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AUD 610: Audit and Assurance Services STATUTORY AND PROFESSIONAL RESPONSIBILITIES Prepared by : Azmiah Abdul Razak 1

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Page 1: Slide PLK-seminar 1 (Students)

AUD 610: Audit and Assurance Services

STATUTORY AND PROFESSIONAL RESPONSIBILITIES

Prepared by :

Azmiah Abdul Razak

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Page 2: Slide PLK-seminar 1 (Students)

AUD 610: Audit and Assurance Services

Auditors’ responsibilities are guided by legislations and professional by-laws...

The main documents supporting auditors in carrying their fiduciary duties in Malaysia are:

Companies Act 1965; and

MIA By-Laws (on professional ethics, conduct and practice) of the Malaysian Institute of Accountants.

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AUD 610: Audit and Assurance Services

Key provisions in Companies Act, 1965 guiding auditors to perform their duties.

In the Companies Act, 1965, several provisions relating to auditors’ duties and responsibilities are stated, namely:

• Qualification (Sec.8 and 9)

• Appointment, removal and resignation (Sec.172)

• Duties (Sec.174 (1) – (3))

• Power or rights of auditors (Sec.174 (4) – (9))

• Remuneration (Sec.172 (16))

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AUD 610: Audit and Assurance Services

QUALIFICATION – Sec.8 & 9, Companies Act 1965

• Under Sec.8 & 9, companies are required to appoint auditor that is qualified, having necessary independent, integrity and objectivity.

• Sec.8 states that companies have to appoint an approved auditor.

• What qualifies approved auditor?

Approved by the MoF to act as auditor.

Good character and competent to perform duties.

A professional accountancy qualification with adequate practical training and a MIA member (CA).

Audit firm that is registered with CCM - can be in the form of sole-prop or partnerships. 4

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AUD 610: Audit and Assurance Services

QUALIFICATION – Sec.8 & 9, Companies Act 1965

Subsequently, auditor must remain independent, integrity and objectivity in performing their duties. Hence, sec.9 (1) prohibits auditors to be appointed, if:

• He is not an approved auditor. • Indebted to the company for more than RM2,500 • He is an officer of the company (who works in the

company within the preceeding 12 months). • A shareholder or spouse being shareholder of a

corporation. • He maintains the register of members or the

register of holders of debentures of the company. (Please check related sections in Companies Act)

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AUD 610: Audit and Assurance Services

APPOINTMENT, REMOVAL & RESIGNATION Sec.172, Companies Act 1965

Appointment:

• Sec.172(1): Power of Directors to appoint auditor before 1st general meeting, otherwise members entitled to appoint in general meeting.

• Sec.172(2): Company shall appoint auditor at each AGM. Term of office starts from appointment at present AGM until conclusion of next AGM. Company must at every AGM appoint and re-appoint auditor.

• Sec.172(3): Power to Directors to appoint to fill casual vacancy (termination of business, winding up), exception to resignation/ dismissal.

• Sec.172 (10): Power to CCM to appoint auditor after dismissal/ removal if company does not appoint new auditor on application in writing of member of the company.

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AUD 610: Audit and Assurance Services

APPOINTMENT, REMOVAL & RESIGNATION Sec.172, Companies Act 1965

Dismissal :

Sec.172(4): To be done at general meeting of which special notice of ordinary resolution to remove auditor is issued.

Sec.172(5): On receipt of special notice by company, it must send a copy of special notice to present auditor, CCM. Auditor may within 7 days of receiving special notice make representation in writing to company request representation be sent by company to all members entitled to receive notice of general meeting.

Sec.172 (8 &10): Company shall inform in writing of removal of auditor to the CCM. The power to CCM to appoint auditor after the dismissal/removal of auditor if the company does not appoint another auditor.

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AUD 610: Audit and Assurance Services

APPOINTMENT, REMOVAL & RESIGNATION Sec.172, Companies Act 1965

Resignation :

• Sec.172 (14): Auditor may resign if he is not the sole auditor of company, at general meeting of company.

• Sec.172 (15): Auditor shall give notice of resignation to Directors. The Directors will arrange for new appointment and resignation only effective on appointment of another auditor.

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AUD 610: Audit and Assurance Services

APPOINTMENT, REMOVAL & RESIGNATION Sec.172, Companies Act 1965

172A: Where an auditor has made written representations to the company pursuant to subsection 172(5) or if an auditor gives notice to the directors of the company of his desire to resign as auditor of the company pursuant to subsection 172(15), he shall within seven days of the submission of the written representations or the submission of his notice of resignation, submit a copy of the written representations or his written explanation of his resignation, to the Registrar and, to the Stock Exchange where the company is a company whose shares or debentures are listed on the official list of a Stock Exchange as defined in the Securities Industry Act 1983.”

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AUD 610: Audit and Assurance Services

DUTIES & POWERS OF AUDITORS Sec.174, Companies Act 1965

Duties :

• Sec.174 (1): To report to the members on the accounts and the company’s accounting and other records relating to accounts in general meeting.

• Sec.174 (2): To express opinion in his report:

True and fair view of accounts of the company and the consolidated accounts.

Books, records, register properly kept Disclose names of subsidiaries he is not auditor Duty to report defects, irregularities in accounts

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AUD 610: Audit and Assurance Services

DUTIES & POWERS OF AUDITORS Sec.174, Companies Act 1965

Duties :

• To ensure all relevant information and explanation obtained

• Ensure proper accounting records are kept • Ensure returns received from branch adequate • Ensure consolidation procedures, methods used

by holding, subsidiary appropriate • Attend general meeting, to receive all notice

relating general meeting which concern auditor • Report particulars of deficiency, failure and

shortcoming.

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AUD 610: Audit and Assurance Services

DUTIES & POWERS OF AUDITORS Sec.174, Companies Act 1965

Power or Rights of Auditors : Sec.174 (4) – (9)

• To access books and records at all reasonable times,

• To gain necessary information and explanation when performing his duties,

• To attend general meeting, to receive all notice relating general meeting which concern auditor,

• To make written representation when company dismiss him as auditor,

• To address shareholders at AGM,

• To attach Auditor’s Report to Annual Report, to be read in general meeting.

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AUD 610: Audit and Assurance Services

For the purpose of subsection (8A) : (a) a company is presumed, unless the contrary is

established, to be controlled by a public company if the public company is entitled to exercise or control the exercise of not less than fifteen per centum of votes attached to the voting shares of the company; and (b) “a serious offence involving fraud or dishonesty” means an offence that is punishable by imprisonment for a term that is not less than two years or the value of the assets derived or likely to be derived or any, loss suffered by the company, member or debenture holder from the commission of such an offence exceeds two hundred and fifty thousand ringgit and includes offences under sections 364, 364A, 366 and 368.”.

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AUD 610: Audit and Assurance Services

DUTIES & POWERS OF AUDITORS Sec.174, Companies Act 1965

Section 174(8A) – Amendment 2007 :

If an auditor in the course of performance of his duties as an auditor of a public company or a company controlled by a public company, is of the opinion that a serious offence involving fraud or dishonesty is being or has been committed against the company or this Act by officers of the company, he shall forthwith report the matter in writing to the Registrar.

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AUD 610: Audit and Assurance Services

DUTIES & POWERS OF AUDITORS Sec.174, Companies Act 1965

Section 172 (16) : Remunerations The fees and expenses of an auditor of a company:

• If auditor appointed in general meeting – shall be fixed by the company at general meeting, or if so authorise by members, by the Directors.

• If auditor appointed by Directors or by CCM – shall be fixed

by the Directors or CCM respectively.

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AUD 610: Audit and Assurance Services

• The Revised By-Laws (On Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants are issued by the Council of the Malaysian Institute of Accountants come into effect on 1 January 2011

• All professional bodies impose a code of conduct on their members.

• This code of ethics provides a set of principles and rules that offer guidance to members.

• Ethics – set of moral principles, values or acceptable behaviour

• In Malaysia, MIA issued the By-Laws on professional conduct and ethics (called “MIA By-Law [on Professional Conduct and Ethics]”)

Provide standard of conduct in daily professional life

Important for gaining public confidence in auditors’ services

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MIA By-Laws

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AUD 610: Audit and Assurance Services

MIA By-Laws

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Part I By Laws on

Professional Ethics

Part II By Laws on Professional

Conduct & Practice

(A) General Application

[Sec.100 – 150]

(B) Professional Accountants

on Public Practice [Sec. 200 - 291]

(C) Professional Accountants

in Business [Sec.300 - 350]

(A) All Professional

Accountants [Sec.400 – 420]

(B) Members in Public

Practice [Sec.500 – 550]

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AUD 610: Audit and Assurance Services

PROFESSIONAL ETHICS PART A – GENERAL APPLICATION

• 100 – Fundamental Principles & Conceptual Framework • 100.1 Fundamental Principles • 100.2 Conceptual Framework Approach • 100.8 Threats and Safeguards • 100.13 Ethical Conflict

• 110 – Integrity • 120 – Objectivity • 130 – Professional Competence & Due Care • 140 – Confidentiality • 150 – Professional Behaviour

150.1 Professional Behaviour 150.2 Advertising, Marketing and Promotions

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AUD 610: Audit and Assurance Services

MIA By-Law Part A - General Application Fundamental Principles & Conceptual Framework

• All Prof. Accountant (accountant) shall comply with fundamental principles (integrity, objectivity, professional competence & due care, confidentiality & prof. behavior) when performing their duties.

• In certain circumstances, there will be exposure of specific threats in the nature of engagement/work assignment which require different mechanism of safeguards. By-Law Conceptual Framework requires accountant to identify, evaluate & address threats to comply with fundamental principles. This conceptual framework approach will assist accountant to comply their ethical requirement in meeting their responsibilities to act in public interest.

• Threats can occur in broad range of circumstances & relationships. Whether the threats can be compromise or not, it gives effect to accountant fundamental principles. Safeguards are actions/other measures that may eliminate/reduce threats to an acceptable level.

• Ethical conflict resolution arise when a accountant may be required to resolve a conflict in complying with the fundamental principles.

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AUD 610: Audit and Assurance Services

MIA By-Law (Professional Ethics)

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INTEGRITY Sec.110

Straight forward/Honest

in all prof. & business

relationship

Fair dealings/ Truthfulness

Avoid prepare/attest/associate

with fraud or misleading information/

documentation

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AUD 610: Audit and Assurance Services

MIA By-Law (Professional Ethics)

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OBJECTIVITY Sec.120

No bias

Avoid conflict of

interest Not to

compromise with professional or

business judgments due to undue influence

of others.

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AUD 610: Audit and Assurance Services

MIA By-Law (Professional Ethics)

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PROFESSIONAL COMPETENCE & DUE CARE

Sec.130

Maintain prof. knowledge &

skills

Attain & maintain

competency Act diligently according to

applicable prof. & technical standards

Due care & diligent at

all time

Appropriate training &

supervision to subordinates

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AUD 610: Audit and Assurance Services

MIA By-Law (Professional Ethics)

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CONFIDENTIALITY Sec.140

Not to disclose info to 3rd parties

without proper & specific authority

Continues confidentiality until

after end of business relationship

Not use info for self, personal or

3rd parties Disclosure allow IF:

- Permitted by law - Authorise by clients - Prof.duty/right to disclose

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AUD 610: Audit and Assurance Services

MIA By-Law (Professional Ethics)

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PROFESSIONAL BEHAVIOUR

Sec.150

Comply with relevant

laws & rules

Prof. dignified & good taste

Avoid any action that

discredits the profession

Professional behaviour

Advertising, marketing, promotions

Relevant & applicable legislations

Honest & truthful offer/

services

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AUD 610: Audit and Assurance Services

PROFESSIONAL ETHICS PART B – PROFESSIONAL ACCOUNTANTS ON PUBLIC PRACTICE

• 200 – Threats & Safeguards • 210 – Professional Appointment

Client Acceptance Engagement Acceptance Change of Professional

Appointment • 220 – Conflicts of Interest • 230 – Second Opinions • 240 – Fees & Remuneration

Contingent Fees Referrals Commission Tenders

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• 250 – Marketing Public Practice

Services

Advertising

Publicity

Solicitation

• 260 – Gifts & Hospitality

• 270 – Custody of Client Assets

• 280 – Objectivity All Services

• 290 – Independence (Audit &

Review Engagement)

Indep. in Mind

Indep. in Appearance

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AUD 610: Audit and Assurance Services

200 – It describe how conceptual framework in Part A applies to certain situations to accountant in public practice. They shall not engage in any business, occupation or activity that will weaken integrity, objectivity or good reputation of the profession.

Threats & Safeguards

• Threats can occur in broad range of circumstances & relationships. Whether the threats can be compromise or not, it gives effect to accountant fundamental principles.

• Threats fall into one or more categories : self-interest, self-review, advocacy, familiarity and intimidation.

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PROFESSIONAL ETHICS PART B – PROFESSIONAL ACCOUNTANTS ON PUBLIC PRACTICE

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AUD 610: Audit and Assurance Services

THREATS • Self-interest threat – the threat that a financial or other interest will

inappropriately influence the accountant judgement or behaviour; (E.g: Having a financial interest in a client’s business)

• Self-review threat – the threat that an accountant will not appropriately evaluate the results of a previous judgment made or service performed by the accountant, or by another individual within the firm or employing organization, on which the accountant will rely when forming a judgement as part of providing a current service; (E.g: Auditing financial statements prepared by the firm)

• Advocacy threat – the threat that an accountant will promote a client’s or employer’s position to the point that the accountant objectivity is compromised; (E.g: Dealing/being a promoter of shares or other securities in a client)

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PROFESSIONAL ETHICS PART B – PROFESSIONAL ACCOUNTANTS ON PUBLIC PRACTICE

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AUD 610: Audit and Assurance Services

THREATS

• Familiarity threat – the threat that due to a long or close relationship with a client or employer, a accountant will be too sympathetic to their interests or too accepting of their work; (E.g: An audit team member having family at the client)

• Intimidation threat – the threat that a accountant will be deterred from acting objectively because of actual or perceived pressures, including attempts to exercise undue influence over the professional accountant; (E.g: Threats of replacing application accounting principles due to disagreement)

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PROFESSIONAL ETHICS PART B – PROFESSIONAL ACCOUNTANTS ON PUBLIC PRACTICE

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AUD 610: Audit and Assurance Services

SAFEGUARDS

• Safeguards are actions/other measures that may eliminate or reduce threats to an acceptable level.

• Two categories of safeguard with examples: Safeguards created by the profession, legislation or

regulation Safeguards within work environment

Firm-wide safeguards Engagement specific safeguards

• Safeguards within clients’ system & procedures : accountant can also rely on safeguards which client has implemented depending nature of work engagement.

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PROFESSIONAL ETHICS PART B – PROFESSIONAL ACCOUNTANTS ON PUBLIC PRACTICE

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AUD 610: Audit and Assurance Services

Safeguards are actions/other measures that may eliminate or reduce threats to an acceptable level.

• Two categories of safeguard with examples:

Safeguards created by the profession, legislation or regulation 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, communication or information produced by a professional accountant

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PROFESSIONAL ETHICS PART B – PROFESSIONAL ACCOUNTANTS ON PUBLIC PRACTICE

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AUD 610: Audit and Assurance Services

SAFEGUARDS

Safeguards within the work environment - firm wide Leadership of the firm that stress important of

fundamental principles & public interest

Policies & procedures –implement/monitor quality control for audit engagement

Documented policies – identify threats & safeguards

Using different partners/audit team in reporting lines

Timely communication within partners & prof. staff – appropriate education & training for audit policies/procedures/compliance

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PROFESSIONAL ETHICS PART B – PROFESSIONAL ACCOUNTANTS ON PUBLIC PRACTICE

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AUD 610: Audit and Assurance Services

SAFEGUARDS

Safeguards within the work environment – engagement specific Involving an additional professional accountant to review the work

done or otherwise advise as necessary

Consulting an independent third party, such as a committee of independent directors, a professional regulatory body or another professional accountant (MIA, AG, MOF, SC, BNM, etc)

Rotating senior personnel

Discussing ethical issues with those in charge of client governance

Disclosing to those charged with governance the nature of services provided and extent of fees charged

Involving another firm to perform or re-perform part of the engagement

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PROFESSIONAL ETHICS PART B – PROFESSIONAL ACCOUNTANTS ON PUBLIC PRACTICE

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AUD 610: Audit and Assurance Services

SAFEGUARDS within clients’ system & procedures:

Accountant can also rely on safeguards which client has implemented depending nature of work engagement, eg:

• The client requires persons other than management to ratify or approve the appointment of a firm to perform an engagement.

• The client has competent employees with experience and seniority to make managerial decisions.

• The client has implemented internal procedures that ensure objective choices in commissioning non-assurance engagements.

• The client has a corporate governance structure that provides appropriate oversight and communications regarding the firm’s services.

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PROFESSIONAL ETHICS PART B – PROFESSIONAL ACCOUNTANTS ON PUBLIC PRACTICE

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AUD 610: Audit and Assurance Services

PROFESSIONAL ETHICS PART B – PROFESSIONAL ACCOUNTANTS ON PUBLIC PRACTICE

210 – PROFESSIONAL APPOINTMENT

• Client Acceptance

Understand client business-avoid illegal issues

Check potential threats before accepting new client - integrity

Evaluate significance threats & apply safeguards.

Impossible to eliminate/reduce threats – decline engagement

Review acceptance decision for recurring clients.

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AUD 610: Audit and Assurance Services

PROFESSIONAL ETHICS PART B – PROFESSIONAL ACCOUNTANTS ON PUBLIC PRACTICE

210 – PROFESSIONAL APPOINTMENT • Engagement Acceptance Accept services that accountant competent to

perform – professional behaviour & due care

Evaluate threats & apply safeguards, if any. Eliminate/reduce threats to an acceptable level.

Determine the reliability on work of expert if require assistance from them based on the expertise, reputation, professionalism, resources & ethical standards.

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AUD 610: Audit and Assurance Services

PROFESSIONAL ETHICS PART B – PROFESSIONAL ACCOUNTANTS ON PUBLIC PRACTICE

210 – PROFESSIONAL APPOINTMENT • Change of Professional Appointment

If require replacement – communicate with existing accountant: Acquire facts about client business. Obtain reasons why they refuse to engage/continue/accept the

engagement Evaluate significant threats & apply safeguards

If existing accountant is bound for confidentiality – write in to potential client for permission to discuss with existing accountant. If permission is refused – propose accountant shall decline the

appointment. If permission is obtained - the existing accountant shall comply with

relevant regulations to communicate with propose accountant - honest

If existing accountant refuse to communicate, propose accountant need to obtain information for possible threats from third party inquiries such as senior management or those charged of client’s governance. 36

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AUD 610: Audit and Assurance Services

PROFESSIONAL ETHICS PART B – PROFESSIONAL ACCOUNTANTS ON PUBLIC PRACTICE

220 – CONFLICTS OF INTEREST

• Accountant should take reasonable steps to identify circumstances which could lead to conflicts of interest – threats to objectivity & confidentiality.

• Eg. Conflicts of interest:

Compete directly with client’s business

JV or personal arrangement with client’s competitor

Client’s business in conflict/dispute in transactions

• If conflict of interest poses more than one threat & fundamental principles & cannot be eliminate to an acceptable level, accountant shall not accept engagement or resign.

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AUD 610: Audit and Assurance Services

PROFESSIONAL ETHICS PART B – PROFESSIONAL ACCOUNTANTS ON PUBLIC PRACTICE

230 – SECOND OPINIONS • Situations where an accountant is asked to provide a second opinion (on the

application of accounting, auditing, reporting or other standards or principles) to specific circumstances/transactions by/on behalf of a company/entity that is not an existing client.

• May create threats if second opinion is not based on the same level of facts that were made available to the existing accountant /is based on inadequate evidence.

• The existence and significance of any threat will depend on the circumstances of the request and all the other available facts and assumptions relevant to the expression of a professional judgment. Accountant shall evaluate significant threats when asked to provide such opinion. Apply safeguards when necessary to eliminate them or reduce them to an acceptable level.

• Seek client permission to contact the existing accountant - describe limitations of opinion to client and provide existing accountant with copy of opinion.

• If the client does not permit communication with existing accountant - to consider whether all circumstances takes into account.

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AUD 610: Audit and Assurance Services

PROFESSIONAL ETHICS PART B – PROFESSIONAL ACCOUNTANTS ON PUBLIC PRACTICE

240 – FEES & REMUNERATION

• Fees charged for assurance engagement should be a fair to reflect amount of work performed base on:

Skill and knowledge required for the work involved.

Level of training and experience on the assignment

Time frame of work.

Work of responsibility and urgency the work.

• No member shall mislead his client by charging unrealistically low fee resulting compromised (jeopardize) professional standards/quality

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AUD 610: Audit and Assurance Services

PROFESSIONAL ETHICS PART B – PROFESSIONAL ACCOUNTANTS ON PUBLIC PRACTICE

240 – FEES & REMUNERATION Contingent fees

• Not allow for assurance services, but allow for certain types of non-assurance services.

Referral fees or Commissions

• Accepting and paying referral fees or commissions may give rise to self interest threats to objectivity and professional competence & due care.

• Accountants not allowed to accept or pay referral fees or commissions unless acceptable safeguards can be put in place.

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AUD 610: Audit and Assurance Services

PROFESSIONAL ETHICS PART B – PROFESSIONAL ACCOUNTANTS ON PUBLIC PRACTICE

250 – MARKETING PUBLIC PRACTICE SERVICE Advertising, Publicity and Solicitation (APS) • Advertising is the communication to the public of facts about

a professional account with a view of procuring profession business.

• Publicity is the communication to the public of facts about a professional accountant.

• Advertising and Publicity use of various media such as magazines, radio to communicate favourable information about the good and service of the firm.

• Solicitation can be defined as various means that accounting firms use to engage new clients other than accepting new clients that approach the firm. Examples include taking potential client to lunch to explain firm’s services.

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PROFESSIONAL ETHICS PART B – PROFESSIONAL ACCOUNTANTS ON PUBLIC PRACTICE

250 – MARKETING PUBLIC PRACTICE SERVICE Advertising or Marketing Services

• Threats may exist when the accountant obtain new work through advertising/ marketing if the promotion is inconsistent with principle. He shall be honest and truthful. If he is in doubt whether a proposed form of advertising/marketing is appropriate, request guidance from the Institute.

Tenders

• Threats may exist if the accountant enter in a public advertisement/tender submission for offering professional services. Accountant shall not respond to advertisements to tender for professional work unless he has established safeguards to eliminate the threats or reduce them to an acceptable level.

• If the appointment may need replacement of another accountant, state in the submission/tender before acceptance the need to contact existing accountant so that inquiries be made as to whether there are professional reasons why the appointment should not be accepted. If the submission/tender is successful, contact the existing accountant in accordance with provisions in Sec.210.

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AUD 610: Audit and Assurance Services

PROFESSIONAL ETHICS PART B – PROFESSIONAL ACCOUNTANTS ON PUBLIC PRACTICE

260 – GIFTS & HOSPITALITY • If gifts are accepted - Create self interest threat to

objectivity • If gifts are made in public - Create intimidation threat • Gifts can be accepted if made in the normal course of

business without specific intent to influence accountant’s decision making.

270 – CUSTODY OF CLIENT ASSETS

• Keep separately from personal or firm’s assets. • Use assets for purpose they are intended. • Be ready to account for the assets, income, dividends

generated. • Comply with all relevant laws and regulations.

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AUD 610: Audit and Assurance Services

PROFESSIONAL ETHICS PART B – PROFESSIONAL ACCOUNTANTS ON PUBLIC PRACTICE

290 – INDEPENDENCE (Audit & Review Engagement) • Professional independence: Attitude of mind characterized by integrity and

objective approach to professional work. Accountant should be & be seen to be free from any conflict of interest.

• Independence in audit means taking unbiased viewpoint in audit report, audit tests and evaluation of results. Audit Report will be using by users to make investment decisions.

• Two criteria for auditor to be & be seen as independence:

Independence in mind – The state of mind that permits the expression of a conclusion without being affected by influences that compromise professional judgement, thereby, allowing an individual to act with integrity, and exercise objectivity and professional scepticism.

Independence in appearance – The avoidance of facts and circumstances that are so significant that a reasonable and informed third party, having knowledge of all relevant information, including safeguards applied, would reasonably conclude a firm’s, or a member of the assurance team’s, integrity, objectivity or professional scepticism had been compromised.

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AUD 610: Audit and Assurance Services

PROFESSIONAL ETHICS PART B – PROFESSIONAL ACCOUNTANTS ON PUBLIC PRACTICE

290 – INDEPENDENCE (Audit & Review Engagement)

Application of independence to specific situation:

• Financial interests

• Loans & guarantees

• Business relationships

• Family & personal relationships

• Employment with an audit client

• Temporary staffs assignment

• Recent service with an audit client

• Serving as a Director or officer of an audit client

• Long association of senior personnel of an audit client

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AUD 610: Audit and Assurance Services

AREAS OF CONTROVERSY (the principal complaints)

• Multiple Services The provision of multiple services may affect independence, especially small audit

firm. For the clients, they are comfort to deal with only one person in charge and considered audit firm as “one stop centre” for them.

For small firm, the same staff will do the audit and accounting and therefore may affect the independence. Working paper should be well documented and should be reviewed by engagement partner.

For big firm may not have this problem as they would have different department for accounting and auditing.

• Low-balling The practice of charging special rate for auditing job and then obtain other services

known as low balling. This situation quite common and the independence here is questionable.

• Opinion Shopping Client get second opinion from the other auditors and sometimes put pressure on

current auditors. To solve, may be through communication between the two auditors.

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AUD 610: Audit and Assurance Services

PROFESSIONAL ETHICS PART C – PROFESSIONAL ACCOUNTANTS IN BUSINESS

• 300 – Introduction

• 310 – Potential Conflicts

• 320 – Preparation & Reporting of Information

• 330 – Acting with Sufficient Expertise

• 340 – Financial Interests

• 350 – Inducements

(Please refer MIA By-Law for details)

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AUD 610: Audit and Assurance Services

PROFESSIONAL CONDUCT & PRACTICE PART A – ALL PROFESSIONAL ACCOUNTANTS

• 400 – Induction Course Upon Admission

• 410 – Continuing Professional Education

• 420 – Description & Designatory Letters

• 430 – Public Practice Programme

• 440 – Attention to Correspondence & Enquiries

(Please refer MIA By-Law for details)

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AUD 610: Audit and Assurance Services

PROFESSIONAL CONDUCT & PRACTICE PART B – MEMBERS IN PUBLIC PRACTICE

• 500 – Method of Practice

• 510 – Professional Indemnity Insurance

• 520 – Death or Incapacity of a Sole Practitioner

• 530 – Client Documents & exercise of Lien

• 540 – Referrals

• 550 – Quality Assurance & Practice Review (Please refer MIA By-Law for details)

THE END

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