CODE OF ETHICS FOR THE PRACTISING ACCOUNTANTS

Transcription

1 CODE OF ETHICS FOR THE PRACTISING ACCOUNTANTS 1 A U G U S T / S E P T E M B E R

2 MIA - ETHICS STANDARDS BOARD 2 Rationale MIA set up ESB on 9 June An endeavor to supplement the Malaysian Government s thrust to promote greater ethics and integrity. Structure An INDEPENDENT standards setting body under the auspice of the Malaysian Institute of Accountants (MIA)

3 MIA - ETHICS STANDARDS BOARD 3 Composition Composition Remarks 1 Voting Chairman MIA Council 8 Voting Members Appointed by MIA s Nomination Committee Total 9 3 Non-voting Observers Current Composition Jabatan Audit Negara Federation of Public listed Companies Malaysia Bursa Malaysia

4 MIA - ETHICS STANDARDS BOARD 4 To adopt high quality professional and ethical standards for the accountancy profession To promote good ethical practices and global best practices for the usage of the accountancy profession in Malaysia

5 MIA - ETHICS STANDARDS BOARD Objectives 5 To serve the public interest by issuing professional and ethical standards which maximize the integrity of the accounting profession by setting out the highest principles of professional and ethical standards; To promote adherence to high quality professional and ethical standards and furtherance of international convergence of standards; To review exposure drafts issued by IFAC International Ethics Standards Board for Accountants and to submit comments thereon; To develop and issue guidance or clarification to assist with the implementation of the Institute s By-Laws; To support the effort of the Institute in promoting greater awareness and understanding of the Institute s By-Laws; To speak out on public interest issues where the professionalism and ethical conduct of accountants is required and relevant.

6 MIA - ETHICS STANDARDS BOARD 6 Immediate Strategy Adoption of the Code of Ethics for Professional Accountants developed in the public interest by International Ethics Standards Board for Accountants (IESBA) under International Federation of Accountants. (IFAC) By when?

7 HISTORY OF MIA BY-LAWS 7 Present By-Laws issued by Council of the MIA on 24 November 2006 and came into effect on 1 January 2007 July 2009, IESBA released the Revised Code which Strengthens the principles of Professional Independence Effective date: 1 January 2011 early adoption is encouraged MIA is in the midst of amending the By-Laws to incorporate the revised Code

8 OVERVIEW OF BY-LAWS The MIA By-Laws consist of 2 Parts: Part 1: By-Laws on Professional Ethics (Substantially based on the Code of Ethics for Professional Accountants issued by IESBA) Part 2: By-Laws on Professional Conduct and Practice Part 1: By-Laws on Professional Ethics consists of; A set of Fundamental Principles 8 Awareness of threats to complying with the principles which must be addressed by safeguards. Part B - Safeguards for Professional Accountants in Public Practise Part C - Safeguards for Professional Accountants in Business

9 BY - LAWS : PART 1A FUNDAMENTAL PRINCIPLES 9 A Professional Accountant shall comply with the following fundamental principles: INTEGRITY to be straightforward and honest in all professional and business relationships. OBJECTIVITY-to not allow bias, conflict of interest or undue influence of others to everride professional or business judgements PROFESSIONAL COMPETENCE AND DUE CARE-to maintain professional knowledge and skill at the level required to ensure that a client or employer receives competent professional services based on current developments in practice, legislation and techniques and act diligently and in accordance with applicable technical and professional standards

10 BY - LAWS : PART 1A FUNDAMENTAL PRINCIPLES 10 A Professional Accountant shall comply with the following fundamental principles: CONFIDENTIALITY to respect the confidentiality of information acquired as a result of professional and business relationships and, therefore, not disclose any such information to third parties without proper and specific authority, unless there is a legal or professional right or duty to disclose, nor use the Information for the personal advantage of the professional accountant or third parties. PROFESSIONAL BEHAVIOR to comply with relevant laws and regulations and avoid any action that discredits the profession.

11 BY - LAWS : PART 1A THREATS AND SAFEGUARDS Relationships or Circumstances may create a threat, which could compromise / be perceived to compromise compliance with the fundamental principles. Threats fall into one or more of the following categories: 11 Self Interest Threat Self Review Threat Advocacy Threat Familiarity Threat Intimidation Threat A financial or other interest which will inappropriately influence judgement or behavior Not appropriately evaluating the results of a previous judgement made or service performed by the professional accountant / another individual within the firm on which the accountant will rely when forming a judgement Promoting a client s or employer s position to the point that the professional accountant s objectivity is compromised A long / close relationship with a client / employer such that a professional accountant will be too sympathetic to their interest Deterrence from acting objectively because of actual / perceived pressures, including influence, over the professional accountant

12 BY - LAWS : PART 1A THREATS AND SAFEGUARDS 12 Safeguards - actions / acceptable level. measures that may eliminate threats or reduce them to an Safeguards include: Educational, training and experience requirements for entry into the profession, Continuing professional development requirements Corporate governance regulations Professional standards Professional or regulatory monitoring and disciplinary procedures External review by a legally empowered third party of the reports, returns, communications or information produced by a professional accountant Safeguards in the work environment

13 KEY AREAS OF REVISION / CHANGES 13 ESB / MIA is in the midst of amending the By-Laws to incorporate the revised Code Overall: A member body of IFAC or firm shall not apply less stringent standards than those stated in the Code. The current By-Laws are in some major respects ahead of the game

14 KEY AREAS OF REVISION / CHANGES 14 ASPECT SUMMARY SPECIFICS REMARKS Public Interest Entities (290.25) a) All listed entities; and b) Any entity ( i ) defined by regulation/legislation as a PIE or (ii) for which audit is required by regulation/ legislation to be conducted in compliance with the same independence requirements that apply to the audit of listed entities IFAC member bodies encouraged to determine whether to treat additional entities as PIEs Factors to be considered include: The nature of the business, such as the holding of assets in a fiduciary capacity for a large number of stakeholders. Examples may include financial institutions, such as banks and insurance companies, and funds; Size; and Number of employees PIEs already in current By - Laws

15 KEY AREAS OF REVISION / CHANGES 15 ASPECT SUMMARY SPECIFICS REMARKS Key Audit Partner The individual responsible for the quality control review and other audit partners on the engagement team Persons who are responsible for the key decisions or judgements on significant matters To be incorporated Non Assurance Additional blanket Prohibition on Already in current Services to PIEs prohibitions on providing non- assurance services to audit clients that are PIEs Accounting and bookkeeping services Tax calculations (except in emergency situations) Internal audit services Valuation services Design / Implementation of IT systems Recruiting services By-Laws. In addition, By- Laws prohibit temporary staff assignments.

16 KEY AREAS OF REVISION / CHANGES ASPECT SUMMARY SPECIFICS REMARKS Joining a PIE Mandatory Cooling Off period for Key Audit Partner /Managing Partner month Cooling off period before a Key Audit Partner or the firm s Managing Partner (or equivalent) joins an audit client that is a PIE as a Director or Officer, or an employee in a position to exert significant influence over the preparation of the accounting records or financial statements Current By-Laws have cooling off period of 2 years Audit Partner Rotation for PIE Key Audit Partner of a PIE required to rotate after seven years Shall not be a member of the engagement team or be Key Audit Partner for two years MIA By-Laws rotation policy is 5 years for PIEs. Client Mergers and Acquisitions ( ) New requirements and application guidance addressing situations where, as a result of a merger or acquisition, an entity becomes a related entity of an audit client. The firm is to evaluate previous and current interests with the related entity to assess the threats and take steps to safeguard these threats including termination To be incorporated

17 KEY AREAS OF REVISION / CHANGES 17 ASPECT SUMMARY SPECIFICS REMARKS Management Responsibilities ( ) The firm shall not assume a management responsibility for an audit client. The Code contains a description of activities that would, and would not, be generally regarded as a management responsibility ( ) and requires the firm to be satisfied regarding certain responsibilities that management must accept in order to avoid the risk of the firm assuming a management responsibility when providing nonassurance services to an audit client. To be incorporated

18 KEY AREAS OF REVISION / CHANGES 18 ASPECT SUMMARY SPECIFICS REMARKS Taxation Services ( ) New provisions relating to threats that are created by certain tax services. Introduces a prohibition on a service where the effectiveness of tax advice depends upon a particular accounting treatment or presentation and there is a reasonable doubt thereon, and the effect on the financial statements is material. To be incorporated Corporate Finance Services Enhanced discussion of nature of Corporate Finance Services, the threats created, factors to consider and potential safeguards. Introduces prohibition on a service where effectiveness of corporate finance advice depends upon a particular accounting treatment or presentation and there is a reasonable doubt thereon, and the effect on the financial statements is material. To be incorporated

19 KEY AREAS OF REVISION / CHANGES ASPECT SUMMARY SPECIFICS REMARKS Evaluation and Compensation Fees Relative Size ( ) Key Audit Partner not be evaluated/compensated based on that partner s success in selling non-assurance services to the partner s audit client. Not intended to prohibit normal profitsharing arrangements between partners of a firm. Requiring a pre-or post issuance review where total fees from a audit client exceeds 15% of the total fees of the firm for two consecutive years 19 One of the following safeguards applied: Pre-issuance review by a professional accountant who is not a member of the firm prior to the issuance of the audit opinion on the second year s financial statements; or Post-issuance review by professional accountant who is not a member of the firm before the issuance of the audit opinion on the third year s financial statements. To be incorporated MIA existing By-Laws already include the 15% threshold and if the fees from a client consecutively exceed 15% threshold, there is no option but to withdraw from the assurance engagement unlike.

20 KEY AREAS OF REVISION / CHANGES 20 ASPECT SUMMARY SPECIFICS REMARKS Contingency Fees ( ) Prohibition on contingent fees for a non- assurance service to an audit client if certain specified conditions are met Prohibition is where fees charged is material to the firm or where the fee is a function of a future judgement related to the audit of a material amount in the financial statements Already incorporated New/Revised Drafting Conventions Clarification and standardization of terms and streamlining text presentation Introduction of Section 291 also To be incorporated

21 21 BUT THEN, What is the different between ETHICS and INTERGRITY?

22 22 It is often said that personal integrity is the foundation for ethics Vice versa, good business ethics encourages integrity Hence, a person who has worked hard to develop a high standard of integrity will likely transfer these principal to their personal life

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