AU D I T R E G U L AT I O N S

T H E M I A B Y- L A W S ( O N P R O F E S S I O N A L
ETHICS, CONDUCT & PRACTICE)
AUD349 Accounting Information System Auditing
 • Student able to
understand the relevant
regulators, authorities, and
professional bodies.
TOPIC
• Students able to
OUTCOME understand the relevant
statutory and regulatory
requirements in Malaysia.
 Part 1: Complying with the Code, Fundamental
Principles and Conceptual Framework

i. 110 - The fundamental principles

Part 3: Professional Accountant in public practice

i. 320 - Professional appointments

ii. 330 - Fees and other types of remunerations

TOPIC Part 4A: Independence for Audit and Review

Engagements
CONTENTS i. 410 - Fees
ii. 420 - Gifts and hospitality
iii.600 - Provision of non-assurance services to an audit client

Part 2: Members in Public Practice

i. B200 - Method of practice

INTRODUCTION
❑ 1st issued in April 1990. Latest revision 2020
❑ Purpose of issue:
1. To inculcate of sound professional practice and
for the prevention of illegal dishonorable
practice by members
2. To be observed by auditors as a standard of
conduct in their daily professional life
3. It is important for the auditor to gain public
confidence in the quality of their service
 Part 1: Complying with the Code, Fundamental
Principles and Conceptual Framework

i. 110 - The fundamental principles

Part 3: Professional Accountant in public practice

i. 320 - Professional appointments

ii. 330 - Fees and other types of remunerations

TOPIC Part 4A: Independence for Audit and Review

Engagements
CONTENTS i. 410 - Fees
ii. 420 - Gifts and hospitality
iii.600 - Provision of non-assurance services to an audit client

Part 2: Members in Public Practice

i. B200 - Method of practice

110 - THE
F U N DA M E N TA L
PRINCIPLES
 ❑ Define a members’ duties to community which covers
the qualities of integrity, objectivity, professional
competence and due care, confidentiality & professional
behavior.

110 1. Integrity: adherence to moral & ethical principles,

FUNDAMENTAL soundness of moral character or simply honest.
PRINCIPLES & 2. Objectivity: impartiality (unbiased) in performing all
CONCEPTUAL services.
FRAMEWORK
3. Professional competence and due care: have the
necessary skills & proficiency to carry out the
professional work.
4. Confidentiality: respect the confidential information
acquired as results of business relationship.
5. Professional behavior: comply with laws & regulations
and avoid any conduct that could discredit the
profession.
Integrity ❑ Adherence to moral & ethical principles,
soundness of moral character or simply
honest

❑ The principle of integrity is be

straightforward and honest in professional
and business relationship. Integrity also
implies fair dealing and truthfulness.

❑ For example, no member shall make false

and misleading report.
Objectivity
❑ Impartiality (unbiased) in performing
all services

❑ Principle of objectivity: not to

compromise their professional
judgment because of bias, free of
conflict of interest and influence by
others

❑ A member shall be and be seen to be

free of any interest which cause
problem to his objectivity

❑ Regardless of service and capacity, all

members shall protect the integrity
and maintain objectivity in their
judgment (For example: pressure,
multiple services, etc.)
Pro f e s s i o n a l ❑ Have the necessary skills & proficiency to
carry out the professional work

Competence ❑ Strive continually to improve his professional

& Due Care services, keep his technical knowledge up to

date, enhance professional competence.

❑ Members shall not undertake professional

work which he is not competent to perform
unless the member obtains such advice and
assistant as will enable him to carry out the
work completely.

❑ Comply with Continuing Professional

Education (CPE) requirement, standards and
guidelines issued by MIA council.
Pro f e s s i o n a l ❑ Due care means the audit should conduct
Competence with courtesy and responsible toward
person who engage him and also to the
& Due Care public.

❑ It also includes consideration of

completeness of working paper, sufficiency
of audit evidence, appropriateness of audit
report
Confidentiality ❑ To treat client information acquired as
confidential. Cannot use or appear to
use that information for his personal
advantage or third-party advantage.

❑ For example: Members dealing in the

shares of the company using
information obtained during his
engagement.
Confidentiality ❑ Confidentiality information of the client shall be not
disclosed except:
1. Consent to do so obtained from client
2. Required by law, for example: Section 174 (8A)
CA, AMLA
3. When a professional duty to disclose to:-
✓ Comply with the quality assurance or
practice review
✓ Respond to inquiry or investigation by the
MIA Investigation Committee
✓ Protect the professional interests of a
professional accountant in legal proceeding
✓ Comply with technical standards or ethics
requirements
Pro f e s s i o n a l ❑ It requires auditor to comply with relevant
laws and should also perform the job to

Behavior maintain good name of institute (MIA) as

well as other members.

❑ Auditor should refrain from acting in a

manner that would discredit the profession.

❑ Auditors also required to take consideration

of how they promote their services through
the public relations channel. Professionally
done, follow laws, not exaggerated, not
comparing to the work of others.
320 -
PROFESSIONAL
APPOINTMENTS
 Client Acceptance
The auditor should investigate the
background and business activities of
the audit client and he should
consider:
• Whether the acceptance of the nomination would
create any threats to compliance with the
fundamental principles; for example, any blood
relationship between auditor and audit client; or
• Whether there are any client issues that would
threaten compliance of fundamental principles; for
example, the audit client involves in illegal
business activities such as money laundry etc.
To accept the appointment, the auditor
need to eliminate or reduce the threats
to an acceptable level with proper
safeguards. Otherwise, the auditor
should decline the appointment.
Engagement Acceptance
The auditor should only accept audit engagements
that he is competent to perform. He should consider
whether acceptance would create any threats to
compliance with the fundamental principles. After
identified the threats, the auditor need to eliminate
or reduce threats to an acceptable level, by applying
the following safeguards:-
1.Acquiring understanding of the nature and
complexity of the client’s business
2.Acquiring knowledge of relevant industries
3.Obtaining experience with regulatory & reporting
requirements
4.Assigning sufficient stat with the necessary
competencies
5.Using expert where necessary
6.Agreeing on the realistic time frame for
performance of the engagement
7.Comply with quality control policies and
procedures..
The successor auditor should
get the prospective client’s
permission to communicate
with the existing predecessor
auditor. If the permission is
not given, the successor
auditor should decline the
appointment.
The successor auditor should If the successor auditor does If no response within a
inquire the predecessor not receive a reply to his reasonable period after
auditor whether there is any inquiry, he is required to send sending of 2 reminders, the
professional reason for the a reminder to the predecessor successor auditor should
proposed change. If there are auditor or communicate with inform the predecessor
such reasons, the successor him through other means. auditor of his attention to
auditor should request the accept the engagement.
predecessor auditor to
provide him with all necessary
details in order to decide the
acceptance of the
appointment.

1. 2. 3. 4.

Guidance on the changes in professional

appointment when there is disagreement between
the existing accountant and the client over ethical
or technical principles in the course of work
330 - FEES AND
OTHER TYPES OF
REMUNERATI O NS
❑ Professional fees charged should be a fair reflection
of the value of the work performed for the client,
considering of:

✓ The skill & knowledge required for the type of

work involved
✓ The level of training & experience of the persons
necessarily engaged in the work
✓ The time necessarily spent by each person
engaged in the works
✓ The degree of responsibility & urgency that the
work entails
4 0 0 – A P P LY I N G
THE CONCEPTUAL
FRAMEWORK TO
INDEPENDENCE
FOR AUDIT AND
REVIEW
ENGAGEMENTS
❑ Defined as …Attitude of mind
characterized by integrity and objective
approach to professional work. Auditor
should be and be seen to be free from
any conflict of interest.

❑ The auditor must be independent from

client in order to act professionally. The
conceptual approach to independence
requires that there is independence in
mind and in appearance.

This Photo by Unknown Author is licensed under CC BY-SA

Independence Independence More to the interpretation
in mind/fact Opinion is formed in appearance of users of financial
without compromising statement of the auditors’
professional judgment. It independence. Example;
requires auditor to avoid receiving significant
exercise skepticism and gifs and hospitality
act with integrity and without proper
objectivity. safeguards as it will create
threat to independence.
Self - Interest Threat Self- Review Threat Familiarity Threat
• The auditor has a • The auditor is also •The audit firm’s long
direct financial involved in the association with the
interest or material preparation of audit client may be
indirect financial accounting records over influencing the
interest in the audit and financial auditor’s professional
client statements of the judgement with regard
audit client to the audit
 Intimidation Threat
• The pressure to reduce
inappropriately the extent of
work performed in order to
reduce the audit fees
Advocacy Threat
• The auditor is dealing in, or
being a promoter of, shares or
other securities in the audit
client.
410 - FEES
 FA C TO R S T H AT C O N T R I B U T E TO
S E L F - I N T E R E S T T H R E AT S

A large portion of the audit

firm’s total earning from one
client
• The audit firm’s financial
heavily dependence on that
client may create self-
interest threat.
• E.g., All cases involving
listed entities, if the total fee
generated exceed 15% of
the firm total fees in each
year over two consecutive
years, a self-interest threat
to independence is created.
The only way is to withdraw
from the engagement.
Overdue fee of an audit client
• Long overdue for significant
amount of audit fee may
also give rise to self-interest
threat.
• The payment of such fees
should require before the
report is issued or before
starts the new engagement.
Pricing – under charged
• The auditor need to
consider whether the lower
fee able to ensure him to
comply with fundamental
principles (e.g., professional
competence and due care).
• The auditor may not be able
to perform the audit in
accordance with applicable
technical and professional
standards for the lower fee.
 FA C TO R S T H AT C O N T R I B U T E TO
S E L F - I N T E R E S T T H R E AT S
Referral fee or
Contingent Fee commission
• Fee should not be charged • The auditor should not
on a contingent basis for receive or pay a referral fee
audit engagements but can or commission (create self-
be used for certain types of interest) unless he/she
non-audit engagements. established safeguards to
• The auditor must have clear eliminate or reduce them to
understanding with the an acceptable level by:
client on the scope and fee • Disclosing to the client the
of the audit engagement. fact of receive and pay a
referral fee or commission
• Obtaining advance
agreement from the client.
420 - GIFTS AND
H O S P I TA L I TY
❑ Accepting gifts from audit clients
may create self-interest and
familiarity threats, but generally is
permissible if the value is clearly
insignificant.

❑ However, if the gifts are significant

and cannot be reduced to an
acceptable level by application any
safeguard, the auditor should not
accept such gifts.
This Photo by Unknown Author is licensed under CC BY

This Photo by Unknown Author is licensed under CC BY-NC

B200 -
METHOD OF
PRACTICE
❑ Prohibit a member from using a trade name or
fictitious name to practice the profession
❑ Member in public practice shall practice as an
auditor or licensed accountant
✓ In his own name; or
✓ In the name or names of his partner or
partners, being auditors or licensed
accountants; or
✓ In the name of a firm existing at the time of
the coming into operations of the
Accountants Act 1967 or formed thereafter
provided that the partners in Malaysia are
eligible to he registered as auditor or
licensed accountants
✓ Requires every member in describing
himself as an accountant in M’sia shall use
the designatory letters “C.A.(M)”
THANK
YOU
AMIZAHANUM ADAM
amiza592@uitm.edu.my