1. Disciplines on domestic regulation for the accountancy sector – Malaysias Perspective Nik Mohd Hasyudeen Yusoff Director, Professional Services Development Corporation Sdn. Bhd.

2. Discipline on Domestic Regulation for the Accountancy sector Scope –Accounting, Auditing and Bookkeeping (CPC 862) –Licensing Requirements and Procedures –Qualification Requirements and Procedures –Technical Standards Principles –Domestic Regulations are not more trade-restrictive than necessary to fulfil a legitimate objective –Transparent Competent authorities and contact points Scope of regulation Rationale for regulation Opportunity for comment Review procedures

3. Regulatory Framework for Accountancy Services in Malaysia Accountants Act 1967Regulates the accountancy profession in Malaysia through the Malaysian Institute of Accountants (www.mia.org.my) Companies Act 1965Regulates companies auditors and liquidators through the Companies Commission (www.ssm.com.my) Income Tax Act 1967Regulates the practice of taxation through the Inland Revenue Board (www.hasilnet.org.my)

4. Regulatory Framework for Accountancy Services in Malaysia Securities Industries Act 1983Regulates the audit of listed companies through the Securities Commission (www.sc.com.my) Cooperative Society Act 1993Regulates the audit of cooperative societies through the Cooperative Development Department (www.jpk.gov.my) Banking and Financial Institutions Act 1989 Regulates the audit of banks and financial institutions through the Central Bank of Malaysia (www.bnm.gov.my)

5. Practising accountancy in Malaysia Membership of MIA –Recognised local accountancy degrees, membership of recognised professional bodies or qualifying examination –3 years relevant work experience Practicing Certificate (PC) –Issued by MIA and annual fee applied –Members of MIA with relevant experience –Principal or only place of residence in Malaysia –Must have minimum professional indemnity insurance (RM 100,000) –Practice only through sole-proprietorships and partnerships except for taxation services –Name of firms must be approved by MIA and restricted to names of partners or former partners only –Holders of (PC) are entitled to provide public practice services except for auditing, liquidation, taxation and financial planning services where additional licences are required

6. Practising accountancy in Malaysia Approval as companies auditors –Licence issued by the Ministry of Finance –Holders of valid PC and passes an audit interview –Audit firms must be registered with Companies Commission Approval as cooperatives auditors –Approved companies auditors with relevant experience in auditing cooperative societies Approval as tax agents –Automatic approval for approved companies auditors –For holders of PC without audit licence, approval from the Ministry of Finance through the Inland Revenue Board is required, normally after passing the interview process

7. Views on implementing the disciplines on domestic regulation for the accountancy sector in Malaysia Domestic regulation is a sovereign right of Malaysia and the processes in the enactment of our laws and regulations should be respected Almost all of the laws and regulations applicable to the accountancy services in Malaysia are formulated –To address the domestic needs of the economy and ensure the quality of services and integrity of accountancy practices Residency requirements, not necessary citizens Method of practice – Corporate entities not allowed, only natural persons which would assume personal professional liabilities –To align our practice with global best practices, among the forthcoming changes would be: Whistle blowing provisions for auditors Anti Money Laundering requirements Independence rules for auditors

8. The Necessity Test –From whose perspective? Benchmark? –Specific needs of developing economy (structure, domestic issues) –Is there a single way of achieving a particular objective in regulating accountancy service sector? –The arbitrator in the event of dispute? Mutual Recognition Agreement –Enables two countries to recognised each others professional qualification or licensing structures by acknowledging the differences within them –Main enabler for market access –Accreditation process in recognising qualification and licensing critical and could be expensive Views on implementing the disciplines on domestic regulation for the accountancy sector in Malaysia

9. Most information on the practice of accountancy is available from the Malaysian Institute of Accountants (MIA) as the Institute has to provide the information to its own members MIA would normally be consulted by other regulatory authorities on proposed changes to laws and regulations which would affect accountancy practices MIA would then communicates to its members on proposed amendments, to the extent it is practical under any given circumstances (exposure draft, consultation through specialised working groups) The regulatory authorities may amend or introduce laws or regulations based on their own internal processes and authorities Certain procedures may have inherent limitation e.g. to obtain an audit licence in Malaysia, candidates have to go through interview process, which rely heavily on the integrity and opinion of the interviewers. Unsuccessful candidates are allowed to re-apply after certain specific period

10. Views on implementing the disciplines on domestic regulation for the accountancy sector in Malaysia Regulation vs. economic needs –International Financial Reporting Standards Only persuasive standards but lately accepted by many countries to be more attractive in attracting investment –Presence of Big-4 globally The big global accountancy firms have presence in most countries which practice different structures of domestic regulation Commercial presence need not necessarily through holding equity Control through licensing of Intellectual Property ownership: Branding, Methodology, Knowledge base

11. Views on implementing the disciplines on domestic regulation for the accountancy sector in Malaysia Convergence of standards in the accountancy sector –International Federation of Accountants membership obligations Education Professional qualification Ethics Quality Assurance of firms Auditing standards Accounting standards –Enforcement through Compliance Committee Assessment of level of compliance by member bodies would be performed on periodical basis

12. Issues on extending the accountancy disciplines to other professional service sectors Differences in scope of professional services in different jurisdiction –Certain functions are performed by different category of professions Multiple layers of competent authorities –National –State –Local authorities –No central regulatory authority Citizenship and residency requirements –Driven by professional liability issue and ethics issues –Require legal reform which would take a long time for certain countries Technical standards –Possibility of having uniform technical standards?