has re-vealed that a properly managed dividendpolicy has a significant positive impact onshare prices and shareholders wealth.Thus dividend policy does matter in cer-tain circumstances. A generous dividendpolicy for companies in high growth andriskier businesses may reduce flexibilitythat causes management to pass up valu-able investment opportunities. On theother hand, for mature companies withstable cash flows, paying out too little maycause managers to over invest. It can beconcluded that, the optimal dividend policyfor any firm is to strike a balance betweencurrent dividends and future growth,which maximises the price of the stock.

REFERENCESAharony, J. & Swary, I., (1980), “QuarterlyDividend and Earnings Announcements andStockholders’ Returns : An Empirical Analysis”,Journal of Finance, Vol. 35, March, pp. 1-12.Baker, H. K., Farrelly, G. E., & Edelman, R. B.,(1985), “A Survey of Management Views onDividend Policy”, Financial Management, Vol.14(3), pp. 78-84.Baker, H. K., Powell, G. E., & Veit, E. T., (2001),“Factors Influencing Dividend Policy Decisionsof Nasdaq Firms”, Financial Review, Vol. 36 (3),pp. 19-37.

Note : The writer is an Accounting Lecturerfrom UiTM (Arau Campus). For fur therenquiries on reference materials [email protected]


Strategic Planning ofAdvancedmanufacturingTechnologyin Malaysia

By Low Lock Teng, Kevin& Arumugam Seetharaman

M A N U FAC T U R I N G

IntroductionAdvanced Manufacturing Technology,

better known as AMT, is among the newtechnologies being used by manufacturingindustries in countries wanting to achievean industrialised status. AMT is rapidlychanging the nature of manufacturing.AMT involves new manufacturing tech-niques and machines combined with infor-mation technology, microelectronics andnew organisational practices in the manu-facturing process. AMT is a key enabler tohelp manufacturers meet the productivity,quality and cost reduction demands of com-petitive global markets. These hardwaretechnologies have found wide acceptancein discrete manufacturing and in resourceand processing sectors.

Literature ReviewSohal (1996) explored the aspect of na-

ture, size of investment, speed of imple-mentation and outcomes, including ben-efits and difficulties, experienced by firmsin New Zealand. He found that factorssuch as management commitment andawareness, long-term and strategic plan-ning, workforce involvement, and willing-ness to change and learn were the keypoints to a successful AMT investment.Small (1999) found that a majority of firmsthat had implemented AMT achieved im-provements in performance, skills leveland skills inventor y of workers. Manyfirms assumed that the reduction inlabour force would automatically lead toa reduction in average labour cost. How-ever, this was proved wrong. Sohal,Burchen, Millen and Lee (1999) com-pared 93 large US companies and 67 UKcompanies and found that US companiesplaced more emphasis on obtaining finan-cial benefits, competitive benefits, coun-tering competitive threats and countering

In order to stay competitive, there is always a constant need toimprove the efficiency of technology in a company. As a result of this,efforts have been made to develop new technologies such asAdvanced Manufacturing Technology (AMT). This paperinvestigates the implementation justification of AdvancedManufacturing Technology (AMT) in manufacturing companies.This paper also provides information which will help companies inMalaysia, particularly the manufacturing industry, to be aware ofAMT. Adoption of this technology will assist Malaysian companies tocompete in the international market arena.



Importance of Objectives for Companies Using AMT

n Mean Std. t Sig. Mean Std. Dev. (2-tailed) Diff. Error

Mean

Improving product quality/reliability 103 3.6400 0.5400 7.4490 0.0000* 0.6400 0.0861

Reducing production costs 103 3.4872 0.7200 4.2210 0.0000* 0.4900 0.1200

Reducing manufacturing lead times 103 3.3590 0.6700 3.3540 0.0020* 0.3600 0.1100

Reducing scrap and rework 103 3.2821 0.8600 2.0560 0.0470* 0.2800 0.1400

Increasing labour productivity 103 3.2051 0.8600 1.4830 0.1460 0.2100 0.1400

Keeping up with the competitors 103 3.1000 0.8500 0.7520 0.4570 0.1000 0.1400

Reducing engineering/design lead times 103 3.0800 0.7400 0.6500 0.5200 0.0769 0.1200

Increasing market share 103 3.0800 0.7700 0.6210 0.5390 0.0769 0.1200

Decreasing labour costs 103 3.0300 0.9000 0.1770 0.8600 0.0256 0.1400

Increasing plant capacity 103 3.0000 0.8600 0.0000 1.0000 0.0000 0.1400

Increasing plant utilisation 103 2.9700 0.8700 -0.1830 0.8550 -0.0256 0.1400

Improving responsiveness to changes

in customer needs 103 2.9700 0.8400 -0.1900 0.8500 -0.0256 0.1300

Reducing work in process inventories 103 2.9200 0.6200 -0.7710 0.4460 -0.0769 0.0998

Gaining earlier entrance to the market 103 2.8700 1.0300 -0.7770 0.4420 -0.1300 0.1700

Improving engineering expertise 103 2.8200 0.7600 -1.4820 0.1470 -0.1800 0.1200

Improving management expertise 103 2.7700 0.8100 -1.7800 0.0830 -0.2300 0.1300

Developing a more integrated

organisation 103 2.7400 0.7900 -2.0390 0.0480* -0.2600 0.1300

Reducing the variety of parts/

components per product 103 2.7179 0.9200 -1.9230 0.0620 -0.2800 0.1500

Reducing material handling 103 2.6410 0.5800 -3.8370 0.0000* -0.3600 0.0936

Reducing set up time 103 2.4872 0.8200 -3.8910 0.0000* -0.5100 0.1300

Note : Respondents evaluated their experience with the above variables on a scale of a (not important) to 4 (veryimportant) * Denotes p < 0.05

Correlation between theImportance of Objectives and Size of Company

Amount of capital

Mean of importance of objectives Pearson Correlation 0.106

Sig. (2-tailed) 0.520

N 103

T A B L E 2

skill deficiencies. The UK companies weremore concerned on enhancing companyimage. In terms of the nature and size ofAMT investments, US companies had awide range of investments in computerhardware and software, and plant andequipment. US companies involved morefunctional areas in AMT idea generationcompared to UK companies.

MethodologyThe area under study focuses on the im-

plementation of AMT on manufacturingcompanies listed on the Kuala LumpurStock Exchange (KLSE) Main Board andSecond Board. Questionnaires were ad-dressed to the Head of the Engineering De-partment, Manager of the Engineering De-partment, Chief Officer of the Engineer-ing Department and Accountants. A totalof 120 replies were received out of 250questionnaires sent. The total replies wereachieved after follow-ups being madethrough phone calls and faxes. After check-ing all the replies, only 109 were used forour data analysis. Fifty-five were returnedto us as the respondents had moved to newor unknown addresses. Out of the 109 re-plies, six companies were not using AMTand 103 companies were using AMT. Thecompany capital structure is shown in Ta-ble 1.

Data AnalysisH1 : The importance of objectivesto acquire AMT and the size of the

companyFrom the responses of companies us-

ing AMT, which consists of those whohave implemented AMT as in Table 2, itwas found that improving product quality/reliability (mean 3.6400) is the most im-portant objective for acquiring or install-ing AMT. The respondents from compa-nies adopting AMT rated the other topfour objectives as :

� Reducing production costs(mean 3.4872)

� Reducing manufacturing lead times(mean 3.3590)

� Reducing scrap and rework(mean 3.2821)

� Increasing labour productivity(mean 3.2051)

Company Capital

T A B L E 1

N % Valid Cumulative

Per cent Per cent

Valid Less than RM5 million 9 8.7 8.7 8.7

RM5 million to RM 10 million 11 10.7 10.7 19.4

RM 10 million to RM 25 million 17 16.5 16.5 35.9

RM 25 million to RM 45 million 20 19.4 19.4 55.3

More than RM 45 million 46 44.7 44.7 100.0

Valid Total 103 100.0 100.0

T A B L E 2a


T A B L E 3

Problems Faced in Installation of AMT

n Mean Std. t Sig. Mean Std. Dev. (2-tailed) Diff. Error

Mean

Integrating automatic and manual

operations 103 2.5526 0.7240 -3.8090 0.0005* -0.4474 0.1174

Justifying investment in AMT 103 2.4737 0.8297 -3.9101 0.0004* -0.5263 0.1346

Interfacing hardware and software 103 2.3684 0.6747 -5.7706 0.0000* -0.6316 0.1094

Developing AMT software 103 2.3421 0.6689 -6.0634 0.0000* -0.6579 0.1085

Encouraging cross-functional

teamwork activity on the AMT projects 103 2.2105 0.7410 -6.5677 0.0000* -0.7895 0.1202

Installing and pre-installing support

from AMT vendors 103 2.1579 0.6378 -8.1387 0.0000* -0.8421 0.1035

Acquisition and delivery of AMT

hardware 103 2.1053 0.6058 -9.1045 0.0000* -0.8947 0.0983

Training of operators 103 2.0263 0.7880 -7.6172 0.0000* -0.9737 0.1278

Training of maintenance staff 103 2.0000 0.6576 -9.3742 0.0000* -1.0000 0.1067

Training of technical/ engineering staff 103 1.8947 0.6893 -9.8847 0.0000* -1.1053 0.1118

Gaining top management support for

AMT 103 1.8684 0.6226 -11.2039 0.0000* -1.1316 0.1010

Obtaining support from employees 103 1.8158 0.6516 -11.2028 0.0000* -1.1842 0.1057

Maintaining relationships with suppliers 103 1.5526 0.5549 -16.0775 0.0000* -1.4474 0.0900

Respondents evaluated their experience with the above variables on a scale of 1 (no problem at all) to 4 (seri-ous problem) * Denotes p <0.05

T A B L E 3a Correlation between levelof problems and size of companies

Mean for level

of problems

Amount of capital Pearson Correlation 0.069

Sig. (2-tailed) 0.025*

* Denotes p <0.05 N 103

Generally, manufacturing companiesimplementing AMT have a common levelof importance of objectives that are, reduc-ing production costs, reducing manufactur-ing lead times and increasing labour pro-ductivity. These objectives are ranked thetop as they are more important in compari-son with other objectives. In Table 2a, thehypothesis concluded that no relationshipexists between the degree of importanceand the size of a company.

H2 : The problems faced inthe installation of AMT

Table 3 displays the level of problemsencountered before or during the installa-tion of AMT for companies using AMTonly. Companies using AMT seem to havemore problems in integrating automaticand manual operations (mean 2.5526).However, the problems encountered arenot serious. Among all the problems listed,none is considered a serious problem orreaching problematic level. Respondentshave rated the other top few problems as :

� Justifying investment in AMT(mean 2.4737)

� Interfacing hardware and software(mean 2.3684)

� Developing AMT software(mean 2.3421)

� Encouraging cross-functional teamworkactivity on the AMT projects(mean 2.2105)

� Installing and pre-installing support fromAMT vendors/outside consultants(mean 2.1579)

This shows that most companies imple-menting AMT are prepared for the poten-tial problems that will be encountered. Theleast problem faced before and during theinstallation of AMT is maintaining its rela-tionships with suppliers (mean 1.5526).This reflects that companies using AMTare able to maintain its relationship withsuppliers well. The results in Table 3a alsoshows that all problems encountered bycompanies have a relationship to the sizeof the companies.



T A B L E 4

AN

Plant Attributes and Plant Performance Factors

n Mean Std. t Sig. Mean Std.

Dev. (2-tailed) Diff. Error Mean

Product quality 103 4.1351 0.7134 9.6780 0.0000* 1.1351 0.1173

Sales revenue 103 4.0541 0.7798 8.2219 0.0000* 1.0541 0.1282

Plant revenues from manufacturing

operation 103 3.9730 0.6449 9.1770 0.0000* 0.9730 0.1060

Production lot sizes 103 3.6216 1.1390 3.3198 0.0021* 0.6216 0.1872

Inventory turnover rates 103 2.9459 0.9703 -0.3389 0.7367 -0.0541 0.1595

Floor space utilised 103 2.8919 1.3288 -0.4949 0.6237 -0.1081 0.2185

The number of machines 103 2.8649 1.2056 -0.6818 0.4997 -0.1351 0.1982

Overhead costs 103 2.8649 1.2728 -0.6458 0.5225 -0.1351 0.2093

Time needed for a major design

change in an existing product 103 2.6757 0.9444 -2.0889 0.0438* -0.3243 0.1553

Time between conceptualisation to

product manufacturing 103 2.4865 0.9316 -3.3529 0.0019* -0.5135*0.1532

Lead-time from receipt of order to

delivery 103 2.4595 0.9887 -3.3256 0.0020* -0.5405 0.1625

Variety of part-types/products

manufactured 103 2.4324 1.0419 -3.3135 0.0021* -0.5676 0.1713

Changeover time from production

of product 103 2.4324 1.0149 -3.4017 0.0017* -0.5676 0.1668

Variety of part/components used

per product 103 2.3514 0.9780 -4.0344 0.0003* -0.6486 0.1608

The average number of tasks per

operator 103 2.1622 1.0675 -4.7739 0.0000* -0.8378 0.1755

Number of operators employed 103 2.0000 0.8819 -6.8972 0.0000- -1.0000 0.1450

Scrap and rework 103 1.8378 0.7643 -9.2497 0.0000* -1.1622 0.1256

Total labour costs 103 1.7027 0.9087 -8.6835 0.0000* -1.2973 0.1494

Respondents evaluated their experience with the above variables on a scale of 1 (significantly decline) to 5

(significantly increase)

H3 : Plant Performance Factors andthe Size of the Company

The results in Table 4 show that prod-uct quality (mean 4.1351) is the prominentfactor among all. Total labour costs (mean1.7027), on the other hand, is the leastprominent factor among the 18 factors. Theother vital factors include :

� Sales revenue (mean 4.0541)

� Plant revenues from manufacturing op-erations (mean 3.9730)

� Production lot sizes (mean 3.6216)

The plant performance has a significantrelationship with the size of the company.

ConclusionThe results have shown that seven out

of 20 objectives have a relationship with thesize of the companies. The others are notaffected. Before implementing AMT, com-panies might focus on achieving an objec-tive, but after the implementation of AMT,the companies’ attention would be directedto other objectives. Most Malaysian manu-facturing companies did not face seriousproblems before or during the installationof AMT. Future research can be done ondifferent industries on the implementationof AMT and the problems likely to be en-countered. Besides, the effect of imple-menting different components of AMT ona company can be tested and it is antici-pated that dif ferent components bringabout different results on the company’sfinancial and physical performance.

ReferencesChen, J. I., & Small, M. H. (1996), “Planning forAdvanced Manufacturing Technology a Re-search Framework”, MCB International Journalof Operation & Production Management, Vol. 16,Issue 5.Frank, L. (1996), “Investments in AMT : oppor-tunities or options (advanced manufacturingtechnology)?”, Management Accounting (Brit-ish), Vol. 74, p. 42 (2).Krinsky, & Miltenburg, J. (1991), “AlternateMethod for the Justification of Advanced Manu-facturing Technologies”, International Journalsof Production Research, Vol. 29, No.5, pp. 997-1015.

For more information on refernce materials pleasecontact the writer at [email protected]

Note : Both writer are lecturers from the Multi-media University, Faculty of Management,Cyberjaya.

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The Assessability ofInterest incomeas a Business source

TA X AT I O NI N T E R E S T I N C O M E

IntroductionThe Income Tax Act 19671 requires each

source of income to be computed separatelywith its own rules before aggregating theminto chargeable income for the purpose ofascertaining income tax payable. The Actspecifically codified the various classes ofincome into six groups2 and inter alia busi-ness income is spelt in Section 4(a) whileinterest, dividends or discounts are spelt inSection 4(c) of the Act. It is always linger-ing in the mind of the taxpayer whether in-terest income, despite being specifically leg-islated in Section 4(c) of the Act, could pos-sibly be treated as business income as inSection 4(a) of the Act.

The Act accords preferential tax treatmentto business income as compared to invest-ment income such as dividends, rental andinterest income. Business income can haveadjusted loss3 — it can claim capital allow-ances against its adjusted income, carry for-ward its unabsorbed losses to future years4 ,grant specific deductions5 and most impor-tantly utilise any unabsorbed losses of thecompany to reduce its statutory income. Allthese preferential tax treatments are notavailable to investment income.

A company does derive business incomeand interest income regularly and given thisinequality of tax treatment among businessand investment sources, the company with itslegal and tax adviser will argue forcefully thatinterest income received from its subsidiar-

By Choong Kwai FattAn Analysis after the Courtof Appeal Decision in PanCentury Edible Oils Sdn Bhd

ies within a group of companies or from fi-nancial institutions is from a business source,assessable under Section 4(a) of the Act andnot a passive investment income. In their opin-ion, only interest income derived from an in-vestment activity is assessable under Section4(c) of the Act. The issue whether an activitycarried out by a company tantamounts to abusiness activity or investment activity is al-

ways a question of disputes between the taxauthorities and the taxpaying company, aquestionable fact, which is ultimately deter-mined by the Special Commissioners.

The Court of Appeal6 delivered a celebrateddecision in Ketua Pengarah Hasil DalamNegeri vs. Pan Century Edible Oils Sdn Bhd7 on31 July 2002 — that a company, if able to sub-stantiate with evidence that its interest income

is derived from its business activity as distinctfrom investment activity, then such interestincome would be assessed as business incomeunder Section 4(a), notwithstanding that in-terest income is specifically provided in Sec-tion 4(c) of the Act. This article analyses thedevelopment of the Pan Century Edible Oilscase, from the Special Commissioners to theCourt of Appeal, laying down the principlesenunciated by the Courts, the possiblehurdles that need to be passed, the evidencerequired for the satisfaction of the SpecialCommissioners to discharge the onus of proofto have the interest income assessed as busi-ness income under Section 4(a) etc.

The Story Begins …The company, Pan Century Edible Oils Sdn

Bhd was incorporated on 1 April 1997, and iscarrying on the business of refining and pro-cessing palm oil. The Memorandum and Ar-ticles of Association provides the authority toadvance deposits or lend money. The com-pany retains a certain portion of cash proceedsfrom the sale of products to acquire raw ma-terials, namely, the crude palm oil. As the priceof crude palm oil fluctuates from time to time,the cash needed to purchase the crude palmoil also varies from time to time.

When less cash is needed to purchasepalm oil when the price falls, the excesscash is placed in short-term and long-termdeposits and on Negotiable Certificate ofDeposits, that is, on very short-term nego-tiable deposits, i.e. 30 days or 1 day call.

The object of placing cash on short-termdeposits is to deal with the excess money onhand, to turn over and make a profit for itsshareholders before it is used to acquire raw

“… whether an activity carriedout by a company tantamount

to a business activity orinvestment activity is always aquestion of disputes between

the tax authorities and thetaxpayer company, a

questionable fact, which isultimately determined by the

Special Commissioners.”


materials. Before placing the deposits, thecompany exercised managerial andorganisational skills by monitoring the fluctu-ating prices of palm oil by resorting to Reuterreports, newspaper reports and bankers’ ad-vice on a daily basis. The company contendedthat once the interest income derived fromthe short-term and long-term deposits is ‘partand parcel’ of business activity or alternativelyancillary to its business or it is a business in-come arising out of an adventure or concernin the nature of a trade, it should be charge-able to tax as income under Section 4(a) ofthe Act. Evidence was adduced to show thatthe deposits followed the cycle of palm oilprices. In addition, the placement of deposits,which was from the proceeds of the sale ofthe palm oil products and the withdrawal ofdeposits to purchase the palm oil, formed theworking capital of the business. Since the fundis part of the working capital process, it can-not be said to be held as an investment or formthe investment activity.

The tax authorities however, contendedthat such interest income should be taxedas income under Section 4(c) of the Act, onthe basis that such interest income wasclearly ‘interest’ and not gains or profits from

a business. The lack of risk in placing thedeposits demonstrates that interest cannotbe treated as business income; the repetitivetransactions do not amount to trade and therewas nothing done to deem it as an ‘adven-ture’ or concern in the nature of a trade.

The issue raised before the Special Com-missioners was whether the interest incomeof the company is business income underSection 4(a) or interest income under Section4(c) of the Act8 . The Special Commissionerswere influenced by the fact that the placing ofdeposits and lifting of deposits continued ona regular and repetitive basis (daily, week inand week out every month) for the relevantyears of assessment under appeal and still con-tinue to do so as at the appeal in 1997. Theyarrived at the unanimous decision that inter-est income satisfied the test laid down in thebadges of trade9 and thus qualified as busi-ness income or alternatively as income froman adventure or concern in the nature of trade.Noor Azian (Chairman of the Special Com-missioners) said10 :

“Considering the motive which was andstill is profit-making and the high volumeand frequency of transactions coupled withthe organisation and the system adopted (de-

tails of transactions, accounts etc. in Exhibit“B”), we are of the view that the transac-tions are indicative of business or an adven-ture or concern in the nature of trade.”

The Special Commissioners found thatthe badges of trade such as the presenceof a profit-seeking motive, existence of anorganisation, method of financing, periodof ownership, frequency of transactions,nature of subject matter and circumstancesleading to the realisation are sufficient tohold that the placing of the deposits

1 The Act. Act 53/1967.2 Section 4(a) to (f) of the Act.3 See Section 44(2). This refers to a situation where

the deductible expenses exceed gross income ofthe business source.

4 See Section 43(2).5 Section 34(2) in relation to bad debts, Section 34(4)

in relation to contribution to approved providentfund, social responsibility expenses defined in Sec-tion 34(6), double deduction are only granted toincome from business sources.

6 Comprises of Abdul Hamid Mohamad, Mohd NoorAhmad and P. S. Gill.

7 Rayuan Sivil W-01-200 Tahun 1997.8 See the Special Commissioners case (1997) MSTC

2891.9 For a detailed discussion on badges of trade, see

Choong Kwai Fatt, Malaysian Taxation — Principlesand Practice, 2002 8th ed., pp. 209-218.

10 Ibid at p. 2899.


TA X AT I O N

11 Ibid at p. 2898.12 Ibid at p. 2899.13 (1972) AC 63414 (1998) MSTC 3,675.15 These are the principles propounded by Lord

Radcliffe in the House of Lords decision in Edwardsvs. Bairstow (36 TC 207).

16 Ibid at p. 3679.

amount to an adventure or concern in thenature of trade. They rejected the tax au-thorities argument that all the badges oftrade must be present in order to estab-lish a business source. The Special Com-missioners firmly laid down that it is notnecessary that all badges of trade must ex-ist to establish business source. To do so,would be too far-fetched11 .

The Special Commissioners also re-jected counsel for the company’s argumentthat the placing of deposits and the pro-cessing and refining of palm oil are closelyallied to form a single business source. Inshort, the placing of deposits are not ancil-lary to the main trade.

The rejection of this argument has nobearing to the company as the SpecialCommissioners already accepted that theplacing of deposits is a new trade or an ad-venture into the nature of trade. Either oneof these factors would enable the interestincome derived to be treated as a businesssource. Thus the company can have its in-terest income to be set off by any unab-sorbed loss available to the company to re-duce its taxes.

It is interesting to note that in arrivingat the decision, the Special Commission-ers have taken note of the anti avoidancemeasures to ensure that the placing of ex-cess cash to derived interest income is atransaction capable of commercial justifi-cation and not solely set up to take advan-tage of the unabsorbed loss of the com-pany. The Special Commissioners said12 :

“We were further satisfied that the trans-actions were … carried out through a genu-ine structure and not an artificial structureset up especially to take advantage of the fis-cal benefit … under Section 43 of the Act.”

The Special Commissioners relied on theprinciple approved by Lord Morris inLupton vs. F.A. & A.B. Ltd13 in relation tothe tax avoidance scheme where the Lord-ship opined :

“If upon analysis it is found that thegreater part of the transaction consists ofelements for which there is some tradingpurpose or explanation (whether ordinaryor extraordinary), then the presence of whatI may call “fiscal elements”, invented solelyor mainly for the purpose of producing a fis-cal benefit, may not suffice to deprive thetransaction of its trading status. The ques-

tion is whether, viewed as a whole, the trans-action is one which can fairly be regardedas a trading transaction. If it is, then it willnot be denatured merely because it was en-tered into with motives of reaping a fiscaladvantage. Neither fiscal elements nor fis-cal motives will prevent what in substanceis a trading transaction from ranking assuch. On the other hand, if the greater partof the transaction is explicably only on fiscalgrounds, the mere presence of elements oftrading will not suffice to translate the trans-action into the realms of trading. In particu-lar, if what is erected is predominantly anartificial structure, remote from trading andfashioned so as to secure a tax advantage,the mere presence in that structure of cer-tain elements which by themselves couldfairly be described as trading will not castthe cloak of trade over the whole structure.”

In this case, the Special Commissionersalso suggested a test to distinguishwhether the placing of deposits is abusiness activity or investment activity. Inthe event a company specifically sets asidefunds to place in time deposits, then theintention is for investment. On the otherhand, if the company is utilising the idleworking capital funds in order to maximiseprofits for the company by placing theexcess or surplus funds to time deposits,the intention for investment may not bepresent. The motive of placing the depos-its is to deal with the excess money onhand, to turn over and make a profit. Theactivity is thus one of the business objec-tives of the company and hence, would tan-tamount to a business income.

The tax authorities being dissatisfied with

the decision of the Special Commissionersappealed to the High Court14 . Hj. AbdulKadir J. accepted in total the Special Com-missioners’ decision as explained in the casestated. The learned judge approved the testsuggested by the Special Commissioners asto distinguish the placing of deposits as abusiness activity or an investment activity.He was guided by the settled law that a HighCourt can only intervene with the decisionof the Special Commissioners provided theirdecision was based on the misconceptionof law, there has been error from the pointof law, or there was no evidence to supportthe determination or as one in which theevidence is inconsistent with or contradic-tory of the determination15. As the learnedjudge found that the Special Commission-ers were correct in arriving at the decisionthat the amount of interest income is a busi-ness income assessed under Section 4(a),he gave his decision in favour of the com-pany.

Hj. Abdul Kadir J. held16 :“… I cannot find anything ex facie bad

law in the record which could tilt the bal-ance in favour of the Appellant (tax authori-ties). The facts as found are simple. It is acase of a company whose purpose is to makeas much profit as possible for its sharehold-ers. Having excess cash over its daily busi-ness, it diverted the said excess for such pe-riod until it is needed for the purpose of busi-ness, by putting it in the bank to earn in-come. Otherwise, those excess found wouldremain idle to the disadvantage of its share-holders. It is not a case where a predeter-mined amount was set aside by the companyfrom time to time for the purpose of it beinginvested in banks to earn interest. Those ex-cess funds in this case together with the in-terest earned would be ploughed back intothe company to be used in its business of therefining and processing of oil palm in timeof need. Those excess funds were in fact thetemporary surplus working capital of theRespondent (the company). Therefore, it isnot right to say that any interest received on

“… the Special Commissionershave taken note of the anti

avoidance measures to ensurethat the placing of excess cashto derived interest income is a

transaction capable ofcommercial justification and

not solely set up to takeadvantage of the unabsorbed

loss of the company.”


Interest income earned from placement of deposits (RM)Year ending 30 days or less 110 to 210 days Fixed period30 Sep of 4 years1986 294,364 Nil Nil

1987 577,252 Nil Nil

1988 47,653 30,612 101,308

1989 Nil Nil 37,997

17 Emphasis of the writer.18 36 TC 207.19 (1979) 1 MLJ 1.20 (1979) 1 MLJ 1.21 Section 96(a) of the Courts of Judicature Act 1964.

TA B L E 1

the account of those short-term deposits isinterest within the meaning of Section 4(c)of the Act as contended by the Appellant (taxauthorities). On the facts, it is income inrespect of gains or profits from a business,within the meaning of Sec.4 (a) of the Actas claimed by the Respondent (the com-pany).”

It should be noted that the company inthis case had three classes of deposits, twoof which are short term while the latter islong-term, a fixed period of four years. TheHigh Court merely addressed that the in-terest received on the account of thoseshort-term deposit is interest within themeaning of Section 4(a) of the Act andnothing else. Hj. Abdul Kadir opined :

“Therefore, it is not right to say that anyinterest received on the account of thoseshort-term deposits17 is interest within themeaning of Section 4(c) of the Act as con-tended by the Appellant (tax authorities). Onthe facts, it is income in respect of gains orprofits from a business, within the meaningof Sec.4 (a) of the Act as claimed by the Re-spondent (the company).”

The existence of lacuna in the HighCourt decision may suggest that long-termdeposits be treated as a business sourceas found by the Special Commissioners,and after all the learned judge had acceptedthe decision of the Special Commissionersin total. It may also give grounds to the taxauthorities to examine this issue in latertax appeal cases.

The Saga Continues …The tax authorities went to the Court of

Appeal to seek final redress on the issueof interest income being assessed as busi-ness income. It took four years since theHigh Court decision. The Court of Appealwas bound by the facts determined by theSpecial Commissioners and they couldonly reverse the Special Commissioners’decision on the issues of law or mixed factsand law. The principles enunciated by LordRadcliffe in the House of Lords decisionin Edwards vs. Bairstow18 were adhered to.The Court would only interfere if the casecontained anything ex facie which was badin law and which bore upon the determi-nation, or if the facts found were such thatno person judicially and properly in-structed as to the relevant law could have

come to the determination under appeal.In this case, the Court of Appeal too had

scrutinised the records in the review of thefinding of primary facts made by the Spe-cial Commissioners and they were in com-plete agreement with what wassummarised by Hj. Abdul Kadir J. in theHigh Court. The Court of Appeal held :

“Having reviewed the findings of primaryfacts made by the Commissioners and in thelight of the relevant law we are satisfied thatthe Special Commissioners are correct intheir decision in holding that the interestincome falls within Section 4(a) of the Act.Therefore, we dismiss the appeal with costsand confirm the Deciding Order of the Spe-cial Commissioners.”

In arriving at the decision, the Court ofAppeal referred to the Malaysian PrivyCouncil case of American Leaf Blending Co.Sdn. Bhd. vs. Director-General of InlandRevenue19 where the law lords in Englandheld that rental, despite being specificallyprovided in Section 4(d) of the Act, thereis room for overlapping between Section4(d) and business income Section 4(a) if aproperty company or an individual carrieson the business of letting premises for rentfrom which the gains or profits of that busi-ness are derived.

Datuk Wira Haji Mohd Noor JCA, deliv-ering the leading decision in the Court ofAppeal followed the decision of AmericanLeaf Blending Co. Sdn. Bhd. vs. DirectorGeneral of Inland Revenue20 held :

“In the same breath, we conclude that theinterest despite the fact that it was referred

to in paragraph (c) of Section 4 of the Actnever theless constitutes income from asource consisting of a business if it was re-ceivable in the course of carrying on a busi-ness of putting the Respondent’s excess cashto profitable use by placing it on short termand long term deposits.”

The Guiding PrinciplesWith the amendment to the Courts of

Judicature Act 196421 in 1995, the highestcourt to appeal for income tax cases is theCourt of Appeal. This would mean thatKetua Pengarah Hasil Dalam Negeri vs.Pan Century Edible Oils Sdn Bhd will bethe binding authority as to the assessmentof interest income as business income. Itis a settled law that interest despite beingspecifically codified in Section 4(c) of theAct, could be assessed as business incomeunder Section 4(a). To do so, the learnedDatuk Wira Haji Mohd Noor JCA requiresthe taxpayer company to adduce evidenceto demonstrate that such “interest incomeis receivable in the course of carrying ona business of putting the taxpayercompany’s excess cash to profitable use.”This phrase is highly subjective and willinvolve argument and convincing skillsbetween the taxpayer and the tax authori-ties, which may result in a lengthy legalbattle later on.

In the lordships opinion, once an inter-est income is said to be received in the or-dinary course of business, it would be aSection 4(a) source notwithstanding thefact that the placement of deposits is forshort-term or long-term.

With greatest respect, the writer wishesto depart slightly from this principle. In thecase of Pan Edible Oils, the company de-rived interest income from various place-ments of deposits as shown in Table 1.

The writer is in total agreement of thecompany’s argument that the excess cash


TA X AT I O N

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AN

from the fluctuation price of raw materialsplaced on time deposits to maximise theprofit from the idle cash is a business in-come as the company embarks actively insuch placement of deposits by resorting toReuter reports, newspaper reports, andbankers’ advice daily.

Furthermore, the company exercisedmanagerial and organisational skills bymonitoring the fluctuating prices of palmoil daily. There exists a close connectionbetween the fund and the business pro-cess. This would apply to the interest in-come appearing in Column 2 and 3. Thefund inclusive of interest received is partof the working capital of the business, andthe interest income is a business income.

However, in the event the company hasexcess cash from the sale of proceeds ofpalm oil and does not require it in the shortrun, the placement of the deposits for aperiod of four years is akin to an invest-ment activity. It amounts to the settingaside of funds for investment purposes.The High Court was of the opinion that theexcess cash over its daily business beingput in the bank is a business activity as theexcess fund together with the interestwould be ploughed back into the companyto be used in its business of refining andprocessing oil palm in time of need. HjAbdul Kadir held :

“… Those excess funds were in fact the tem-porary surplus working capital22 of the re-spondent.”

In the writer’s opinion, a fund, whichforms the temporary surplus working capi-tal and is ready to be ploughed back asneeded must be placed in deposits for lessthan a financial year. The phrase ‘workingcapital’ would refer to a situation that thefund is needed within a financial year. Acompany which places an amount for adeposit period of four years would meanthat such fund is never needed to form theworking capital and it would be tantamount

of setting aside an amount for investment.Therefore, interest income in Column 4should be a Section 4(c) investment sourceand not Section 4(a) business source. Tohold such income to be business income,in the opinion of the writer is too farfetched. It is unfortunate that the counselfor the tax authorities did not bring this tothe attention of the Court of Appeal.

It is a principle of law that the test sug-gested by the Special Commissioners to dis-tinguish the placing of deposits as a businessactivity or investment is an acceptable test.The Court of Appeal approved the adoptionof the High Court in relation to this principle.According to the Special Commissioners, ifa company specifically sets aside funds to

place in time deposits, then the intention isfor investment. Interest income is then as-sessed under Section 4(c) of the Act.

In Pan Edible Oils case, it is a unique fea-ture that the company does have idle fundsfrom time to time due to the fluctuation ofraw material prices. The placement of theseidle funds to derive interest income is a busi-ness activity. In cases where manufacturingor trading companies whose funds to ac-quire raw materials is fairly consistent mayfind difficulty in having their case fall in thecircumstances as in Pan Edible Oils. To en-sure that the interest income is assessed asbusiness income, these companies must en-sure that the placement of deposits arecarried out on a regular and repetitive ba-sis. The company must exercise manage-rial and organisational skills by monitoringthe interest rates, by resorting to Reuterreports, newspaper reports, and bankers’advice daily, etc. When the holding companyborrows from the bank and then lends toits subsidiaries within the group of compa-nies it must ensure that it has the object of‘fund and treasury management’ stated inthe Memorandum of Company and possessthe skill in fund management, in addition tothe frequency and regular test suggested

above. All this evidence must be properlydocumented to prevent unnecessar ydisputes with the tax authorises later on dur-ing the tax audit.

ConclusionSince the Malaysian legal system abol-

ished the appeal procedure to the PrivyCouncil, coupled with the restructuring ofMalaysian Courts, it is always uncertain asto the binding effect of the Privy Councildecisions in modern days. The Court ofAppeal followed the principle enunciatedin the Malaysian Privy Council case inAmerican Leaf Blending, confirming theapplication of these Malaysian Privy Coun-cil decisions in the Malaysian Courts andthis is indeed a welcomed one.

The decision of Pan Edible Oils merelyreiterates a settled principle that invest-ment income such as rental, interest etc.,despite being codified in Section 4(d) and4(c) of the Act, nonetheless can be as-sessed as business income if the taxpayercompany received such income (i) in thecourse of carrying on the business and (ii)from activity to put the taxpayer’s asset intoprofitable use amounting to a business ac-tivity. These two factors are highly subjec-tive, requiring the taxpayer to adduce evi-dence to discharge the onus of proof, aquestion of fact which is ultimately decidedby the Special Commissioners.

The question is whether the placementof deposits for a long-term exceeding onefinancial year would be considered as a busi-ness source. In the opinion of the writer itremains unresolved as the Court of Appealmerely expressed it as a passing remark anddid not address this issue specifically. Inshort, the tax authorities have not lost theirbattle, and neither can the taxpayer be con-fident that interest income is now a businessincome with the decision of Pan Edible Oils.The legal battle continues.

22 Emphasis of the writer.

Note : Choong Kwai Fatt is a Tax Consultant,Lecturer at the Faculty of Business and Accoun-tancy, University of Malaya, LL.B(Hons)(London), B.Acc(Hons)(Malaya), Mas-ter of Comparative Laws(IIUM), Chartered Ac-countant, Certified Public Accountant, CertifiedFinancial Planner, Fellow Malaysian Institute ofTaxation. He can be contacted [email protected].

“… it is a unique feature that the company does have idle fundsfrom time to time due to the fluctuation of raw material prices …In cases where manufacturing or trading companies whose fundsto acquire raw materials is fairly consistent may find difficulty inhaving their case fall in the circumstances as in Pan Edible Oils.”


RevivingENTREPRENEURSHIPin your business

Entrepreneurship is recognisedas being extremely importantto business whether it is micro,small, medium or large. Many

business people think they know what en-trepreneurship is but even academics donot know what is entrepreneurship.

Many people think that being in businessis entrepreneurship. “It is not,” says Dr.Noel Lindsay, the Chairman of Vizier Me-ridian Centre for Entrepreneurship in hisaddress at the National Accountants’ Con-ference 2002 held at the Sunway ResortHotel on 17-18 September recently.

Only a very small percentage of ownermanagers who are in business act in anentrepreneurial manner. Many do not under-stand the principles of entrepreneurship andhow to develop them or revive them in theirbusiness. Some confuse the term with ‘smallbusiness’ — which it is not. Most smallbusiness owners/managers do notdemonstrate entrepreneurial abilities at all orhave forgotten how to be entrepreneurial.

Teachers sometime think that runningcourses for their students on bookkeepingand business principles is entrepreneur-ship but this is not entrepreneurship. En-trepreneurship is as much a way of think-ing as it is a way of doing.

Although entrepreneurship is hard to de-fine, there are certain ingredients that seemto pop up time and time again when peoplediscuss entrepreneurship. These include(but are not limited to) the following …� a degree of risk taking� innovation (doing things differently …

thinking outside the square).� the pursuit of opportunity� the ability to package up and communi-

cate the business opportunity to othersso that they will more readily invest inthe opportunity (ability to develop a com-prehensive business plan), and

� the ability to scrounge for and attract re-

sources … to do more with less.Although there is no one universally ac-

cepted definition of entrepreneurship, itcan be thought of as the process of creat-ing or seizing an opportunity through do-ing creative or innovative “things” — whileseeing the upside potential but, at the sametime, managing the downside risk — andwithout regard to the resources currentlyowned or controlled by the entrepreneur.

Many small business people are con-cerned about growing their businessesbecause they believe that this will makethem more vulnerable to failure. They be-lieve that the bigger they get, the “furtherthere is to fall” if business matters gowrong. Larger businesses have a greaterchance of succeeding … providing that en-trepreneurship is embraced.

Entrepreneurial businesses have agreater chance of succeeding than non-entrepreneurial businesses. (More than 60per cent of all new businesses tend to failwithin the first few years; the more entre-preneurial businesses typically are theones that succeed.) In addition, many fin-anciers prefer not to finance businesses

that are not entrepreneurship because ofthe risk that they will lose their money ifthey advance money to these businesses.

True entrepreneurs add value; they cre-ate wealth … not only for themselves, butalso for their employees, their sharehold-ers, and for their micro and macro econo-mies. True entrepreneurs are there for thelong-term. They build solid business struc-tures based on high professional standardsand ethical values.

Many people believe that successful en-trepreneurs are “lone wolves”; that is, theyare very individualistic in the way that theyrun their businesses. Nothing could befurther from the truth. Most successfulentrepreneurs develop teams of peoplearound them to help them develop theirbusinesses. Even high profile entrepre-neurs such as Bill Gates and RichardBranson have excellent teams of people intheir businesses and they empower thesepeople to make decisions and act in a teamway. They give them freedom to experi-ment and to make mistakes (with an em-phasis on keeping the mistakes unique!).

There is no one psychological profile of

Dr. Noel Lindsay …True entrepreneurs add value;they create wealth …not only for themselves,but also for their employees

M A N A G E M E N TE N T R E P R E N E U R S H I P / K - AC C O U N TA N T S


an entrepreneur. Many have tried to developsuch a profile but this has been elusive.However, certain traits do tend to be presentin successful entrepreneurial people.

These include the following :� They are opportunity focused … forever

looking for opportunities they are notcrazy speculators … they do not take un-necessary risks … they can deal with un-certainty, change, and ambiguity.

� They have the ability to think outside thesquare in solving problems … they lookto develop businesses that are not “metoo” type businesses … they use theircreative abilities in this regard.

� They have an internal locus of control… they believe that they are in controlof their destiny and “if it is to be, then itis up to them” … where they end up.

� They do not try to blame others if thingsdo not work out.

� They are action-oriented … they push toget things done.

� The major reason for their being in busi-ness is not money! They use money andwealth as a gauge to measure whetherthey are making progress; however, mak-ing money does not consume their focus.

� They have a high need for achievement.This often is the major reason why manyentrepreneurial people go into business… they set themselves goals to achieve

and they love achieving them and thenmove on to the next goal.

� They are very persistent. Even whenthings are not going as well as they couldbe, they push on relentlessly.

� They tend to have a positive attitude …a “can do” attitude.

� They demonstrate leadership … theyhave the ability to develop an excellentteam that embraces their vision.So, while there is no one perfect profile

of an entrepreneur, many successful entre-preneurs demonstrate these types oftraits/qualities.

There are some people who believe thatentrepreneurs are born and not made. Thisis NOT correct. People can be taught howto become more entrepreneurial; busi-nesses can be made more entrepreneurialwith the right type of guidance given to themanagement team who are at the “helm”of the business. A great deal of researchhas been undertaken in this area and thereis no doubt that people can be taught howto be more entrepreneurial.

Issues such as the following can betaught with success …� How to recognise business opportunities.� How to commercialise technology.� How to develop comprehensive business

plans to present those opportunities toothers.

� To become “investor ready” so that fin-anciers will more likely be inclined to putfunds into the venture.

� How to develop the creative side of theirbrains so that they will be more inclinedto think outside the square and come upwith innovative businesses solutions,and

� How to use their business resources ap-propriatelyReviving entrepreneurship in a business

involves understanding the driving forcesthat underlie the entrepreneurial process:the entrepreneur and the team put to-gether to develop the business; the oppor-tunity; and the right type of resources re-quired to make it all happen. Owners, man-agers, and or key employees can be edu-cated in this regard.

Once the key people in the business un-derstand the principles, they then can beguided on how to apply these principles totheir businesses … to develop comprehen-sive business plans that set out strategiesfor growing their businesses. Some peoplecan do this themselves through simply read-ing about entrepreneurship. Most peopleappreciate that they need help and, in sodoing, either develop an internalprogramme to help in educating themselvesand their key staff members or they attendpublic entrepreneurship programmes. AN

K-ACCOUNTANTS —A human resourceperspective

AK-Accountant must be a visionary, flexible, technologicallysophisticated and highly experienced. In the past, an ac-

countant were mere bean counters thatrecords financial transactions and producehistorical financial figures but aK-Accountant will need the knowledge andability to analyse financial information andconvert those results into predictive tools.It would not be wrong to say that gone werethe days that ROI means Return on Invest-

ments, for a K-Accountant it would meanReturn On Information.

“Accounting, as perceived today, will goaway. The traditional functions will continuebut will be less prominent. Less than 25% ofAICPA members actually provide traditionalcorporate accounting and auditing services.The majority performs technology, manage-ment consulting and personal financial plan-ning services. There’s a new way of think-ing. The profession is changing and evolv-ing into more knowledge services,” says

Leigh Knopf, the Director of Strategic Plan-ning & Change Management for the Ameri-can Institute of Certified Public Accountants.

Traditional accounting skills will alwaysbe in demand as accountants’ audit and re-port on company operations. In fact, a grow-ing number of corporate boards of directorswill include their Chief Financial Officers(CFO) who can make strategic informeddecisions based on thoughtful financialanalysis into their board meetings. How-ever, to succeed in the future, accountantsmust supplement their core competenciessuch as technical skills and communicationsabilities. “The primary reason for this shiftwill be due to the nature of corporate ac-counting, which is seen evolving, creatingnew structures, job descriptions and report-


solve problems and conduct financial analy-sis and strategic planning. Such consultantswill be sought for in supply chain managementand business-to-business integration; re-source planning; staff training and mentoring;financial systems conversions; reengineeringand e-commerce (from advising on the busi-ness implications of a web initiative to testingfor security, disclosure, integrity and deliveryon all of the site’s promises).

As the workforce becomes more entre-preneurial and mobile, an increasing num-ber of K-accountants will elect to work forthemselves, rather than one corporation.More young people will go into consultingbecause of the variety, fast pace and chal-lenge that it offers. Retired professionals willreturn to work as consultants. Consultantswill be called upon to serve their clients asmentors, strategists and acting or interimChief Financial Officers. Advanced degreesand certifications — MBA, CPA, CMC (Cer-tified Management Consultant) and CPM(Certified Project Manager) — will be in-creasingly important for consultants.

Mandatory SkillsTechnical : To perform their jobs effectively,financial professionals will requirebroad-based expertise in every area of tech-nological development — from an understand-ing of new applications and software to a work-ing knowledge of wireless technologies.

Communication : Because they’ll bespeaking from top to bottom and vice versa,strong written and verbal communicationskills will be critical. A K-Accountant mustbe able to explain financial data innon-financial terms and offer clear, conciserecommendations.

Interpersonal : Tomorrow’s financialprofessionals must be flexible, proactiveand able to relate to colleagues from di-verse backgrounds and professions. Withincreased interaction between accountingand other internal departments, K-Accoun-tants will need to hone “soft” skills such aspersuasion, diplomacy, negotiation, coach-ing and teambuilding.

Managerial : In addition to financialknowledge, accounting professionals mustdevelop management, marketing and opera-tional expertise. They will need to under-stand all areas and functions of a companyand anticipate the needs of the business.

New Specialities Needed forK-Accountant

• Information Technology ServicesAccountants who have multimedia exper-tise will be asked to work with IT to imple-ment specialised, advanced computer sys-tems.

• E-commerce ExpertsThe growth of e-commerce will drive the needfor financial professionals who are systemssecurity experts and Internet strategists. Acomprehensive knowledge of Internetregulations and the ability to managee-commerce initiatives will be indispensable.

• Assurance ServicesUsing both financial and non-financial infor-

mation culled from past performance and/orpresent conditions, assurance services provid-ers will put business intelligence into a finan-cial context. They’ll convert data into knowl-edge, especially in sectors such as elder care,e-commerce, risk assessment, performancemeasurement and information technology.

Asohan S.Human ResourceManager

M A N A G E M E N T

ing hierarchies. All these are caused by achanging economy emphasis,” says AsohanS, the Human Resource Manager in his pa-per “K-accountant — A Human ResourcePerspective” presented at the National Ac-countant Conference on 18 September 2002.

What Leigh Knopf the Director of Strate-gic Planning & Change Management for theAmerican Institute of Certified Public Accoun-tants says, is a real insight of the emergenceof Knowledge Accountants or K-Accountants.

Based on the new trends in the account-ing fraternity, let’s examine its impact froma Human Resource point of view. Here wewill see what these trends will take shapein the future, the necessary skills and com-petencies a K-Accountant will need to com-pete in a global market.

The Future of AccountingIn the future, accounting will become a

knowledge services profession. In additionto traditional audit and reporting roles,K-accountants will serve as analysts, forecast-ers and managers. Rather than concentrat-ing on compiling and presenting the num-bers, a K-accountant will have to mine data,turn information into knowledge and sharetheir forecasts with senior management.

Accountants will no longer be statisticians,but strategic partners. They will consider pastperformance, analyse existing data and evalu-ate changes in the economy to help positiontheir companies for future success. As finan-cial professionals spend less and less time ontraditional functions and more time using theirknowledge and insights to help companiesgrow, “Financial Manager” or similar titles willreplace the term “accountant”.

As investors insist on setting standards thatcan be used to accurately gauge a company’sperformance, the new K-accountant willfurnish the factual basis and strategic advicefor management’s decisions and helpdemonstrate the impact of those decisions onthe bottom line and in return improve investorrelations. Major growth areas forK-accountants will be in cash flow forecastingand analysis; computer systems and othertechnology procurement; strategic planningand management; and international finance.

Career In ConsultingThe vigorous growth of independent finan-

cial consulting as a career will continue asbusinesses rely on these professionals to in-troduce new concepts, provide expert advice,


• Personal Financial PlanningK-accountants in this speciality will help

their clients reduce debt; develop investmentand asset allocation plans; control expensesand minimise their tax burdens. PersonalFinancial Planners also may get involved ininsurance analysis and retirement planning.

• International AccountingCross-border transactions, overseas

trade agreements and other daily activitiesin the expanding global economy will re-quire the expertise of K-accountants whounderstand foreign laws, tax structuresand business practices. Fluency in one ormore foreign languages will be crucial.

• Environmental AccountingAs businesses strive to be environmentally

responsible (as well as more profitable), theywill list professionals with the CPA creden-tial to handle projects ranging from environ-mental compliance audits to managing andpreventing claims and disputes.

• Forensic AccountingThose accountants who can identify and

track computer fraud, particularly in therealm of e-commerce, will be in high de-mand as corporations increasingly rely ontechnology. Forensic accountants will workclosely with the other financial and IT pro-fessionals to solve problems related to sys-tems integrity and security.

The Evolution of the CPAAs businesses seek to turn information

into knowledge, K-Accountants will movefrom the backroom to the boardroom. Theywill assume more consultative roles, combin-ing traditional services with non-traditionalones such as technology consulting, assur-ance services and e-commerce consulting.

Many professionals with public account-ing backgrounds will become informationmanagers. Others will sell securities orbecome investment or asset managers.

The CPA credential will remain highlyportable. A public accounting backgroundprovides a strong foundation in businessand can be adapted to a variety of functionswithin companies. A CPA designation byitself will not be enough, however. Profes-sionals will need to specialise in anotherarea, such as information technology.

The Impact of TechnologyA K-Accountant will be called upon to

bridge the gap between technology andbusiness. With the rise of integrated sys-

tems, technical expertise will go hand inhand with general business knowledge.

With the growth of e -commerce, safe-guarding assets in the digital realm will bea critical area in accounting. A K -Accoun-tant must know the company’s web systemsand functionality’s, order to ensure the in-tegrity and security of internal computersystems. To work productively with ChiefInformation Officers and the IT staff, aK-Accountant must be conversant with com-puter code and programming language;possess a working knowledge of new busi-ness applications and be proficient in data-base, spreadsheet and analytical software.

The Internet will continue to transformaccounting’s basic foundation of serviceand delivery. A K-Accountant must developfamiliarity with Internet engineering aswell as Application Service Providers andother web-deployed applications.

Survey With CFOs(Source: Robert Half International survey of 1400 CFOs)

The CFOs pre’ “ . that issues and responsi-bilities outside of traditional accounting func-tions will py 37 per cent of a senioraccountant’s time five years from now. Themost important ills, aside from financial ex-pertise for financial professionals in the futurewill be technology expertise (44 per cent),followed by strong communication skills (24per cent); general business knowledge (16 percent) and leadership abilities (11 per cent).

Based on that survey, 52 per cent of CFOsays that IT training will be their first prior-ity in supporting professional developmentfor their accounting staff in the next twoyears; 22 per cent ranked traditional finan-cial skills development as most important.

82 per cent of CFO said their accountingdepartments have become more involved withtheir companies’ technology initiatives in thelast five years. More specifically, almost halfof CFO said their accounting departmentshave become more involved with e-commercein the last three years. There are 52 per centof CFO polled said the most effective way foraccountants to build their non-financial skillsis through classes and seminars; 36 per centsaid on-the-job learning was most valuable. 85per cent of CFO believe that a professionalcertification, such as CPA or CMA, helps incareer advancement.

Educational OutlookWith continued interaction between tech-

nology and finance functions in the workplace,

the accounting curricular needs to be revisedand expanded. Accounting majors will minorin Information Systems, or may ultimatelyseek a combined accounting/IT degree. Tobetter prepare accounting students for evolv-ing workplace trends, business and academiawill collaborate to create more mentoring pro-grams and internship opportunities.

Towards this direction, local universitiesand the traditional accounting departmentmay eventually merge with a broaderMBA-track program to educate and pre-pare future K-Accountants for both financeand general business issues.

The accounting curriculum should incor-porate more on learning through teamprojects, rather than via the traditionalmodel of lectures and tests. Critical instruc-tional areas for tomorrow’s k-accountingstudents will include entrepreneurial think-ing, creativity, leadership and communica-tion. The accounting major should em-brace liberal arts and business courses.

Work BalanceToday Accountants work more than 40

hours each week. Some even go beyond thosehours. All this adds up to their stress due tothe rising workloads and creating an unbal-anced work life that eventually disrupts theirlife style. Given a choice, the KAccountantwould like to decrease job stress; have greaterprofessional autonomy; more flexible workschedule and fewer hours at work. AK-Accountant will work from home to haveflexible y” king hours and provide his exper-tise from the home to regain their lost life style.

ConclusionThe rapid changes in the technology and

the need to keep business competitive in aborderless economy are some of the chal-lenges that will be posed to a K-Accountant.Malaysian accountants on the whole, wouldneed to move in tandem with those changesto secure its credibility of the profession.

To ensure maximum success, aK-Accountant should dedicate himself forlife-long teaming opportunities to broadenhis knowledge in this Information Age. Thiswould require a K-Accountant to learn newskills and competencies, relearn informa-tion to keep abreast with the technologicalchanges and unlearn obsolete informationbased on historical data. Such initiativeswould put the K-Accountant in the main-stream business activities and deal with realtime events around the globe. AN


M O N E Y T R E EF I N A N C I A L P L A N N I N G

The Integrated System ofFinancial Planning —

Total WealthManagementSystem

By Yap Ming HuiFor any accountant who wants to advise their business-ownerclient on their financial affairs, you need an integrated financialplanning system.

Ihave personally met with many ac-countants who are very enthusias-tic about providing financial plan-ning services. They have taken a lotof effort to equip themselves with

various financial products and services likeinsurance, unit trust, Will writing and oth-ers. However, they complain to me abouttheir frustration of not being able to im-press upon their clients that they are dif-ferent from a financial product agent.When I ask them how they approach theirclients, I find that they do not have a finan-cial planning system to integrate all areasof financial planning and products. Whatthey have done is to just share with the cli-ents the list of products and services theyprovide in an isolated manner.

In this article, I would like to share withyou the integrated system we use inWhitman Independent Advisors to adviseour business-owner clients. Our TotalWealth Management System is a propri-etary system of financial planning createdto help those who have accumulated a rea-sonable size of wealth to address theunique financial challenges this wealthbrings. The Total Wealth ManagementSystem is a comprehensive financial check-list for high net-worth individuals to man-age and maintain the fitness of accumu-lated wealth. Wealth management qualifiesand manages a high new-worth individual’ssuccess in four financial components :wealth protection, wealth accumulation,wealth preservation and wealth distribu-tion. Each of these different componentsis meant to play a different role in address-ing unique issues of staying wealthy.

Wealth ProtectionWealth protection is the area where you

help your clients have the assurance that theywill live the lifestyle they desire. The area ofwealth protection represents more than pro-tecting a loss of income from death, disabil-ity and critical illnesses. It also includes pro-tecting your client’s cash flow through disci-plined and conscientious budgeting, moni-toring “under-earning” and actively pursuingmeans to protect his or her earned incomefrom unacceptable tax consequences, some-thing quite similar to business budgeting.

A proper understanding on sources of rev-enues and planning how to spend protectsyour client from the unwanted consequencesof not saving and investing according to planand therefore ultimately not providingenough for the desired lifestyle for tomor-row. This is the component that includes the


budget planning and control. It is dedicatedto monitor what amount of money comes intoyour client’s account throughout the year andwhere the money goes. It is also the compo-nent that determined some minimum pro-tection should your client lose his incomefrom disability, death and critical illnesses.We also evaluate tax planning under this com-ponent. The financial planner also helps thehigh-income clients explore the possibilitiesof tax-advantageous strategies under thisarea of wealth management.

Wealth AccumulationWealth accumulation aims to achieve

reasonable capital growth with the primaryobjective of preser ving accumulatedwealth. This is the area that addresses thechallenges of addressing the risk of losingcapital and the risk of losing purchasingpower at the same time. Despite the factthat wealth accumulation planning seemsto be the component about which your cli-ent is almost always most concerned andexcited, it is this very focus that makesthem lose sight of other important compo-nents of wealth management. As yourclient’s trusted advisor, it is your duty toremind your client to not overlook otherareas of wealth management.

The area of wealth accumulation repre-sents more than achieving maximum rate ofreturn for accumulated wealth and savings.Our system also includes investment strate-gies to preserve the invested capital so thatit cannot be lost under all circumstances.Success in wealth accumulation is very muchdependent on effective application of the as-set allocation principle. Effective applicationof asset allocation strategies allows an indi-vidual to minimise risk and maximise returnon his accumulated wealth by diversifyingthe portfolio into diverse and uncorrelaratedtypes of asset classes. This is the componentthat measures the actual performance ofyour client’s investment planning efforts. Itis dedicated to compare your client’s actualinvestment performance and expected rateof return. It is also the component that moni-tors the actual savings contribution for wealthaccumulation purposes. If you find this areaof wealth management is beyond your com-petencies, you may want to be affiliated withto professionals to compensate your lack ofexperience in this area.

As financial planners, we must also makeprovision for short-term major financialpurchases under this component. Withsuch a proper provision, we can help to en-sure minimum disruption to the long-term

accumulation plan by introducing short-term monetary needs.

Wealth PreservationIf your client is a business-owner, you

must never overlook his or her wealth pres-ervation issues. Wealth preservation is an-other important component of wealth man-agement. For an individual who has accu-mulated a reasonable amount of wealth, abad investment can cause some major dis-comfort, but still, poor investment perfor-mance is not so serious. As far as wealthpreservation is concerned, adequate ef-forts should be made to preserve the ac-cumulated wealth. The wealth preserva-tion component aims to protect the accu-mulated wealth against every conceivablefinancial risk and threat. It is one area a lotof individuals know they need work but be-cause of preconceived notions, they maybe disinclined to spend sufficient efforthere. Almost everyone dislikes thinkingabout death, bankruptcy, disaster, or law-suits, so enough planning may not begiven. The financial planner has a duty tohighlight the importance of proper plan-ning for wealth preservation issues.

A proper understanding and honest as-sessment of sources of risks and threatshelps your clients to make decisions as towhich methods should be utilised to protectaccumulated wealth. One major planning inwealth preservation is liability protectionplanning which includes personal, directorand officer and personal guarantor’s liabilityrisks. This is also the component that in-cludes risk planning and control for propertyand other physical assets. We can advise theclient to shift the financial catastrophes forwhich they cannot fully self-insure to thegeneral insurance company. Wealth preser-vation is also the component that makes surethat proper valuation and planning has beendone on your client’s business interestsshould his or her partner suffer from disabil-ity, death and critical illnesses or retire. Wealso evaluate debt control and managementof the client under this component. It is veryimportant for the financial planner to helphigh-income clients to contain the risk ofbeing too highly leveraged.

Wealth DistributionWealth distribution is important in the

discipline of wealth management becauseof its inevitability and its spectre. Death issomething that most of your clients tendto ignore. The more wealth your client hasaccumulated, the more complicated his or

her financial issues become when he or shepasses away. The objective of wealth dis-tribution is therefore to properly plan sothat your client’s accumulated wealth canbe managed and distributed according tohis or her wishes with minimum hassle.

The wealth distribution exercise startswith the identification of estate planning ob-jectives. You must take into considerationthe personal values and special provisionbased on your client’s family circumstances.The most important area to look into inwealth distribution is to review your client’sWill, if he or she has any. The Will must bevalid and specify his or her wishes clearly.Due to the unique regulatory system, thereare some assets that can be distributed out-side the estate. As such, proper beneficiarydesignation would be required on the dis-tribution of non-probate assets like life in-surance proceeds and EPF moneys. In thiscomponent, you also help your clients to ex-press how he/she wants his wishes to becarried out should he/she be no longer ina position to do it himself, for example, men-tal or physical incapacitation? Wealth distri-bution is also the component that providesfor the unlikely and complicated situationwhereby both husband and wife die to-gether. Specific issues and challenges inleaving assets for the minors and depen-dents are explored in this component. Toensure the financial fitness of the estate, wealso prepare and evaluate the projected bal-ance sheet and potential liability risk shouldpremature death happen to the client.

As discussed above, the discipline ofwealth management encompasses a verywide range of financial issues and needs. Tokeep what your clients have accumulatedand stay wealthy, you would need to have abalanced effort and control on all four com-ponents of wealth management. Each com-ponent of wealth management is just likethe pillar of the empire. Overlooking anycomponent of wealth management maycause damage that is irreparable to yourclient. If you aspire to be a trusted financialadvisor to your clients, it is not enough tojust let them know you sell insurance, unittrusts or provide will writing services. Youmust have an integrated system to adviseyour clients in a total manner. The systemmust also be able to integrate various finan-cial products and services as you make rec-ommendations to your clients.

Note : The writer is the Managing Director ofWhitman Independent Advisors Sdn Bhd. Hecan be contacted via e-mail at [email protected]

AN

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A M E R I C A

The role of the consultant as achartered accountant, or anyother professional, is notidentical all over the world.Despite this fact and despite allefforts to move closer to asingle global set of accountingstandards, the necessarycommunication with theinternational client is still andwill also remain subject to adifferent set of rules.

By Sergey Frank

DOING BUSINESSIN TheUSA

B U S I N E S S W AT C H

The first part of this articledescribed aspects such ascommunication, the timefactor as well as the appro-priate approach for con-

ducting business in the US. Today we willhave a closer look at the negotiating ap-proach of business people in the US. It mayhappen that after a short introduction re-ferring to abstract business principles andglobal considerations of business the dis-cussion will turn to details of the actualproject rather swiftly. Exact definitions ofmost key terms of an agreement are es-sential. Not without reason there is a well-known proverb saying “He who defines theterms wins the argument”.

The style of negotiating is pragmatic,result-oriented and may sometimes be veryfast and efficient. Communication is polite,direct and straight. The same applies to the

mutual search for options for solutions.The American partner uses rhetorics formainly pragmatic reasons in order to reachtargets faster and more effectively. Inter-ruptions during a presentation by askingquestions are possible and not necessarilyconsidered as impolite. American businesspeople are open and flexible. Without be-ing asked they illustrate their perspectivesand support the other side in receiving thenecessary information in order to see the‘whole picture’. Because of their distinctivepragmatism they are often quite creativein jointly finding new solutions and options.It is therefore advantageous to exchangeinformation that is not confidential as wellas have flexibility to explore new options

in joint brainstorming-meetings. The nego-tiations in the US contain a fair deal of bar-gaining. The American partner makescompromises on the basis of reciprocity,he expects the other side to make similarconcessions in return (‘tit for tat’). He be-lieves in fair competition, but has also asound sense for fair-play and often tendsto chose solutions based on the maxim that“I want to win” rather that “I want to seethe other side lose”. In this context it isoften possible, to define mutual conces-sions in such a manner, that both sides aresatisfied with the negotiation result andthus reach a so-called “win-win-solution”for both sides. This does not apply, how-ever, in a situation where one party nego-

(PART 2)


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Note : The ideas put forwardin the articles apply for theactual internationalconsultation regardlesswhere it is taking place. Thearticles aim to educate ondif ferent ways of doingbusiness in different countries. This is importantsince it helps to understand international business.And this conclusion is vital because nowhere inbusiness, especially in international consulting,can so much be gained and lost so quickly as ininternational transactions and projects. Thearticles were first published in Accounting &Business, ACCA’s monthly publication.

tiates from the position of strength.The US is a country, where lawyers, es-

pecially attorneys play a very significantrole. The attorney at law combines the dif-ferent functions of a solicitor and a barris-ter as existing in the UK. A generally well-known fact is the common compensationlaw suits, in which enormous compensationamounts are claimed and are also partlygranted by the courts. These circumstancesalso strongly influence business negotia-tions. In-house lawyers and attorneys areinvolved in the negotiating process moreoften and especially a lot earlier than in theUK. It is therefore advisable to involve anattorney for important deals in the US from

the beginning. He should be a specialist inthe particular business sector and, at thesame time, be also familiar with the locallegal system of the particular state. Suchinvolvement may be very costly since no-where else is legal advice as expensive asin the US. The amount of the hourly-basedfee including additional expenses shouldtherefore be negotiated in advance. The law-yer should be requested to prepare an esti-mate for his service.

Contracts based on Anglo-American laware generally coming from a case-law his-tory and do not include the principles of acommercial code. Therefore, they usuallyare very detailed and consider all eventu-alities. This is why one has to prepare for a

‘paper chase’ when negotiating in the US,in other words long contracts commencingwith detailed definitions and covering pos-sibly all questions and contingencies whichmay arise. Americans stick to contracts asagreed upon. A kind of ‘contract repentance’in case of later on changed circumstancesis not usual. The American partner will insuch a case feel nevertheless bound to theagreement. However, he will try to negoti-ate a contract amendment, but under no cir-cumstances will he by nature consider thecontract as non-committing.

Besides typical aspects during a negoti-ating situation such as the communication,the negotiating approach and various con-

tractual points, the following aspectsshould also be considered.

� The US is a multi-cultural and multi-eth-nic melting pot where also many businesspeople are immigrants from first or sec-ond generation. All of them have onething in common : they are American citi-zens, live and enjoy the high standards ofthe American way of life and its freedom.

� Women’s liberation has won recognition inUS business life. This is why many positionsespecially in various service sectors suchas in management consulting, in charteredaccounting, in the legal field as well as inadvertising, just to name a few, are moreoften occupied by women than in Europe.

� The dress code is conservative and clas-sic. Dashing combinations are not ac-cepted in the majority of industries. Darkblue and dark grey suits with black shoesand dark socks in particular are appro-priate. Light coloured or especially whitesocks are worn by the Americans forsports activities but not in business life.

After all that has been said, one shouldnot forget one aspect : Americans love tohave fun, and fun should also exist in theprofessional world apart from all the stress.It may be exactly this attitude which makesthe opportunity of working or doing busi-ness in the US appear so attractive. AN

Note : Sergey Frank is a partner of KienbaumExecutive Consultants and Managing Directorof Kienbaum Ltd., the London office of theKienbaum Group. He is a worldwide acknowl-edged author and speaker on international com-munication issues. www.Kienbaum.co.uk


T E C H N I C A L N E W S


IFAC's International Auditing and Assurance Standards BoardInvites Comments on its Operations and Guidance

The International Auditing and As-surance Standards Board (IAASB)of the International Federation of

Accountants (IFAC) has issued an expo-sure draft of three documents that are criti-cal to its operations : its Terms of Refer-ence, Preface to the International Standardson Quality Control, Auditing, Assurance andRelated Services and Policy on Bold TypeLettering. Comments are requested by 28February 2003.

“The IAASB believes that it is importantthat those with an interest in the setting ofinternational standards for audit, other as-surance engagements and related servicesare able to comment on how the IAASB,formed earlier this year, intends to oper-ate. This will help to ensure that the IAASB

operates in the public interest,”emphasises Dietz Mertin, Chairman of theIAASB.

The IAASB is also significantly expand-ing the scope of its guidance and would likecomments on whether the Terms of Refer-ence and Preface to International Stan-dards, when taken together, address allrelevant matters. A new Auditing and As-surance Services Handbook will be devel-oped focused essentially on four areas :

� Quality control;

� Audits and reviews of historic financialstatements;

� Assurance engagements on other sub-ject matters; and

� Related services.

Within the handbook, the IAASB intendsto continue bold facing particular sentencesin its standards. This is often referred to as‘black lettering’. Such lettering is used forsentences that convey basic principles oressential procedures. The process and ra-tionale for black lettering is explained indetail in the exposure draft.

Note : The documents may be downloaded fromthe IFAC website at www.ifac.org/EDs. Com-ments on the Terms of Reference may be sub-mitted online to [email protected] or sentto the IFAC Chief Executive via fax (+1-212-286-9570) or by mail to 535 Fifth Ave., 26th Floor,New York, NY 10017. Comments on the othertwo documents may be submitted to the IAASBTechnical Director at the same email address.All comments become a matter of public recordand will be posted on the IAASB website(www.iaasb.org).

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AN

René Ricol Named President of the International Federation of Accountants

At its meeting in Hong Kong on 18November 2002, the Council of theInternational Federation of Ac-

countants (IFAC) announced the appoint-ment of René Ricol of France as IFAC Presi-dent for a two-year term, beginning thismonth. IFAC is the worldwide organisationfor the accountancy profession, represent-ing 156 accounting organisations withmore than 2.4 million accountants.

Ricol, who has been an IFAC Boardmember since 1997, is President of his ownaccountancy firm, Ricol, Lasteyrie and As-sociates, which works nearly exclusivelywith listed companies. He has held variousleadership positions within the interna-tional accountancy profession and is anardent proponent of initiatives tostrengthen the international profession.

During a keynote address at the WorldCongress of Accountants’ Closing Sessionon 20 November in Hong Kong, Ricol an-nounced new IFAC undertakings, sup-ported by its governing Council, to :

� Renew IFAC’s commitment to the pub-lic interest, through, for example, en-couraging firm adoption of effective qual-

ity controls;

� Rebuild credibility in financial reportingthrough, for example, enterprise gover-nance; and

� Revitalise the profession by reinforcingthe concept of ‘integrity’.

“There is no doubt we are in a new eraof accountability and transparency,” statesRicol. “The profession must re-engineeritself to effectively serve the public inter-est and we must work together with regu-lators, standard setters, and others to ac-complish this. We must also recommit our-selves to integrity.”

“The integrity of the profession is whatdistinguishes accountants. It is not some-thing we can legislate. It is an attribute wemust instil in new entrants into the profes-sion and one that leaders of the accountancyprofession and employers of accountantsmust repeatedly reinforce throughout anaccountant’s career,” emphasises Ricol.

Ricol, who plans to work closely withIFAC’s member organisations in efforts tostrengthen the international profession,has extensive leadership experience at thenational level. He has served as President

of the two national French accountancybodies, L’Ordre des Experts-Comptablesand Compagnie Nationale desCommissaires aux Comptes, and is thefounding President of Compagnie desConseils et Experts Financiers (CCEF), anassociation of financial advisors whosemembership includes accountants andother professionals from the finance sec-tor. He is Honorary President and a found-ing member of France Défi (a French net-work of independent accountants) and ofEuro Défi (a European network of indepen-dent accountants, lawyers and notaries).

In addition to his many leadership roleswithin the accountancy profession, Ricolserves as a legal expert registered with theSupreme Court (Cour de Cassation). Otheractivities include his appointment in 1991by the Prime Minister of France as Presi-dent of a study group for the advancementof small and medium-sized businesses.Ricol has also been honoured by theFrench Government through the awardsof Officier de L’Ordre National du Mérite(1996) and Officier de la Légion d’Honneur(2000). AN



IFAC Recognises Outstanding Articles onFinancial and Management Accounting

Anew publication released by the In-ternational Federation of Accoun-tants (IFAC) recognises outstand-

ing articles on financial and managementaccounting topics. Entitled, Articles of

Merit : 2002, the book features articlesselected by IFAC’s Financial and Manage-ment Accounting Committee (FMAC) aspart of its annual Articles of Merit AwardProgramme for Distinguished Contribu-tion to Management Accounting.

“Calculating the Economic Value of Cus-tomers to an Organisation,” written by PaulAndon, Jane Baxter, and Graham Bradley,was selected as the award-winning articleby an international panel of judges. Nomi-nated by CPA Australia, it first appeared inthe Australian Accounting Review. The ar-ticle examines how the economic value of

customers to an organisation is calculatedin practice and reports on the findings of anew exploratory field of study of threeAustralasian service organisations.

This article is included with10 other ar-ticles in the on-line and print booklet Ar-

ticles of Merit — 2002 Competition. Theother award-winning articles focus on suchtopics as :

� Behavioural finance;

� Internal reporting of derivatives;

� Equity restructuring techniques;

� Activity-Based Costing and Activity-Based Management;

� Budgeting; and

� Environmental policies.

The Articles of Merit Award Programme

is designed to give recognition to pub-lished articles that have made or are likelyto make a distinct and valuable contribu-tion towards the advancement of manage-ment accounting. Articles selected for the2002 Articles of Merit publication werenominated by the journal editors of IFAC’smember organisations. They were origi-nally published in 2001. As a result of theFMAC programme, these articles are nowaccessible to a broader international audi-ence.

Note : The print booklet with all articles maybe purchased for US$25 plus shipping and han-dling and can be ordered through the IFAC’sonline bookstore (www.ifac.org/store) or bycalling +1-212-286-9344. The electronic versionmay be downloaded free of charge through theonline bookstore. The winning article is alsoavailable through IFAC’s online Articles andSpeech Library (www.ifac.org).

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IFAC Issues Exposure Draft on Compliance withInternational Financial Reporting Standards

T he International Federation ofAccountant's International (IFAC’s)Auditing and Assurance Standards

Board (IAASB) is proposing new guidancedesigned to clarify when financial state-ments are in full compliance with Interna-tional Financial Repor ting Standards(IFRSs), thus contributing to greater con-sistency in the application of these stan-dards.

The exposure draft of International Au-diting Practice Statement (IAPS) Report-ing on Compliance with International Fi-nancial Reporting Standards makes clearthat when an entity references compliancewith IFRSs, auditors should issue an auditreport with an unqualified opinion only ifthe entity complies fully with all applicableIFRSs.

“Examples have arisen of entities seek-ing to claim credit for complying withIFRSs when their financial statements havenot complied in full with all applicableIFRSs,” states IAASB Chairman, DietzMertin. “This can be misleading and con-fusing to users of financial statements. Theproposed practice statement is designed toassist auditors in communicating moreclearly when financial statements complywith IFRSs.”

The proposed practice statementsupplements guidance provided in ISA200, Objectives and General Principles

Governing an Audit of Financial State-

ments, and ISA 700, The Auditor’s Report

on Financial Statements. Specifically, itprovides additional guidance when theauditor expresses an opinion on financial

statements prepared :

� In accordance with IFRSs;

� In accordance with both IFRSs and rel-evant national standards and practices;and

� In accordance with relevant nationalstandards or practices, but which dis-close in the notes to the financial state-ments the extent of compliance withIFRS.

Note : The ED on Reporting on Compliance withInternational Financial Reporting Standardsmay be downloaded at no charge from IFAC'sweb site (www.ifac.org). Comments are due byJanuary 15, 2003. They may be submitted onlineto [email protected] or may be sent toIFAC IAASB Technical Director via fax (+1-212-286-9570) or by mail to 545 Fifth Ave., New York,NY. 10017.

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AN



IFAC Public Sector CommitteeSeeks Further Comments on

Proposed Cash Basis Standard

At its meeting in Hong Kong on 21 November 2002 the Pub-lic Sector Committee (PSC) of the International Federa-tion of Accountants (IFAC) will consider a proposed In-

ternational Public Sector Accounting Standard (IPSAS) on thecash basis of financial reporting. This proposed standard followsthe issue of Exposure Draft 9, Financial Reporting under the Cash

Basis of Accounting, in November 2000.Since the exposure draft was issued, the committee has consid-

ered responses received on ED 9 and undertaken further ex-tended consultation with developing and transitional economies(see PSC Updates 3, 4, 5 and 6 for progress reports on this IPSAS).Based on responses to ED 9 and the extended consultation, thePSC has substantially restructured the IPSAS to make it moreuser-friendly. The PSC has also adopted a principles-based ap-proach to the proposed IPSAS, which substantially reduces thelevel of prescription in the document.

Consistent with this principles-based approach, the proposedIPSAS has been restructured into a two-part document compris-ing mandatory requirements and underlying principles in Part 1,and non-mandatory encouragements in Part 2. This approach notonly ensures that comprehensive cash basis financial statementsare prepared but also enables governments and their agencies toreport cash receipts, disbursements and balances in a format thatis relevant to, and more readily understood by, their constituents.Part 2 of the proposed IPSAS also provides encouragements andguidance for governments and government agencies which are

increasingly moving beyond a pure cash basis of accounting tosupplement statements of receipts and payments with schedulesof accruing receipts, payments and a range of other assets andliabilities.

Note : The PSC would welcome any comments from interested partieson its restructured proposed IPSAS. Comments should be e-mailed [email protected]. Comments received by the end of business onFriday November 8 will be considered by the PSC at its November meet-ing when it is anticipated that the IPSAS will be finalised.

IFAC PSC Advances Public SectorStandard Setting Program with Releaseof Two New Accrual-Based Standards

As part of its ongoing program to strengthen public sectorfinancial reporting and contribute to increased transpa-rency by governments worldwide, the International Fed-

eration of Accountants (IFAC) Public Sector Committee (PSC)has released two new International Public Sector Accounting Stan-dards (IPSASs).

� IPSAS 19 — Provisions, Contingent Liabilities and Contingent

Assets. This Standard defines provisions, contingent liabilitiesand contingent assets, sets out criteria for the recognition anddisclosure of provisions, and rules for measuring those provi-sions. This standard excludes from its scope provisions andcontingent liabilities arising from social benefits such as agepensions, child benefits and disaster relief, which are being con-sidered in detail by a separate PSC Steering Committee on So-cial Policy Obligations.

AN

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IFAC Task Force Focuses on Restoring Credibility in Financial Statements

Improving the credibility of financial re-porting worldwide is the objective of anew task force appointed by the Inter-

national Federation of Accountants (IFAC),an organisation representing more than150 accountancy organisations fromaround the world. The IFAC Task Forceon Rebuilding Public Confidence in Finan-cial Repor ting will be chaired by JohnCrow, former Governor of the Bank ofCanada, and includes representatives fromcompany management, boards of direc-tors, the investment community, and theaccountancy profession.

“The task force will provide an interna-tional perspective on the problem of the

loss of credibility of financial statements.This loss of credibility occurred prior tothe collapse of Enron and WorldCom, al-though these events have made address-ing the issue all the more urgent,” com-ments IFAC President Aki Fujinuma.

“Specifically, the task force will identifyand analyse the causes of the loss of cred-ibility, and consider alternative courses ofaction to restore credibility. These may in-clude recommendations on principles ofbest practice in the areas of financial andbusiness reporting, corporate governance,and auditor performance,” adds Fujinuma.

In carrying out its work, the task forcewill give attention to :

� The considerable volume of work al-ready undertaken by IFAC member bod-ies and others at a national level in ad-dressing the loss of credibility;

� Cross-national variation in the extent ofthe loss of credibility and its causes; and

� The emerging patterns of convergencein such areas as financial reporting andcorporate governance.

The task force plans to issue a report inmid 2003. This report will outline actionsthat the task force considers are necessaryto restore public confidence in financialstatements, with a focus on the role of theaccounting and auditing profession. AN



� IPSAS 20 — Related Party Disclosures. ThisStandard requires entities to disclose theexistence of related party relationshipswhere control exists, and informationabout transactions between the entity andits related parties that occur outside thenormal supplier or client/recipient rela-tionship. It also requires disclosure of cer-tain transactions with key managementpersonnel and their close family members.

“The PSC has now completed the devel-opment of the core set of accrual basedIPSASs. It has now issued 20 Standards.We will be moving forward to developIPSASs that address the public sector spe-cific issues that we have identified in thisfirst phase of our standard setting process,”says Ian Mackintosh, the PSC Chairman.Mackintosh also noted that work on thecash basis IPSAS was nearing completionand he anticipated the release of that Stan-dard by the end of 2002.

Note : The IPSASs are posted on the IFACwebsite (www.ifac.org). Visitors to IFAC’swebsite may download all International PublicSector Accounting Standards at no charge.

AN

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Financial Reporting :Commission Welcomes IASB/FASB Convergence Agreement

The European Commission has wel-comed a joint announcement bythe International Accounting Stan-

dards Board (IASB) and the US FinancialAccounting Standards Board (FASB) oftheir commitment to achieving real conver-gence between their respective accountingstandards by 2005, when listed EU compa-nies will be required to apply IAS. The an-nouncement is a major step towards a glo-bal system of accounting standards and willin particular help the US Securities and Ex-change Commission (SEC) to accept finan-cial statements prepared by EU companiesin accordance with IAS, without reconcili-ation to US GAAP, for the purposes of list-ing on US markets.

Frits Bolkestein, European Commissionerfor the Internal Market, said “The recentscandals have shown how important top qual-

ity accounting standards are for the healthof all financial markets. Today’s announce-ment is a very positive move towards a singleworldwide set of high-quality, best of breed,principles-based financial reporting stan-dards, which would dramatically improve theefficiency of global capital markets : costswould decrease, comparability would im-prove and corporate governance would beenhanced. We must ensure convergence isachieved without diluting the quality of thestandards. I am confident that the IASB andFASB will rise to that challenge.”

The IASB and the FASB announcementare based on a Memorandum of under-standing on convergence of their respec-tive standards. The Memorandumformalises the commitment of the two bod-ies to convergence based on high qualitysolutions and, once convergence is

achieved, to its maintenance through co-ordination of future work.

In June 2002, the EU adopted the IASRegulation requiring EU companies listedon a regulated market to prepare their con-solidated accounts in accordance with en-dorsed IAS from 2005 onwards. MemberStates may extend this requirement to un-listed companies and to annual accounts.

Bolkestein discussed the issues of con-vergence of accounting standards and ofrecognition by the SEC of accounts pre-pared in accordance with IAS with theChairman of the US Securities and Ex-change Commission (SEC), Harvey L. Pitt,during the latter’s visit to Brussels on 9October.

Note : The full text of the IASB/FASB announce-ment can be found at : http://www.iasc.org.uk/cmt/0001.asp

AN

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The Chairman of the Securities andExchange Commission applaudedthe decisions by the Financial Ac-

counting Standards Board and the Inter-national Accounting Standards Board towork together toward greater convergencebetween US Generally Accepted Account-ing Principles and international accountingstandards.

“This is a positive step for investors inthe US and around the world,” said SECChairman Harvey L. Pitt. “It means thatreducing the dif ferences in two widelyused sets of accounting standards will re-ceive consideration by both boards, as theywork to improve accounting principles andaddress issues in financial reporting.”

SEC Commissioner Roel C. Campos,who has been the Commission’s partici-pant in recent meetings of the InternationalOrganisation of Securities Commissions,added : “I find it encouraging that inter-ested parties in all countries can contrib-ute their thinking. It is clear that investorsglobally could benefit to the extent thattransparency and high quality information

Actions by FASB, IASB Praised

might be provided by a common worldwideapproach.”

Chairman Pitt and Commissioner Camposnoted that international accounting stan-dards have been a subject of interest formany years, and that the subject has receivedincreased prominence with the decision ofthe European Union to adopt IAS in 2005, aswell as similar actions being taken or con-sidered in a number of other countries. Theyalso noted that an effective infrastructure forinterpretation and enforcement of account-ing standards, and cooperation among regu-lators, would be critical to realising the ben-efits of convergence.

“For years, many have believed that a de-sirable goal someday would be to move to-wards a single set of high quality accountingstandards around the world,” Pitt said. “Nowthe time frame has a more immediate focus.With so many new users of IAS coming in2005, in Europe and elsewhere, there is agreat opportunity to focus attention on waysto improve information for investors whileworking for greater convergence in both theshort-term and the long-term.” AN


This 600-year-old capital blends ancient and modern side-by-sidemaking it one of the most amazing cities to discover

T R AV E L A N D L E I S U R E

Seoul’sOld and New

S O U T H K O R E A

The first impression visitorsmight have of Seoul is thatit’s a bustling, thoroughlymodern city that lacks anything culturally enticing to

savour. Not so. With over 5,000 years ofculture, which is on display virtually every-where — from ornate paper lanterns atBuddhist temples to street musiciansplaying the koto, there is a wealth ofsights, sounds and smells for the sensesto savour.

The whole experience is made moreagreeable courtesy of a transport systemthat operates in clockwork precision.The 30-year-old metro system has eightlines stretching 287km with 262 stationsand it’s the best mode of transport foranyone to get around in the city. Signsare in both English and Korean, with lit-erally litter-free stations that are clearlymarked and well lit, making night jour-neys safer. In addition, there are 400 busroutes snaking around the city supportinga fleet of more than 8,500 vehicles.

Day-and Night MarketsThe markets are probably the best place

to get acquainted with Seoul’s unique wayof life. Take the subway and alight at theHoehyon or Myungdong stop to get to the

Namdaemun/Myungdong area.Namdaemun, which literally means

“great south gate”, is the name both of theimpressive stone and wood structurewhich still stands at the centre of the inter-section, and of the large market nearby.

Since 1414, Namdaemun Market hasbeen a lively place where merchants and

buyers gather to bargain over a wide vari-ety of goods. Travel east of Namdaemunand you get to the fashion Mecca ofMyungdong, full of young people trying onthe latest styles. To the south is the cablecar station that will take you up to SeoulTower for a picturesque view of the city.

East of Namdaemun is Dongdaemun

(“great east gate”), another large areapacked with small shops and big malls. Theplace has become famous for having nearlythe same clothing as available at departmentstores, but at very reasonable price. Takethe subway and alight at either Dongdaemunor Dongdaemun Stadium. The bigger, mod-ern shopping malls like Doosan Tower (thatstays open till 5 a.m.!) and Freya Town (withmovies shown 24 hours a day) have madeDongdaemun a must-see and experienceplace on any traveller’s itinerary.

If the buzz gets too much for you, slip intoany of the alleyways to discover a Korea thathasn’t changed for the past 2,000 years. Inthis damp alley, old folks squat around with

their vegetables and chopping boards asthey prepare for the night market, whilesmall groups of men huddle aroundboard games encircled by the smokefrom their lit cigarettes.

Ancient ArtefactsKorean history may date back 5,000

years, but there’s precious little physi-cal evidence left. Because many ofSeoul’s magnificent royal palaces andtemples were destroyed during the Japa-nese invasion of 1592, and later from1910 to 1945, many have been built andrebuilt. There are however two striking

attractions in the city that deserve a view-ing : Changdeokgung and Jogyesa.

Changdeokgung is the best preserved ofSeoul’s five major palace compounds builtduring the Joseon Dynasty (1392-1910).Today, it’s a UNESCO World Heritage Site.The palace was built in typical ancient Ko-rean architecture — with black-tiled ridged

Changdeokgung is the best preserved of Seoul’s five major palacecompounds built during the Joseon Dynasty (1392-1910)

Seoul’s skyline at night

Woman in traditional Hanbo —Korea’s national costume


roofs meant to imitate the spine of a dragonand intricately painted wooden frames ingreens, yellows, reds and blues. The vast100-acre grounds are also home to thepalace’s piwon, or secret garden. The gar-den is breathtaking, not so much from thefoliage that makes up the ground, but theway each tree, flowerbed, lake and gazeboseem to balance harmoniously with natureand bring about an air of tranquillitythrough the gardens.

Unlike the palace, Jogyesa temple is aworking centre and serves as the head-quarters of the Korean Buddhist OrderJogye — the largest Buddhist sect in Ko-rea. It’s unique because it’s the only Bud-dhist temple located in the heart of the citywhen the majority is often found nestledin the mountains. On every eight day ofthe fourth lunar month, the temple is trans-formed into a sea lotus lantern with a pa-rade that begins from Dongdaemun Sta-dium, to mark the birth of Buddha. Thetemple’s rich history and ancient artefactscan be enjoyed through a free English tourguide available on the grounds.

Quirky TakesEven the modern takes on a unique Ko-

rean twist that highlights the local culture.There are more than 300 theatres, art gal-leries and museums to cater for all tastes,plus a plethora of historic monuments. Butthe one that tickles the senses (and the tastebuds) has got to be the Kimchi Museum.

Kimchi is the most common dish to ac-company the rice. This spicy vegetabledish is usually made up of Chinese cabbageand fermented in a mixture of fish juice,

salt, sugar, red pepper and other ingredi-ents. Koreans used to prepare kimchi as asubstitute for fresh vegetables during thewinter. Today there are more than 160 va-rieties of kimchi, made from ingredients asdiverse as persimmons and cucumbers, andat the Kimchi Museum, you’ll never beshort of kimchi ideas to try.

The other distinctive practice of the Ko-reans is sleeping on ondol (heated) floors.The individual Korean house, new or old,is built to protect its inhabitants from out-side elements. Rooms often have ondolfloors that are heated from under thefloor. This system of heating is so ingrainedin Korean life that even the most fashion-able, Western-style houses and hotels builtin recent years have rooms that are heatedthrough the floor.

Even the Ritz-Carlton Seoul, famous forits personalised service and warm hospi-tality, offer bedrooms equipped with tradi-tional ondols, courtesy of the hot water cir-culating under the floor. Likewise, if youwant to experience the traditional Koreansleeping, you can also request for rollwaysto be sent to your room. These are thicklypadded cushion-like mats found almost inevery home in Korea.

And if you do stay at the Ritz, try out theKorean-style bath menu. These are spe-cially designed bubble bath soaks preparedby your own butler, with a local menu tomatch. Whether you select the Mint andCitrus Tonic with a sweet array of Ginseng,or the Iced Green Tea Crisp Crudit’s withHerb and Olive Tapenade, you’ll experi-ence the wonders of local herbs in thehands of professionals. AN

Autumn in Seoul One of the sacred templesin the mountains

Seoul’s Ritz-Carlton Hotel


B E T T E R L I F E

GOOD POSTUREPreventsBACKACHE

H E A LT H

By Christina Chong

Back pain is very often caused by poor posture and faulty bodymechanics. Months or even years of sitting, standing or liftingloads incorrectly will eventually lead to back problems.

What is Bad Posture?When viewed from the side, the human

spine has four natural curves that help ab-sorb shock and provide flexibility. Whenthese curves are lost or exaggerated, someparts of the spine will have to bear moreweight. This causes stress on the struc-tures and results in backache.

In standing, a sway back is characterisedby an increased curve in the lower back.The head is usually thrust forward, theshoulders rounded and the upper back

humped. The abdomen protrudes forwardwhile the buttock sticks out backwards.The knees are often locked straight. Theopposite of a sway back is a flat back. Thisposture is characterised by a flat back, likea tabletop. The lumbar spine has lost itscurve, while the knees are in a slightly bentposition.

Neither of the above extreme positionsis good for the spine. The ‘neutral’ positionis in between these two postures. You arein ‘neutral’ when, in standing, your ear,

shoulder, hip and knee joints are in astraight line as seen from the side.

Getting the Correct orNeutral Posture

Maintaining a neutral (natural curve)posture in the lower back is a key factor tohaving a healthy back. This is where thespine tolerates the mechanical forces best.The general population does best in a mid-range position, one that is within the ex-tremes of your pelvic movement. To findthis neutral position, stand straight with

your back against thewall. Keep your upperbody erect with yourchest out. Next, stickyour bottom out at theback to arch your backas much as you can.This is the excessivesway back posture. Re-verse this motion byflattening your backand tucking your tail-bone forward to the flatback position. Now, ad-just your low back/body to the mid-way ofthese two extremes.Usually this involvescontraction of the ab-dominal muscle. How-

Testing Posture


ever if one has spinal restrictions or patho-logy that causes pain, the neutral positionmay vary to the optimal position where ac-tivities of daily living may be tolerated withthe minimal amount of stress to the back.A physiotherapist would be the best per-son to guide and help one attain this formof neutral posture.

Do’s and Don’ts for HealthyDaily Living Activities

Standing

Prolonged standing with both kneesstraight increases swayback. High heelsfurther increase the curve in the back.Placing one foot on a stool flexes the hipand knee and relieves the strain on theback.

Sitting

Sitting in a slumped position with theback rounded for prolonged periods willcause over-stretching of the ligaments.Avoid sitting for too long. Sit on a chair thatprovides good support for your lower back.Both feet should be resting on the floor.

Correct Posture Alignment

� Chin tucked in� Head and neck straight� Shoulders in midline� Stomach tucked in (control of low back curve)� Knees in midline

UnbalancedPosture

� An unbalancedbody due to badposture may resultin sway back,rounded shoulders,spinal curvature,strain and backache

keep your back straight. Hold the load asclose to you as possible. Keep you lowerbody/ low back in the neutral position men-tioned above and lift the load via use of legmuscles.

If you have persistent backache, it is ad-visable to see a doctor or physiotherapist.Oftentimes the stabilising muscles thatform a corset around your low back weak-ens after an injury or becomes de-condi-tioned with inactivity and poor posturalhabits. Take care of your back as your qual-ity of life depends on it.

Note : The writer is a Registered Physiothera-pist (NZRP, Auckland) and is currently attachedto Documentation Based Care (DBC). DBC isan international network of active spine centresthat offer a structured back and neck-recondi-tioning programme for people with chronic pain.Specialised equipment helps the patients workthe weak muscles in the different directions thatthe back moves in. Proper stretching andstrengthening exercises are individually taughtand prescribed. For further information, call 03-7725 1335 or check out www.dbc.fi orwww.dbcamerica.com. The writer can also becontacted via e-mail at [email protected]

Correct Incorrect

Sleeping

When sleeping on your back, place asmall pillow under both knees to flatten thecurve in your back. When sleeping on yourside, bend the top knee while keeping thebottom leg nearly straight, and place a pil-low between the legs. Sleeping on yourstomach is not advisable because it strainsthe neck.

Driving

Maintain a balanced posture. Do notpush the seat nor tilt the backrest too farback. Try not to grasp thesteering wheel in such away that you need to bendfor ward while driving.Grasp the wheel at 4 and 8o’clock positions with atleast forearms distancefrom the wheel.

Lifting

Lifting with straightknees and back bent for-ward is not advisable. Standclose to the load with yourfeet apart and one foot infront. Bend your knees and

AN

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○


P E N A N G MIA PENANG BRANCH


Post Enron — Lessons Learnt

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Over 150 participants comprising ofExecutive Chairmen, Audit Com-mittee Chairmen, Managing Direc-

tors, and Directors of PLCs, senior manage-ment of MNCs and SMEs, academicians, ac-countants and auditors attended a forum onPost Enron — Lessons Learnt, held at theUniversiti Sains Malaysia (USM) on 24 Oc-tober 2002.

In his welcoming ad-dress, Professor SyedAhmad Hussein, theUSM Deputy Vice-Chan-cellor of Academic Affairsexpressed delight that theUniversity, once again,had worked with the In-stitute in organising thisforum. Several years ago,the School of Manage-ment and MIA PenangBranch had jointlyorganised courses for theentrepreneurs and morerecently, evening talks.He viewed these effortsas a good Universiti-Institute collaborationin promoting accounting and business knowl-edge among members of the business com-munity as well as the public.

The Organising Chairman and Moderator,Ng Swee Weng who is the Partner in chargeof Assurance Practice in KPMG Penang thenkicked off the forum proper with an intro-duction on Enron. An eloquent speaker, SweeWeng had the audience in rapt attention as

he elaborated on his slides which coveredcorporate information, fast facts, revenue/cost of goods sold/gross profit/net profit,key players, the employees retirement ben-efits and other pertinent information withregrads to Enron’s affairs. He animatedlyillustrated on how profits were so easily be-ing generated and recognised using Special

Purpose Entity (SPE) under FASB 140,which allows for non-consolidation withincertain accounting criteria. i.e. creating off-balance sheet transactions. Swee Wengshared his thoughts on the causes of failureand identified noteworthy questions on cor-porate governance, culture and discipline,and culpability arising from this debacle. Heclosed his presentation with five questionsfor the panellists who were free to address

any questions or any issues related to Enron.The panellists were Dato' Noor Ahmad

Mokhtar Haniff, a Board member and AuditCommittee Chairman of a few listed compa-nies; Dato' OK Lee, Executive Director ofToray Pen-Group and FMM NorthernBranch Chairman; Dato’ Yeo How, Group Ex-ecutive Director (Finance & Corporate Af-

fairs) of IOI CorporationBhd, and Executive Di-rector of IOI PropertiesBhd. and Palmco Hold-ings Bhd, and Prof. DaingNasir Ibrahim, Dean ofthe School of Manage-ment and the President ofthe Asian Academy ofManagement.

With such eminentpanellists, the commen-tary session followed byQ&A was lively and stimu-lating with some thoughtprovoking comments andsuggestions. In closingthe discussion, Swee

Weng aptly summarised that the convergenceand integration of the four E’s, i.e. ethics, edu-cation, enforcement and effectiveness wouldcontribute towards minimising corporate fail-ures while acknowledging corporate failuresare inevitable in certain market circum-stances. Also present was MIA PenangBranch Chairman, Steven Teh, who in hisclosing remarks congratulated and thankedall the speakers for a job well done.

A section of the audience

USM Deputy Vice-Chancellor, Prof. SyedAhmad Hussein welcoming the participantsto the forum

One for the album … (L-R) Dato’ OK Lee, Ng Swee Weng, Dato’ Yeo How, Steven Teh,Dato’ Noor Ahmad Mokhtar Haniff and Prof. Dr. Daing Nasir Ibrahim


MIA SABAH BRANCH


S A B A H

Be Ready, Says Sabah Chief Minister

In addressing the 500 members andguests present at the grand 35th Anni-versary Dinner of MIA Sabah Branch held

recently in Kota Kinabalu, the distinguishedGuest of Honour, Chief Minister Datuk ChongKah Kiat urged accountants to be adequatelyprepared to face foreign competi-tion. Datuk Chong said that with theimplementation of free trade andmarket liberalisation measures,Malaysia could not resist the wavesof globalisation that are already lap-ping on her shores. He advised lo-cal accountants to adopt transpar-ency at all times, to safeguard theinterests of shareholders particu-larly those in major corporationsand to check on any possible short-comings within the local corpora-tions in the effort to boost investors’confidence.

MIA Sabah Branch Chairman,Alexandra Thien in her addresssaid that today’s accountants havetaken the role of business part-ners by providing value added ser-vices and therefore it was important for MIAmembers to cultivate the right attitude to-wards self-development and be motivatedenough to acquire new knowledge.

Datuk Chong commended MIA’s proactivesteps to keep the public informed by strength-

ening its channel of communications throughenhanced public relations programmes andthe use of information technology.

Before dinner commenced, MIA SabahBranch thanked her numerous generoussponsors and advertisers with a VCD dis-

play of their company logos and particulars.The hotel was gaily decorated with colourfulmusical notes and local Sabahan musical in-struments in tune with the theme for thisyear’s dinner — Symphony Below The Wind.Members and guests were entertained by

the impressive performance of Tshung TsinChinese Orchestra on rare classical Chinesemusical instruments like the yang qing, guzheng, pipa , zhong ruan and dizi. Memberswho were winners in the recent branch’skaraoke competition were ‘contracted’ to

sing two numbers. Besides the music andsongs, a group of young locals gave theirmodern dances a different but interestinginterpretation

This music theme was also carried in thefirst CD-ROM produced by any branch or

Distinguished Guest of Honour, YAB Datuk Chong Kah Kiat andDatin Ivy with MIA President Abdul Samad bin Alias (right)

and MIA Sabah Branch Chairman Alexandra Thien (left)

MIA President, Abdul Samad bin Alias giving hisaddress at the Sabah Branch 35th AnniversaryDinner

Alexandra Thien presenting a special memento ofa miniature crystal musical note and violin to YABDatuk Chong Kah Kiat


MIA SABAH BRANCHS A B A H / S A R AWA K


Oriental Values of Accountants

Sarawak Branch Chairman, DavidTiang believes that in the pursuitof our goals in life we should think

also about our social inheritance andhumble beginnings. At the recentSarawak Branch Annual Dinner held inKuching, themed Oriental Legacy he re-mained members to not forget their rootsand be proud that Malaysia, and Sarawakin particular, is such a potpourri of vari-ous ethnic groups living in harmony.While accountants value the morality as-pects of legacy and culture, accountantsshould also accept behavioural change ortransformational change in the way we dobusiness today. His message was timelyas accountants today have to brace them-selves for greater changes and challengesin this globalised era.

In conveying the President’s message,Vice President, Albert Wong highlightedthe strategic objectives of the Institutenamely to promote and regulate profes-sional and ethical standards, to enhance

members’ competency through continu-ous education and learning, to lead re-search and development for the enhance-ment of the profession and to inculcate ahigh sense of social responsibility.

True to the theme of the night , mem-bers and guests were dressed in theircultural attire while the organising com-mittee succeeded in creating a culturalatmosphere in the grand ballroom of thehotel with fans and lanterns. Besidesbeing enter tained by a full culturalprogramme of drums, music, songs anddances there was the Mr. MIA and Miss.MIA contest, prize giving to the golf win-ners, lucky draws and the presentationof memento’s to the branch committeemembers. The golf competition held inconjunction with the branch annual din-ner was one of the social activitiesorganised by the branch committee andit attracted many entries from golfing ac-countants, from as far as the Miri andBintulu chapters.

any dinner committee under the exceptionalleadership of Alexandra Thien and the un-tiring efforts of Chang Yu Chuk and his sup-porting working committee. The CD-ROMwas initiated by Sabah Branch to commemo-rate MIA’s 35th anniversary and to replacethe normal published dinner souvenir maga-zine. A special contribution on The Music ofSabah by Dr. Jacqueline Pugh-Kitingan fromUniversity Malaysia Sabah was included inthe CD-ROM. During the dinner MIA SabahBranch presented excerpts from the CD-ROM by projecting highlights of the vari-ous activities of the Sabah branch.

Sabah Members … (L-R) Titus Tseu, Dennis Wong and Suzanne LimGuests … (L-R) Ir Dr Jacob Yan, Chee En Loong and SandakanChapter Chairman Tan Huang Dak

Dinner Organising Chairman, Chang Yu Chuk and Alexandra Thien surrounded by membersof the Dinner Working Committee, all smiles of satisfaction after months of hard work

David Tiang, Sarawak Branch Chairman, addres-sing members and guests at the annual dinner

Appreciation to Fahehan Hussin, Dinner Organ-ising Chairman and Committee Member 2002

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AN

MIA SARAWAK BRANCH


I N S T I T U T E N E W SS A R AWA KMIA SARAWAK BRANCH

Members and guests from the Audit Department and Professional Bodies

Let the drums roll … welcoming the guests

Mr and Mrs MIA 2002

Yet Nai Sing (left) receiving his golf prizefrom Albert Wong (right), witnessed by GolfOrganiser, Kenny Chong

Vice-President, Albert Wong and Branch Chairman, David Tiang with branch committee members


C O L U M N SN E W S F R O M P R O F E S S I O N A L B O D I E S

T he need for independent and com-mitted non-executive directors toplay a much bigger role in compa-

nies is a greater concern for Chief Finan-cial Officers (CFOs) in Malaysia than any-where else in South East Asia, a new sur-vey has shown.

In the survey, it has been noted thatthose working in Malaysia felt moststrongly that non-executives should play astronger role in corporate governance.

ACCA commissioned an independentagency to conduct interviews with 200CFOs in Hong Kong, Shanghai, KualaLumpur and Singapore, complemented bycase studies with CFOs, heads of corporategovernance institutes and fund managers.All respondents to the survey were in thetop 300 companies in each country.

According to their responses, it is alsomore difficult to appoint truly independentNEDs than it is in neighbouring Singapore.They also felt that there is not enough mar-ket pressure from shareholders or investorsfor companies to appoint non- executives.

And where NEDs are appointed by com-

MALAYSIAN CFOS HAVE GREATEST

CONCERNS OVER NON-EXECUTIVES, SURVEY SHOWS

panies, more CFOs working in Malaysiathan in any other part of the region feltstrongly that NEDs do not devote enoughtime to their roles in those companies.

Datuk Khalid Ahmad, member of ACCAMalaysia Advisory Committee (MAC) said;“This survey demonstrates that the role ofNEDs remains a live issue in the region,in terms of their availability, fitness for roleand their ability to make a positive impactthrough the prevalence of company cul-tures which do not sit easily with the roleof NEDs.”

“It is difficult to be prescriptive. More-over, it is not clear that companies any-where are yet using NEDs as fully as theymight. Nevertheless, our research sup-ports the principle that NEDs can make avaluable contribution to companies, and,indeed, welcomes an expanded role forthem in the future. While it is not yet clearhow this might translate into action, it sug-gests that further education and pressurefrom investors could help to create the cir-cumstances for a beefed-up role for NEDs,which, in turn, could lead to the introduc-

tion of more independence into corporategovernance systems.

“ACCA also believes NEDs should bemore involved in the appointment of audi-tors, along with audit committees, to pro-tect the independent status of the audit.Clearly, this depends on the willingness ofindependent non-executive directors totake the baton. The evidence of this sur-vey is that, while there is a willingness forthe involvement of NEDs, there is not cur-rently a way. Nevertheless, the belief thatthere is scope for a larger role for NEDs inthe future is an encouraging sign,” saidDatuk Khalid.

On 12 November 2002, ACCA launchedthe corporate governance survey simulta-neously in China, Hong Kong, Singaporeand Malaysia.

In Malaysia, the panel who presented theresearch were YBhg Dato Khalid Ahmad,FCCA, a member of ACCA Malaysia Advi-sory Committee, Teo Ee Sing, ACCA In-ternational Council member and AdelinaIskandar, ACCA’s Manager of CorporateCommunications. AN

Briefing the media … (L-R) Teo Ee Sing, YBhg Dato’ Khalid Ahmad and Adelina Iskander


N E W S F R O M P R O F E S S I O N A L B O D I E S

C O L U M N S

Sixty-three graduates were newly ad-mitted as Fellow & Associate Mem-bers of the Chartered Institute of

Management Accountants (CIMA) duringthe CIMA Membership Graduation Cer-emony recently. A total of 280 people at-tended the event and this included thefamilies and loved ones of the graduates,

representatives from professional account-ing bodies, universities and colleges.

Fifty-eight graduates received the Asso-ciate title (ACMA) while five received theFellow title (FCMA). Associates are stu-dents who have been admitted as membersof CIMA after successful completion of theCIMA examinations and attainment of threeyears relevant practical experience. Fellowshave a higher grade of membership, beingelevated from Associateship after obtainingat least three years of senior and strategicexperience, normally at Board level. DatukIshak Imam Abas, the Senior Vice-Presidentof Finance, Petronas, was among the recipi-ents of the Fellow title, having been granteda special elevation to Fellowship by thePresident of CIMA.

On hand to present the scrolls was thePresident of CIMA Malaysia Division, YBhgDato’ Lee Ow Kim, who is also the Execu-tive Director of Pen-Group of Companies andChairman of the Federation of MalaysianManufacturers (FMM) Northern Branch.

In his special address, Dato‘ Lee re-minded the newly admitted Fellows and

CIMA GRADUATION JOYAssociates of CIMA that as professionals,they must at all times, endeavour to providesuperior performance and to uphold theirintegrity and the CIMA Code of Ethics.

“Membership brings with it great honourand also heavy responsibilities. In the lightof the Enron debacle, companies will belooking for integrity in their Chief Financial

Officers and finance functions. Above all,accountants have a duty to their professionand this may at times conflict with immedi-ate self interest or loyalty to one’s employerbut it cannot be stressed enough that it isimportant to maintain what is ethical andobjective,” added Dato’ Lee.

Dato’ Lee also touched upon new devel-opments in CIMA, the most significant ofwhich was that CIMA’s qualification is now

CIMA Fellow and Associate Members celebrate their achievement

multi-level, to reward success at each stageof the journey to become a CIMA member.The new qualifications framework intro-duces the CIMA Certificate in BusinessAccounting for students who pass at Foun-dation Level and the CIMA Advanced Di-ploma in Management Accounting for thosewho complete the Intermediate Level.

The ceremony also saw 13 CIMA mem-bers and staf f receiving Long ServiceAwards in recognition of their long anddedicated services to CIMA Malaysia Di-vision. Among the outstanding recipientswere YM Raja Dato’ Seri Abdul Aziz b RajaSalim FCMA, the Founder President ofCIMA Malaysia, who served for 20 yearsand Lim Eng Seng, Chief Executive of E SLim & Co, who served for 18 years.

The old and the new … Founder President, YM Raja Dato’ Seri AbdulAziz b Raja Salim (right) with his “Long Service Award” and Dato’ O.K. Lee, the current President of CIMA Malaysia Division

Special “Fellow”, Datuk Ishak Imam Abas (right) receiving his scrollfrom Dato’ O. K. Lee

AN



The mail of the following members have beenreturned to the Institute by the postal au-thorities. Members are kindly requested tocontact Yan or Mr. Teoh to update their ad-dresses. Thank you.

REQUEST FORADDRESSUPDATE

M/NO NAME

390 Balendran Kandiah

958 Poh Sim Tart-Thomas1006 Choo Chieh Hwa1056 Kong Kwet Liong1659 Koh Yoon Sing2320 Pang Fook Yun2688 Syed Ahmad Bin Tuan Temerang

3164 Amirruddin Bin A. Rahman3455 Tham Sai Choy3744 Chew Swee Ai3958 Pushparani D/O A. Moothathamby4415 Goh Teoh Ean5159 Voon Siew Peng

5177 Tai Yuik Cheng5210 Ganthimathi Subramaniam5213 Mak Hing Kwai5678 Wong See Hong6067 Azman Bin Hj Mokhtar6095 Wong Sau Yee6186 Ahmad Skhri Ramli

6672 Wong Lee Tuck-Edwin6743 Kalvathy D/O M Subramaniam7068 Jane Soong Lu Yee7240 Zamri @ Mohd Zamri Bin Shamsuddin7246 Bazlan Bin Osman7371 Yeo Beng Kheng

7388 Chen Kok Song7511 Saw Teng Lam7778 Che Ismail Bin Che Mood7719 Tan Cheng Hock7912 Teo Lay Beng8010 Sohaimi @ Azmi Bin Mohd Salleh

8101 Ivan Foo Tze Khiong8181 Koh Eng Wah8254 Mohd Ali Hanafiah Bin Mohamed8446 Lau Tian Chen8769 Yusffy Yusoff8839 Mohd Ridzuwan Bin Hj Abdullah

8938 Yong Wen Kiat8948 Lam Yoke Lee8998 Peck Vui KingM/NO NAME

9185 S. Kasturi A/P Suntharam9292 Ng Kien Hwee

9450 Low Poh Ming

List of New Books, Available in theMIA Resource Centre

E-Commerce Law and Practice, by Julian Ding,Petaling Jaya : Sweet & Maxwell, 1999.

Call No. : 343.09944 DINInternational Accounting Standards : A Guideto Preparing Accounts, 3rd ed., London : ABGProfessional Information, 2001.

Call No. : 657.0218 INTSurvey and Analysis of Financial Reporting ofIslamic Banks Worldwide, by Dr. Hamzah Ismail& Radziah Abdul Latif, Kuala Lumpur : AMBG& MAREF, 2001.

Call No. : 332.10917671 HAMAccounting : Industry as a Partner for Sustain-able Development, London : ACCA, 2002.

Call No. : 658.408 ACCKod Malaysia untuk Tadbir Urus Korporat/Jawatankuasa Kewangan dalam Tadbir UrusKorporat, Kuala Lumpur : MICG & ACCA, 2002.

Call No. : 658.409595 MAL

Malaysian Taxation : Principles and Practice,by Choong Kwai Fatt, 8th ed., Kuala Lumpur :Infoworld, 2002.

Call No. : 336.2009595 CHO

2002 XYZ Model Financial Accounts : an XYZ Pre-sentation, by Kevin W. Neville, Kew, Victoria :Thomson Legal & Regulatory Ltd., 2002.

Call No. : 657.3 NEV

Standar Profesional Akuntan Publik : per 1Januari 2001, by Ikatan Akuntan Indonesia-Kompar temen Akuntan Publik, Jakar ta :Salemba Empat, 2001.

Call No. : 657.021809598 IKA

Panduan Percukaian untuk Individu : Tax Guidefor Individuals, by Lembaga Hasil Dalam Negeri,3rd. ed., Kuala Lumpur : LHDN, 2002.

Call No. : 336.24209595 PAN

Auditing and Assurance Services in Malaysia, byWilliam F. Messier, Jr. and Margaret Boh, KualaLumpur : McGraw-Hill, 2002.

Call No. : 657.45 MES

International Accounting Standards 2002, Lon-don : IASB, 2002.

Call No. : 657.0218 INT

Personal Financial Planning, by Koh Seng Kee& Fong Wai Mun, 2nd ed., Singapore : PrenticeHall, 2000.

Call No. : 658.15 KOH

Issues in Financial Accounting, by Scott Henderson& Graham Peirson, 9th ed., French Forest :Pearson Education Australia Pty Ltd., 2000.

Call No. : 657.48 HEN

Indonesian GAAP : Similarities and Dif ferencesamong IAS, Indonesian GAAP, US GAAP andUK GAAP, Jakarta : PricewaterhouseCoopers,August 2001.

Call No. : 657.021809598 IND

Wonderful Malaysia Berhad : Interim Report —Third Quarter 2002, Kuala Lumpur : KPMG, 2002.

Call No. : 657.3 WON

Financial Accounting and Reporting, by BarryElliot & Jamie Elliot, 6th ed., Essex : PearsonEducation Limited, 2002.

Call No. : 657.3 ELL

Public Sector Accounting, by Rowan Jones &Maurice Pendlebury, 5th ed., Essex : PearsonEducation Limited, 2000.

Call No. : 657.835 JON

Knowledge-based Economy Masterplan : Strate-gic Initiative One of the 21st Century, KualaLumpur : Institute of Strategic and InternationalStudies, 2002.

Call No. : 330.9595 INS

Global Financial Stability Report : Market De-velopments and Issues, Washington D.C. : Inter-national Monetary Fund, 2002.

Call No. : 332.152 GLO

Comparative International Accounting, by Chris-topher Nobes & Robert Parker, 6th ed., Essex :Pearson Education Limited, 2000.

Call No. : 657.0218 NOB

World Economic Outlook : Recessions and Re-coveries, Washington D.C. : International Mon-etary Fund, 2002 .

Call No. : 338.544309048 WOR

Economic Report 2002/2003, Kuala Lumpur :Ministry of Finance, 2002.

Call No. : 330.9595 KEM

The Tax Computation of Companies, by ChoongKwai Fatt, Kuala Lumpur : Infoworld, 2002.

Call No. : 336.207 CHO

Commercial Applications of Company Law inMalaysia, by Pamela Hanrahan, Ian Ramsay,Geof Stapledon, Aiman Nariman MohdSulaiman & Aishah Bidin, Singapore : CCH AsiaPte Limited, 2002.

Call No. : 346.066026595 COM

Illustrative Interim Report, 30 September 2002,Kuala Lumpur : PricewaterhouseCoopers, 2002.

Call No. : 657.3 ILL

Annotated Copy of the Finance Act 2002, TheChartered Institute of Taxation, London : ReedElsevier, 2002.

Call No. : 343.0302 ANN

Hong Kong Society of Accountants : PracticeManual, Hong Kong, Hong Kong Society of Ac-countants, 2001.

Call No. : 657.095125 HON

NOTICEPlease be informed that all non MIAmembers are required to pay an annualfee for the usage of the MIA resourcecentre. The effective date of this fee is1 January 2003. For further clarifi-cation, please check with Puan Kalsom,the librarian.

Annual feeACCA students — RM20 p.a.Others — RM30 p.a.


REGISTRATION OF ACCOUNTANTSThe following persons are now entitled to usethe word ‘Accountant’ upon their admission tothe Malaysian Institute of Accountants, in ac-cordance with Sections 22 & 23 of TheAccountants Act 1967.

AS AT 27 SEPTEMBER 2002

KELANTAN DARUL NAIM

Kota BharuTan Siok Lian 20095/CAMELAKA

Ayer KerohNor Yati Binti Ahmad 20117/CAMelakaChan Kia Ngoh 20039/CAChoo Choon Beng 20153/CASong Siew Chean 20365/CAYeo Jee Tin 20269/CANEGERI SEMBILAN DARUL KHUSUS

PedasAnizam Bin Adam 20058/CASerembanChou Wei Sein @ Chow Wei Yein 20073/CADaud Bin Sulaiman 20373/CAMary Lim Lai Wan 20165/CAPukhari Bin Samsuri 20340/CASiew Chan Yoong 20212/CASiva Chandran A/L K. Shanmugam 20293/CAZamani Bin Azali 20382/CAPAHANG DARUL MAKMUR

JengkaHalil Bin Paino 20392/CAKuantanAhmad Rosdi Bin Ismail 20301/CANg Chong Kooi 20110/CANg Kok Ann 20132/CANor Akillah Binti Osman 20090/CAShahrul Azrin Bin Abdullah 20226/CAPERAK DARUL RIDZUAN

IpohChee Yong Yong 20094/CADillion Singh Banwait 20118/CAKhoo Chooi Siean 20085/CALau Ping Ong 20235/CALeong Quee Sing 20237/CATang Lee Szen 20371/CAWong Lai Kuan 20219/CAKamuntingAnuradha Rani A/P Dharam Pal 20158/CATanah RataMalek Rizal Bin Hizat 20274/CAPERLIS INDRA KAYANGAN

ArauRosiatimah Binti Mohd Isa 20419/AMBeseriYeap Joo Nee 20247/CAPULAU PINANG

Ayer ItamTeoh Suan Kim 20337/CALean See Wei 20364/CALoi Kit Yok 20278/CAOng Ko Lynn 20231/CABayan LepasJimmy Ong Chin Keng 20404/CA

CA — Chartered AccountantAM — Associate MemberLA — License Accountant

PHNOM PENH

Phnom Penh 3Ling Doh Seong 20069/CALiu Yung Shan 20070/CAJOHOR DARUL TAKZIM

Batu PahatChing Yann Tsyr 20310/CAKea Teng Thiam 20397/CALum Chon Eng 20156/CAJohor BahruChiam Soo Teong 20040/CAChiang Choon Kai 20136/CAChow Pei Pei 20092/CAEr Siew Wey 20057/CAHanim Bte Hadison 20270/CALew Sze How 20043/CALow Ee Ping 20179/CAMd Aris Bin Amin 20283/CAMohd Azri Bin Ab. Samah 20359/CAMongis Bin Mangir 20262/CANorlela Binti Mohd Zin 20233/CANorshaidi Bin Yusof 20034/CASeow Tien Long 20388/CASherenzakiah Binti Muhamed Yusoff 20227/CAToh Cher Cin 20036/CAYong Kok Fong 20065/CAYong Shing Cheong 20105/CAKluangLai Haw Ran 20144/CALim Khee Yen 20146/CASyaiful Nizam Bin Abdul Majid 20130/CAMasaiHo Yik Ren 20406/CAKua Le Ting 20201/CAMuarChua Pin Lin 20250/CAFauziah Binti Mohamed 20367/CAGan Yu Yu 20225/CATan Chun Guan 20228/CATan Pek Hoon 20033/CAPasir GudangZamri Bin Abdul Wahab 20106/CASegamatAbu Thahir Abdul Nasser 20041/CANadzira Binti Yahaya 20417/AMNg Kim Sing 20306/CANorehan Binti Mohd Tahir 20416/AMSaunah Binti Zainon 20418/AMKEDAH DARUL AMAN

Alor SetarChong Sok Chee 20114/CAOoi Lay Si 20232/CAKulimHo Lim Lim 20164/CASungai PetaniJoyce Cecilia A/P Antony Pitchiah 20273/CAKhor Huey Yun 20186/CATeoh Ee Ken 20363/CA

9578 Lee Seng Meng10253 Tee Soo Ping

11149 Chan Foong Leng11283 Stephanie Ling Yu Ming11295 Idris Bin Md Tahir11384 Muhammad Fauzi Bin Abdul Hamid11417 Andrian Khor Yew Meng11511 Maznah Bt Sulong

11680 Abdul Rahim Bin Yahya11698 Mohd Yusof Muhammad Isahak12210 Lee Min Lan12267 Ahmad Nasir Bin Mohd Daud12286 Tong Chee Chew12322 Noradlan Bin Abdul Latif

12329 Lai Chee Kong12789 Fahimi Bin Faisal13203 Richard Tan Ling Geck13742 Siti Hawa Binti Ali13826 Mazlan Bin Mohamed14055 Amir Zuhri @ Zul’asri Bin Zubir

14379 Selvarajan A/L Karuppanan14520 Teo Sia Yian14557 Zaini Bin Jasami @ Jasmi14580 U Yuit Tyng @ Woo Yuit Tyng14818 Chay Fook Hong14960 Jason Seng Wai Kong

14968 Sophia Anyi15349 Wong Yet Ka15566 Mohd Hakimi Bin Zabair15707 Marzelita Binti Rejab15808 Lai Teck Choy15961 Nik Khairil Azman Bin Nik Abdullah

16194 Hur Wei Wun16277 Seew Choi Har16542 Azlan Bin Abd Malik16584 Tan Boon Hoe16648 Rohaya Binti Yaakub16796 Mohammed Hanafi Bin Muhi

16836 Chin Wai Ching16847 Muhammad Badri Bin Hussin17044 Suryani Binti Harun17242 Natwarlal Sanjay @ Sanjay Patel17515 Jeffery Bin Yon17842 Shaharuddin Bin Abd Majid

18053 Choi Keng Soon18538 Kingsley Anak Larry Renben19257 Muhamad Bin Yaacob19403 Toh Lay Perk19421 Mohd Suhaimy Bin Harun



Tey Lee Hong 20361/CAToh Lai Mei 20300/CAYap Ley Chuen 20091/CAZahrin Bin Md Nasir 20352/CAPetaling JayaAditya Vikram Mohan 20213/CAAlan Taslim Bin Alias 20204/CAAng Yew Chai 20184/CABeh Sin Woh 20299/CABoey Mai Da 20268/CAChai Ah Hin 20169/CACharlie Lim Kim Hwa 20271/CAChin Chun Lan 20305/CAChong Chen Siong 20188/CAChow Yuen Pheng 20243/CAChristina Ling Hui May 20316/CAEdelweiss Ooi Chia Mae 20103/CAFoo Wan Ping 20413/CAHerbert Chua Guan Heng 20080/CAHo Gee Leng 20125/CAIskandar Zulfakar Bin Hassan 20052/CAJegathesan A/L N Kathiravelu 20119/CAKhin Myat Khine @ Nafisah 20322/CA

Bt Mohd Ayub KhanLee Wai Ling 20294/CALeong Ting Siong @ Martin Leong 20345/CALim Khing Yam 20398/CALim Kok Chong 20178/CALim Tong Hee 20377/CAMarion Sheila Naden 20288/CAMonica Sam Ping Sim 20211/CANg Choon Keat 20162/CANg Soe Kei 20134/CANorhani Bt Mohd Yusof 20354/CAPrashanth A/L Raja Ratnam 20148/CARatana Binti Ismail 20060/CARaveendra Kumar A/L Nathan 20076/CAReuben Kee Keah Chek 20120/CARicky Tew Chee How 20126/CASandra Lee Ching Ching 20038/CASeow Chai Leng @ Siew Chai Leng20031/CASoh Siong Chew 20074/CASyahirah Bt Ismail 20168/CATang Pit Yen 20255/CATe Cheu Fang 20260/CATengku Sharifena R. M. 20277/CABinti T. Sulaiman S.Teoh Choon Wei 20083/CATing Hock Yee 20066/CAVinod Kumar A/L Chandra Kumar 20157/CAWan Anwar Bin Wan Abdul Rahman 20172/CAWong Pooi Khay 20251/CAWong Siew Seun 20161/CAWong Yoon Long 20176/CAYap Tuai Yai 20259/CAYeap Lee Lee 20059/CAPuchongChan Fook Kwong 20046/CAJi Lee Peng 20338/CAKenneth Yeoh Guan Hin 20409/CALee Pui Lin 20343/CASevani A/P Shanmuga Sundaram 20394/CAShamsul Anuar Bin Idris 20098/CATan Chai Ying 20214/CAWong Lee Chin 20197/CA

GelugorAngeline Lee Li Choon 20206/CAGeorgetownMohd Zulhabri Bin Md Suibarek 20355/CANibong TebalTan Yu Yin 20374/CAPaya TerubongTeoh Saw Gaik 20408/CAPenangChong Kok 20192/CADavid Khoo Chong Beng 20159/CAHwang Lip Koon 20229/CAKhaw Lay Inm 20240/CALee Seok Hoon 20101/CALim Siew Tin 20050/CALim Wei Khoe 20324/CANg Phui Chan 20389/CANg Yong Wah 20384/CAOng Saik Ching 20336/CAOng Su Koon 20320/CAPeh Tien Wen 20230/CATang Ying Hoe 20187/CATeng Hooi Pheng 20102/CAThoe Shar Yan 20223/CASeberang JayaAzrie Bin Tamjis 20265/CASimpang AmpatLee Lin Lin 20314/CASungai NibongTan Kok Wei 20104/CASABAH

Kota KinabaluAlexander Clement Dominic 20400/CAChaw Ken Vun 20276/CAChong Kian Hiung 20045/CAHapsah @ Kalthom Binti 20037/CAS. MohammadPeter Lee Pui Tet 20112/CATan Chi Siong 20084/CAYong Sun Sun 20261/CAYusof Bin Wahab 20391/CALabuan, W.PSony Bin Haroun @ Haron 20183/CASandakanLena Lim Chai Foon 20152/CASARAWAK

BintuluHasiah Binti Haji Morsidi 20393/CAMckevin A/K Toni 20149/CAKapitSharizon Bin Salleh 20189/CAKuchingDamien Lee Iung Yau 20063/CAHii Yii Huong 20155/CAJohny Anak Percy 20372/CALai Mung Kee 20116/CALow Lee Chin 20086/CAMohamad Nor Topek Bin Julaihi 20312/CANelson Ong Wei Pang 20185/CANgu Hie Hie 20049/CARita Teng Hie Yieng 20410/CAShamsul Anuar Bin Ahamad Ibrahim 20313/CASia Siew Yin 20100/CATay Tsai Hung 20239/CATing Mee Ming 20048/CAWong Eng Hui 20411/CA

Wong Kieng Chang 20222/CAMiriChai Foong Ngan 20339/CAFam Siew Yun 20311/CAPaul Ting Ing Ming 20137/CASarikeiSaripudin Bin Kanda 20145/CASibuCheung Nguk Ping 20147/CALoh Kung Ee 20062/CASELANGOR DARUL EHSAN

AmpangKwa Koon Yee 20280/CALim Yeng Hong 20295/CANorhaslina Binti Muhamad 20267/CARahamathbi Binti Abdul Suban 20347/CAYap Miew Kiong 20304/CAZatika Izati Binti Puade 20353/CABandar Baru BangiNik Azlan Bin Nik Abdul Aziz 20291/CANor Asikin Bt Abdul Hasib 20302/CAShamsul Kamal Bin Abdul Aziz 20198/CABandar Putra PermaiYusniza Bt Mohamed Yusoff 20133/CABatu 9, CherasHaliza Binti Hashim 20131/CABatu CavesChin Yien-Ping 20263/CAIshak Bin Mohd Ariffin 20257/CAKho Wooi Leng 20082/CARosdi Bin Nordin 20253/CARosman Bin Nordin 20326/CABeranangLoo Sat Fong 20287/CACherasAzlan Bin Abu Bakar 20292/CAGhazali Bin Mohd Yahya 20272/CAMohd Azraai Bin Md Aznan 20399/CAMohd Shuhaimi Bin Sukor 20380/CACyberjayaMohd Asri Bin Yusof 20199/CAKajangAida Zahara Binti Ahmad 20123/CALenny Marlina Binti Mustapah 20332/CALeong Tek Kwee 20035/CAMalik Faisal Bin Faidz 20138/CASiew Han Ngee 20139/CAKelana JayaLow May-Teng 20383/CAKepongWong See Ken 20246/CAKlangChay Siew Lan 20405/CAChoong Nai Kang 20308/CAFong Ah Choy 20111/CAJoel Elizer A/L D.K. Jeyaraj 20360/CALee Kuai Ling 20331/CALee Woan Chiou 20307/CALim Ee Seong 20097/CANg Kay Imm 20196/CANur Diana Binti Abdul SAMad 20108/CAOng Chee Ting 20096/CAResa Lee Chee Leng 20079/CASoh Peng NAM 20209/CATan Yeen Meng 20279/CATee Chew Yen 20330/CA


RawangAhmad Mazuki Bin Ahmad Bokhari 20275/CALoo Chee Chou 20298/CAWong Yoke Foo 20200/CASeri KembanganBadrul Hisham Bin Mohd Yusoff 20193/CAShah AlamAhmad Zakine Bin Aziz 20032/CAJalaluddin Bin Mustafa 20115/CAKhairul Azizan Bin Ahmad 20143/CALee Suk Mei 20401/CALim Wai Liang 20242/CALoh Saw Hoon 20221/CANoor Hisam Bin 20051/CAKamarodzaman @ GhaniNor Aizam Binti Salip 20224/CARien Hashim 20081/CASiti Saadah Binti Yahya 20099/CATan Mei Ling 20387/CAYang Rafidah Bt Ali 20181/CAYap Cay Lee 20254/CASubang JayaChoong Hon Chow 20075/CACynthia Thien Vui Kyun 20296/CAFairuz Binti Fadzil 20151/CALena Beh Beng Ewe 20303/CALeong Ken Phin 20068/CANg Kit Cheong 20358/CATeo Eva 20369/CAViswanathan A/L Subramaniam 20342/CAZarina Binti Markam 20171/CASungai BulohPeh Yean San 20248/CAUEP Subang JayaSwee Kai Han 20088/CATERENGGANU DARUL IMAN

KemamanRohayati Binti Abd Rashid 20335/CAWILAYAH PERSEKUTUAN

Kuala LumpurAhmad Zaki Bin Mahmood 20190/CAAng Boon Hang 20407/CAAngeline A/P Antony Leo Nathan 20160/CAAnnie Yap Pei Lan 20154/CAAzaharin Bin Ahmad 20414/CAAzleen Binti Mat Zip 20055/CAAzlina Binti Yusof 20078/CAAzmin Bin Kamaludin 20218/CAAzura Binti Hanafiah 20210/CAChan Pei Li 20321/CAChang Poh Sheng 20067/CAChen Pei Yan 20113/CAChew Kwong Hua 20415/CAChoh Wai Mun 20327/CAChong Sing Yee 20386/CAChong Teck Chuan 20203/CAChoo Wai Mun 20140/CAChoong Lai Foong 20328/CAChua Siong Yew 20177/CADenis Teo Chee Khoon 20323/CAFoong Kok Chong 20202/CAFrances Choong Li Yen 20109/CAGuna Segaran A/L Alagappan 20319/CAHaiu Pei See 20195/CAHasifah Fauziah Binti Ishak 20309/CAHaslina Binti Ramley 20194/CA

Hatimah Bt Hamid 20390/CAHayati Aman Binti Hashim 20107/CAHew Cun Kiong 20249/CAHo Kwok Piow 20289/CAHow Dai Koan 20072/CAHow Lian Yeong 20385/CAHow Yong Wai Hoong 20087/CAHusni Bin Mohammed Hassan 20128/CAIsaac Daniel 20362/CAJaginder Singh A/L 20245/CAGurcharan SinghJamaluddin Bin Abu Samah 20266/CAKee Thuan Meng 20167/CAKhamizah Binti Abdul Aziz 20396/CAKho Wai Kay 20220/CAKok Kee Chin 20351/CAKok Wei Chin 20350/CAKow Chee Seng 20127/CALai Foong Ling 20329/CALai Yit Loong 20282/CALau Yein Chuan 20348/CALee Leng Tat 20286/CALeena A/P Tharmakulasingam 20395/CALeow Hoi Kheng 20077/CALetchumy @ Sharmini 20071/CAA/P RamalingamLiew Onn Sion 20315/CALiew Yap Peng 20093/CALim Bun Hwa 20376/CALim Fui Sun 20379/CALim Sey Hock 20053/CALim Thai Hui 20412/CALim Yong Hwa 20241/CALoo Soo Chan 20180/CALoo Tuck Choy 20236/CALooi Yuen Pheng 20208/CALow Wei Hsing 20054/CALow Yee Wah 20356/CAMaizatul Khairumie Bt Mansorudin 20403/CAMasita Binti Mohamad Jalil 20333/CAMastura Binti Lockman 20281/CAMohd Amran Bin Abd Ghani 20341/CAMohd Farez Bin Mohd Khir 20264/CAMohd Hilmi Bin Isa 20142/CAMohd Nazir Bin Abu Hassan 20285/CAMunira Binti Mohamad Ariff 20135/CANg Chin Meng 20173/CANorhaisinah Binti Asmoni 20375/CANorhazilah Binti Abdul Hamid 20124/CANorshafizah Binti Hanafi 20297/CAOng Chin Peng 20317/CAOng Hui Peng 20207/CAOw Weng Hoong 20234/CARaja Azlan Shah Bin Raja Muhammad 20216/CARaymond Cheong Chee Wai 20056/CASam Bah Cheau 20244/CASaw Yew Yew 20378/CASelvakumaran A/L Lokanathan 20089/CASin Phooi Cheng 20215/CASiow Sook Ferhin 20357/CASiti Rafidah Bt Jamaludin 20290/CASoo Keng Wah 20258/CASumitra Nair A/P Kannan Kutty 20174/CASyed Muhammad Faisal 20217/CABin Said MustafaTai Ewe Chin 20175/CA

Tan Chooi Hoon 20349/CATan Huey Chyi 20344/CATan Kee Lok 20044/CATan Kim Hor 20252/CATan Seok Hoon 20370/CATan Su Yung 20129/CATeo Kheng Swee 20166/CATeo Ling Lee 20064/CATham Yee Ping 20141/CATun Noor Shahya Bt 20284/CATun Abdul RazakVoon Min Kean 20170/CAWahidah Binti Sakaria 20061/CAWong Hung Boon 20256/CAWong Kian Leon 20325/CAWong Lai Siew 20402/CAWong Ngiap Lim 20163/CAYap Mee Ling 20381/CAYeo I-May 20047/CALabuanClament Chua Wee Voon 20366/CAPutrajayaMurniyati Bt Ramli 20334/CANawiah Binti Mohet 20346/CASuhaila Binti Eleas 20368/CASINGAPORE

Chau Mau Yeap 20042/CAChuo Hung 20121/CALau Kiew Fong 20122/CALim Kok Chong 20238/CALincoln Lau Boon Thong 20318/CAPang Hui Peng 20182/CATeo Thiam Beng 20191/CAYap Teck Seng 20205/CA

READMISSIONLee Tien Chye, Spencer 803Annapillai Benedict 929Arunachalam s/o Ponnambalam 1155Muahamad Sanuri Bin Sarijan 4611Yap Wee Hin 5341Mat Nazri Bin Harmine 5858Chung Yit Chong 6448Teo Kian Beng 6675Tan Seet Choo 7089Choo Kok Poon 7832Gurjeet Singh 8096Tan Kok Foo 8679Chin Kok Siong 8796Mah Kheng Hoe, Rachael 8924Hue Kok Kee 9717Mahmmud Bin Kindang 9968Malik Parvez Ahmad 10297Vanaja A/p Jayaraman 10468Ooi Sek Min 11033Jayasangaran Dhanapal 11658Lim Boon Aik 12705Ahmad Ikbal Tarmiji 13175Koh Boon Cheng 13324Wong Yeet Sin 16578

RECLASSIFICATIONFrom AM to CA

Arfah Binti Salleh 17739

RESIGNATIONCheong Wai Kuan, Stephanie 9977


Calendar of Professional Education Programmes TOWN DATE PLEASE TICK

TITLE VENUE CPE HOURS✔

Kuala

Lumpur

and

Selangor

Penang

Johor

Bahru

K Kinabalu

Kuching

6-7 Jan 036-9 Jan8-9 Jan9 Jan10 Jan13 Jan13-14 Jan14-15 Jan15-16 Jan18 Jan21 & 23 Jan20-21 Jan20-23 Jan22-23 Jan23-24 Jan24 Jan24 Jan24 Jan25 Jan

27-29 Jan30-31 Jan15 Feb

18 Feb19-20 Feb25 Feb1 March

6 March11 March15 March

18 March25 March29 March1 April8 April12 April26 April9-10 Jan 0323 Jan 036-7 Jan 0324 Jan 0319-20 Feb21 Feb 0317-18 Feb20 Feb 03

MCSBMCSBPrince HotelMCSBMCSBMCSBMCSBPan Pacific KLNovotel CenturyNovotel CenturyMCSB KLMCSB KLMCSB KLMCSB KLMCSB KLMCSB KLMCSB KLMCSB KLNovotel Century

MCSB KLMCSB KLNovotel Century

PJ HiltonPJ HiltonPJ HiltonNovotel Century

PJ HiltonPJ HiltonNovotel Century

PJ HiltonPJ HiltonNovotel CenturyPJ HiltonPJ HiltonNovotel CenturyNovotel CenturyCity BayviewShangri La HotelHyatt Regency, JBHyatt Regency, JBShangri-La Tanjung AruShangri-La Tanjung AruHoliday InnHoliday Inn

163216888

1616164

16163216168884

24164

81684

884

8848844

168

168

168

168

Yes! I would like to know more about the programmes ticked above.Please send the information to :

Contact Person :

Organisation :

Address :

Tel : Fax :

FOR FURTHER INFORMATION PLEASE MAIL, FAX OR E-MAIL TO :

Malaysian Institute of AccountantsDewan Akauntan, 2 Jalan Tun Sambanthan 3Brickfields, 50470 Kuala LumpurTel : 03- 2279 9200 Fax : 03- 2273 5167e-mail : [email protected] : http://www.mia.org.my

1967



Microsoft Word 2000 (Basic/Intermediate)Microsoft Visual Basic 6.0 Programming (Basic/Intermediate)Microsoft Excel 2000 (Basic/Intermediate)Developing Enterprise Risk Management FrameworkMicrosoft PowerPoint 2000 (Basic/Intermediate)Financial Analysis with Microsoft ExcelMicrosoft Access 2000 (Basic/Intermediate)Automating Tasks with Microsoft ExcelInventory Management for Financial & Non Warehouse Managers 1/2-DayModular Course — The Self Assessment System for all Categories of TaxpayersIntroduction to Corporate Taxation for New Recruits/Tax AssistantsMicrosoft Word 2000 (Advanced)PC Configuration Troubleshooting and Data RecoveryMicrosoft Excel 2000 (Advanced)Knowing Your PC: A Giant Step Ahead for YouMicrosoft PowerPoint 2000 (Advanced)Introduction to NetworkingIntroduction to Internet1/2-Day Modular Course — Preparing a Correct Tax Computation underthe Self Assessment SystemMicrosoft Access 2000 (Advanced)Designing Web Pages with MS FrontPage1/2-Day Modular Course — Getting Your Gross Income Correct &Differences Between Accounting Practice & Tax PrinciplesNew Form C & Form R under Self Assessment SystemReport Writing SkillsAdvanced Assessable Income & Deductible Expenses1/2-Day Modular Course — Maximising Tax Deductions includingPrepayments & AccrualsAdvanced Capital AllowancesWithholding Tax1/2-Day Modular Course — Maximising Deductions for CapitalExpenditure & Capital AllowancesReal Property Gains Tax (RPGT)Tax Incentives1/2-Day Modular Course — Tax Incentives - Part 1Corporate Tax Planning — BasicDouble Tax Agreement & Cross Border Transactions1/2-Day Modular Course — Tax Incentives - Part 11/2-Day Modular Course— Surviving a Field Audit & Tax InvestigationIntroduction to Corporate Taxation for New Recruits/Tax AssistantsDeveloping Enterprise Risk Management FrameworkIntroduction to Corporate Taxation for New Recruits/Tax AssistantsDeveloping Enterprise Risk Management FrameworkInventory Management for Financial and Non Warehouse ManagersDeveloping Enterprise Risk Management FrameworkInventory Management for Financial and Non Warehouse ManagersDeveloping Enterprise Risk Management Framework


M A A A N E W S

Incorporationand Aim

The Malaysian Assoc-iation of AccountingAdministrators (MAAA)was incorporated in 1990with limited liability

under Section 16(4) of the Companies Act, 1965in recognition of the two-tiered nature of theaccountancy profession. MAAA (previouslyknown as Malaysian Association of AccountingTechnicians) is a company sponsored by theMalaysian Institute of Accountants (MIA).

Main Objectives• To provide a qualification to be known as

Accounting Technicians/Administrators forpersons employed on duties customarilyundertaken by assistants to accountantsregistered with the MIA.

• To provide an organisation and membershipfor such persons who are desirous ofacquiring such qualification and persons whoare granted such qualification.

• To promote in the public interest the technicalcompetence of such persons engaged inpositions and performing the functions ofaccounting technicians/administrators.

Council Members (2002 Term)Elected MembersIzhar Abd Kahar (President)Koo Yew Fook, Allan (Vice-President)Cheah Foo SeongChin Wah YinKasim DarusLim Ah LeckLow Han Men, AricMahadevan s/o GengadaramMok Kam SengPanneer SelvamYM Raja Noorhana bt Raja HarunWong Chee KheongYong Yoon Kee

MIA Nominated MembersManjeet Singh s/o Santokh SinghAssoc. Prof. Dr. Nafsiah bt. MohamedAssoc. Prof Dr. S. Susela Devi

Secretariat OfficeMalaysian Association of Accounting AdministratorsDewan Akauntan, 2 Jalan Tun Sambanthan 3,Brickfields, 50470 Kuala Lumpur.Tel : 03-2279 9200 or Fax : 03-2274 1783e-mail : [email protected]

MALAYSIAN ASSOCIATIONOF ACCOUNTING ADMINISTRATORS

Editor for MAAA News : G. Mahadevan

MAAA AT A GLANCE

AN

T he Malaysian Association of Accounting Administrators (MAAA) has had afairly active year in 2002 as can be seen from this report. Among the activi-ties organised were members dialogues, workshops and courtesy visits. A

summary of these activities is listed below :

9 March 2002 One day workshop to develop a business plan for theMAAA Diploma in Accountancy.

25-29 March 2002 MAAA Council members served as members on theCommittee on Occupational Analysis for Accounting in-vited by the National Vocational Training Council(NVTC) of the Ministry of Human Resources.

18 May 2002 MAAA 12th AGM — Cheah Foo Seong was elected asa new Council member. Seventeen resolutions weretabled and passed by members.

24-29 June 2002 MAAA Council members attended the second commit-tee meeting on Occupational Analysis for Accountinginvited by the National Vocational Training Council(NVTC) of the Ministry of Human Resources.

31 August 2002 MAAA President, Izhar Abd Kahar was invited to be aspeaker at a seminar entitled Accountancy Students To-wards Professionalism organised by UiTM Dungun,Terengganu

17 August 2002 MAAA Members’ Dialogue/Membership Drive in KotaKinabalu, Sabah.

18 August 2002 MAAA Members’ Dialogue/Membership Drive inKuching, Sarawak.

27 September 2002 Dennis Adams, Deputy Chief Executive Officer of theNational Institute of Australia (NIA) and Gavan Ord,Technical Policy Manager of NIA paid a courtesy visiton the President and Council members of MAAA.

28 September 2002 MAAA submitted proposed examination syllabus to theExamination Board of the Ministry of Education to seekapproval to conduct examination.

Despite the above activities, the Council is of the view that more can be done bythe Association for its members. As such the Council looks forward to initiatingmany more interesting activities in the coming year with the continuous support ofmembers.

The Council wishes all members Selamat Hari Raya, Merry Christmas and aHappy New Year.

Documents

Untitled - Malaysian Institute of Accountants