Group 3

Co. Act, MIA By-Law

Group Member
Nur Hadi Bin Mohd Rohman Mohamad Hakim Bin Arifadil Mohd Zulkarnain Bin Zulkifle Muhammad Shahrizan Bin Mohd Ngali

ACK Company approaches Mohamed, a chartered accountant, to undertake an engagement involving the implementation of an information technology (IT) and control systems. However , due to lack of experience and knowledge Mohamed recommends his friend Abdullah, who is also a chartered accountant, for the engagement. Abdullah is considering giving Mohamed a certain percentage of the fees earned. This situation violates the MIA By-Laws sec 240 (1) Any payment regarding commission of referral is strictly prohibited. It may create self-interest threats.

Teguh Bhd decides to offer Salmiah a chartered accountant, to prepare a working paper for a loan application. The working paper is required by the bank to assess the credit worthiness of its borrower. Salmiah will only be paid if the bank grant the loan to the company.

This situation violates the MIA By-Laws since contingent fee arrangement will give rise self interest. The fee upon the result of the contingent work will cause bias on auditor judgment.

In a management letter to one of its audit client, Zubir & Co warned the company that its computer systems lacked essential controls. The company decided to install a totally new computer systems and Zubir & Cos management consultancy department was appointed to design the system.

This situation violates the MIA By-Laws since the nonassurance services may rise the threats on independence . The system concerned as a significant part of the accounting systems where the self review threat may be occurred when the auditor involve in the designing the system that are used to generate information for the client.

Question 18 A (April 2010, Q1A)

OBJECTIVITY

- not to compromise because of bias, conflict of interest or the undue influence of others.
Situation may Impair objectivity Gift or entertainment Conflict of interest or prejudices Pressure being exerted

CONFIDENTIALITY S.140.1 The principle of confidentiality imposes an obligation on all professional accountants to refrain from: (a)Disclosing confidential information without proper and specific authority or unless there is a legal or professional right or duty to disclose (b)Using confidential information for their personal advantage or the advantage of third parties.

140.7 Exception: a) Disclosure is permitted by law and is authorized by the client or the employer b) Disclosure is required by law, for example: c) There is a professional duty or right to disclose, when not prohibited by law:

Should disclose but why?

MIA By-Laws (On professional conducts and ethics)
Integrity means adherence to moral and ethical principles, soundness of moral character, or simply honesty. In this kind of situation, I have discovered that directors have been inflating profits by using the Company to gain proceeds from illegal activities, and as auditors, I would to report my findings to the relevant authorities since the activities done by Company are against a rules.

 Professional behavior Imposes an obligation on professional accounts to comply with relevant laws and regulations and avoid any action that may bring discredit to the profession. Since, I know that the director of the Company are involved in illegal activities, with this professional behavior, I would disclose this incident to relevant authorities. The by-law on professional independence also prohibits an auditor from providing services to promote illegal activities of a client. In addition, a member is also prohibited from associating with any statements or reports that are believed to be false or misleading.

Conclusion
Since, this situation is exactly against a rules, my obligation as auditors is, I would disclose this incident to the relevant authorities even thought directors of the Company have warning me to resign immediately or will remove me as auditors of the Company if I disclose this incident. Because its my obligation to disclose this incident as auditor.

Discuss the following fundamental principles that a profesional accountant needs to comply with :

Members shall be sincere, honest & straight forward Violation - knowingly makes & allows false and misleading entries in FS or records To protect integrity pro accountant should not associate with any reports or statements that he believes is false and materially misleading

Members should comply with relevant laws & regulations IFAC code, MIA by laws, MICPA code etc Should avoid any action that may discredit the profesion Convicted in serious crime could have his membership revoked

Members should keep his knowledge up-todate Comply with Continuing Professional Education (CPE) requirement Aware any new pronouncement made by MIA or other relevant bodies

Diligence acting responsibly, carefully and performing profesional services according to requirements Also requires members to ensure that staff working under their authority are properly trained and supervised

Encik Rahim cannot act as the reporting accountant of Buzynet Sdn Bhd because: En Rahim are formally a director for Buzynet Sdn Bhd and he can be bias while doing his job as reporting accountant because he have a relationships with the company.
Objectivity Conflicts of Interest Independence

Procedure to change auditor: The new auditor should communicate with the existing auditor. The external auditor should ask the company permission before disclosing any information to the new auditor.

 In

his case, Encik Hassan should tell the truth that a material fraud has occurred in Glory Entertainment Sdn Bhd to the chartered accountant. The chartered accountants should cannot accept appointment as auditor of Glory Entertainment because there are threats in the company to compliance with the fundamental principles.