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MALAYSIAN INSTITUTE

OF ACCOUNTANTS
(Established pursuant to the Accountants Act, 1967)

BY-LAWS (ON PROFESSIONAL


CONDUCT AND ETHICS)
[REVISED JANUARY 2002]
BY-LAWS (ON PROFESSIONAL CONDUCT AND ETHICS)

TABLE OF CONTENTS

1. INTRODUCTION

2. INTERPRETATION

3. PART A - APPLICABLE TO ALL MEMBERS

BY-LAW A-1: FUNDAMENTAL PRINCIPLES

BY-LAW A-2: INTEGRITY AND OBJECTIVITY

BY-LAW A-3: PROFESSIONAL COMPETENCE AND DUE CARE

BY-LAW A-4: CONTINUING PROFESSIONAL EDUCATION

BY-LAW A-5: CONFIDENTIALITY

BY-LAW A-6: DESCRIPTIONS AND DESIGNATORY LETTERS

BY-LAW A-7: ATTENTION TO CORRESPONDENCE AND ENQUIRIES

BY-LAW A-8: ACTS DISCREDITABLE TO THE PROFESSION

BY-LAW A-9: ADVERTISING, PUBLICITY AND SOLICITATION

4. PART B - APPLICABLE TO MEMBERS IN PUBLIC PRACTICE

BY-LAW B-1: PROFESSIONAL INDEPENDENCE

BY-LAW B-2: METHOD OF PRACTICE

BY-LAW B-3: ADVERTISING, PUBLICITY AND SOLICITATION

BY-LAW B-4: CLIENTS’ MONIES

BY-LAW B-5: LOANS TO AND FROM CLIENTS

BY-LAW B-6: FEES AND COMMISSION

BY-LAW B-7: REFERRALS

BY-LAW B-8: CHANGES IN PROFESSIONAL APPOINTMENTS

BY-LAW B-9: INCAPACITY OR DEATH OF A SOLE PRACTITIONER

BY-LAW B-10: PROFESSIONAL INDEMNITY INSURANCE

5. PART C - APPLICABLE TO MEMBERS IN SPECIFIC TYPES OF PUBLIC PRACTICE

BY-LAW C-1: PROFESSIONAL CONDUCT OF MEMBERS IN SPECIFIC TYPES OF PUBLIC


PRACTICE

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BY-LAWS (ON PROFESSIONAL CONDUCT AND ETHICS)

INTRODUCTION

1. These by-laws are made by the Council of the Malaysian Institute of Accountants on 29
December 2001 pursuant to Section 10(a) of the Accountants Act 1967, and shall come into
operation on 15 January 2002 unless otherwise stated.

2. These by-laws may be cited as the Institute’s By-Laws (On Professional Conduct and Ethics)
[Revised January 2002] and shall revoke and supercede the Institute’s existing By-Laws (On
Professional Conduct and Ethics) [first issued April 1990 and amended from time to time].
However, such revocation shall not affect any pending investigation or disciplinary proceedings
before the Investigation Committee or the Disciplinary Committee respectively in respect of any
offences or breaches committed pursuant to the Institute’s existing By-Laws (On Professional
Conduct and Ethics).

3. The by-laws herein set the standards of conduct for members in view of the professional
responsibilities and duties owed by all members whether in public practice or otherwise, to their
clients, employers, the authorities and the public. In recognising the significant role played by
the accountancy profession in society, these by-laws have been framed with the objective that
members exhibit the highest standards of professionalism and professional conduct that are
expected of the profession.

4. The Fundamental Principles herein form the main essence of these by-laws, and set out the
overriding criteria that as professionals, members must at all times discharge their
responsibilities with integrity, objectivity, impartiality, due professional care and be free from
influence of any consideration which might appear to be in conflict with these criteria.

5. A breach of these by-laws will prima facie give rise to a complaint of unprofessional conduct
against the member concerned. As such, members who fail to observe proper standards of
professional conduct as set out in these by-laws may be required to answer a complaint before
the Investigation and the Disciplinary Committees of the Institute.

6. This Introduction and the Interpretation set out herein form part of these by-laws and should be
construed accordingly. Likewise, the explanatory notes which are included in these by-laws to
provide further guidance or to explain the intention and meaning of a certain paragraph or
sub-paragraph of the by-laws, also form part of these by-laws and should be construed
accordingly. However, the explanatory notes are not and cannot be all encompassing and it is
for members to exercise their own judgment in applying the express words and the spirit of the
by-laws including the explanatory notes, to the circumstances in which they find themselves at
any given time.

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BY-LAWS (ON PROFESSIONAL CONDUCT AND ETHICS)

29 December 2001

INTERPRETATION

1. In these by-laws unless the context otherwise requires -

(i) "Act" means the Accountants Act 1967.

(ii) “advertising” means the communication by any means, to the public of information about the
services, skills or experience of a member or member firm with a view to procuring professional
business.

(iii) "Council" means the Council of the Institute established by Section 8 of the Accountants Act,
1967.

(iv) "direct mail" means the sending by any means, of unsolicited circulars, brochures or other
literature about the member or the member firm to non-clients.

(v) “immediate family” of a member means the spouse(s), parent(s), sibling(s) and dependent
child/children including adopted child/children and stepchild/stepchildren, of the member.

(vi) "Institute" means the Malaysian Institute of Accountants established by section 3 of the
Accountants Act 1967.

(vii) "member" means a person who is registered with the Institute in accordance with the
Accountants Act 1967 as a chartered accountant, a licensed accountant or an associate
member.

(viii) "member in public practice" means a chartered accountant or licensed accountant who, as a
sole proprietor or in a partnership, provides or is engaged in public practice services in return
for a fee or reward for such services otherwise than as an employee, and who holds a valid
practicising certificate issued pursuant to Rule 9 of the Malaysian Institute of Accountants
(Membership and Council) Rules 2001.

(ix) "member firm" means a firm where the sole-proprietor or all the partners of the firm are
members of the Institute.

(x) “officer” in relation to a company includes those persons defined as such in section 4(1) of the
Companies Act 1965.

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BY-LAWS (ON PROFESSIONAL CONDUCT AND ETHICS)

(xi) “publicity” means the communication by any means, to the public of information about a
member or member firm which is not designed for the deliberate promotion of the member or
the member firm.

(xii) “public practice services” includes -


(a) auditing (including internal auditing);
(b) accounting and all forms of accounting related consultancy;
(c) accounting related investigations or due diligence;
(d) forensic accounting;
(e) taxation, tax advice and consultancy;
(f) bookkeeping;
(g) costing and management accounting;
(h) insolvency, liquidation and receiverships;
(i) provision of management information systems and internal controls;
(j) provision of secretarial services under the Companies Act, 1965; or
(k) such other services as the Council may from time to time prescribe.

(xiii) "recognised body" means an association of accountants specified in Part II of the First
Schedule of the Accountants Act 1967.

(xiv)
“Rules” means the rules of the Institute made from time to time pursuant to section 7 of the
Accountants Act 1967.

(xv) “solicitation” means the approach by any means, to a potential client for the purpose of offering
professional services.

2. References to the masculine gender only herein shall include the feminine gender and/or the
masculine or neuter gender, as the case may be.

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BY-LAWS (ON PROFESSIONAL CONDUCT AND ETHICS)

PART A: APPLICABLE TO ALL MEMBERS

BY-LAW A-1: FUNDAMENTAL PRINCIPLES

The fundamental principles set out below are framed in broad and general terms. They form the basic
tenets of ethical and professional conduct of all members.

A-1.1 In accepting or continuing a professional assignment or occupation, a member shall always act
with integrity, objectivity, independence and impartiality.

A-1.2 A member shall carry out his professional work with proper regard for the technical and
professional standards expected of him as a member and shall not undertake or continue any
professional assignment that the member is not professionally competent to perform unless he
obtains such advice and assistance as will enable the member to complete the assignment in a
competent, efficient and timely manner.

A-1.3 A member shall conduct himself with courtesy and consideration towards all with whom he
comes into contact in the course of his professional work.

A-1.4 A member shall conduct himself in a manner consistent with the good reputation of the
profession and of the Institute and shall refrain from acting in any way or manner as to lower the
dignity or honour of the profession or to discredit the profession.

BY-LAW A-2: INTEGRITY AND OBJECTIVITY

A-2.1 Statement on integrity and objectivity:

(1) Members shall at all times be straightforward, honest and sincere in their approach to
their professional work. Integrity implies not merely honesty but fair dealing and
truthfulness by all members.

(2) The principle of objectivity imposes the obligation on all members to be fair,
intellectually honest and free of conflicts of interest. Members shall be fair in their
approach to their professional work and shall not allow any prejudice, bias or influences
of others to override their objectivity.

(3) A member in public practice shall be, and be seen to be, free in each professional
assignment he undertakes, of any interest which might detract from objectivity. The fact

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BY-LAWS (ON PROFESSIONAL CONDUCT AND ETHICS)

that this is self-evident in the exercise of the reporting function must not obscure its
relevance in respect of other professional work.

(4) Although a member not in public practice maybe unable to be, or be seen to be, free of
any interest which might conflict with a proper approach to his professional work, this
does not diminish his duty of integrity and objectivity in relation to that work.

A-2.2 Regardless of service or capacity, all members shall protect the integrity of their professional
services and maintain objectivity in their judgment.

Explanatory Note:

In assessing situations which may impair integrity and objectivity in members’ approach to
professional work, adequate consideration should be given to the following factors -

(i) Members may in the course of their professional work, be exposed to situations which
involve the possibility of pressures being exerted on them. These pressures may impair
their objectivity. Hence, members shall identify and assess such situations and ensure
that they uphold the principles of integrity and objectivity in their professional work at all
times.

(ii) Relationships which give rise to prejudices, conflicts of interest or influences that
override objectivity should be avoided. Members shall also ensure that employees
engaged on professional services adhere to the principle of objectivity.

(iii) Members shall neither accept nor offer gifts or entertainment which might reasonably be
believed to have a significant and improper influence on their professional judgment or
those with whom they deal, and shall avoid circumstances which would bring their
professional standing or the Institute into disrepute.

A-2.3 No member shall make, prepare, attest to or certify any statement which he knows to be -

(a) false, incorrect or misleading; or

(b) open to misconstruction by reason of any error, omission or suppression of a material


fact or otherwise.

Explanatory Note:

It is the duty of members to present or report on information objectively. That duty is the
essence of professionalism and is appropriate to all members whether they are in public
practice, commerce, industry, academia and/or the public sector.

BY-LAW A-3: PROFESSIONAL COMPETENCE AND DUE CARE

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BY-LAWS (ON PROFESSIONAL CONDUCT AND ETHICS)

A-3.1 Every member shall continually improve his professional services, keep his professional
knowledge up-to-date, and bring due care and diligence to bear upon the discharge of his duties
to clients or employers.

A-3.2 A member shall not undertake professional work which he is not competent to perform unless
the member obtains such advice and assistance as will enable him to carry out the work
competently.

A-3.3 A member shall endeavour to enhance his professional competence and comply with the
Continuing Professional Education (CPE) requirements as set out in these by-laws and as may
be prescribed by the Council from time to time.

A-3.4 A member has a continuing duty to maintain professional knowledge and skills so as to ensure
that a client or employer receives the advantage of competent professional service. As such, a
member shall keep up-to-date with developments in practices and techniques, and shall comply
with all the applicable laws, rules, regulations and professional standards for the time being in
force and the by-laws, standards, guidelines and circulars as may be prescribed by the Council
from time to time.

BY-LAW A-4: CONTINUING PROFESSIONAL EDUCATION

A-4.1 All members shall participate in Continuing Professional Education (CPE) programmes.

Explanatory Note:

(i) The objectives of this by-law are -

(a) to ensure that members maintain an adequate level of technical knowledge and
competency;

(b) to assist members in responding to new technological developments, changing


responsibilities and economic and financial conditions; and

(c) to demonstrate to society the concern of the profession for the public interest
by encouraging members to acquire adequate technical knowledge and skills in
order for them to provide the services reasonably expected of them.

(ii) There are rapid changes to the knowledge and competency that is required of members
in order for them to discharge their professional obligations effectively and responsibly.
Rapid developments by way of changes to legislation, accounting standards and
guidelines, developments in technology, increased public expectations of the work of
members - all these place increasing demands on the profession.

(iii) It is therefore every member’s responsibility to ensure that the quality of service
rendered is of the highest standard. Participation in a programme of Continuing

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Professional Education is therefore vital in maintaining high standards and public


confidence in the profession.

A-4.2 (1) It is mandatory for:

(a) members in public practice to obtain a minimum number of ninety (90) CPE
credit hours of structured CPE learning for each CPE cycle of three (3)
consecutive calendar years; and

(b) members who are not in public practice to obtain a minimum number of sixty
(60) CPE credit hours of structured CPE learning for each CPE cycle of three
(3) consecutive calendar years.

(2) For the purposes of by-law A-4.2(1), each member shall obtain at least one-third of the
requisite CPE credit hours of structured CPE learning by the end of the second
consecutive calendar year of any CPE cycle.

Explanatory Note:

A CPE programme may comprise of structured and unstructured learning -

(i) Structured CPE learning includes attendances either as presenter/lecturer or participant


at short courses, conferences and seminars, recognised post-graduate studies or
diploma courses and formal ‘home study’ or distance learning courses. It also includes
participation or rendering services in a technical committee where technical material is
prepared by the member, or writing technical articles, papers or books for publication.

(ii) Unstructured CPE learning includes private reading and study, and technical research
for practical work.

Accredited structured and unstructured CPE activities are shown in Appendix I to this by-law.

A-4.3 (1) A CPE audit shall be conducted by the Institute for each CPE cycle on a sample of
members who will be selected at random from the Institute’s records and who will be
requested to produce evidence of their compliance with the above CPE requirements.

(2) Members shall maintain records of their compliance with the above CPE requirements
for each CPE cycle and shall tender the appropriate evidence of such compliance if
called upon to do so pursuant to by-law A-4.3(1).

Explanatory Note:

Suitable evidence would include attendance certificates, diary records, evidence of


enrolment, qualification or assessment reports, employer’s reports or confirmations,
academic awards and receipts. An example of a CPE record is set out in Appendix II to
this by-law.

A-4.4 (1) The Council may in its absolute discretion, grant a temporary or partial exemption from
the CPE requirements in this by-law, to any member who makes a written application
for such exemption, for the following reasons -

(a) prolonged illness or disability; and/or

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BY-LAWS (ON PROFESSIONAL CONDUCT AND ETHICS)

(b) any other reason as may be determined by the Council.

(2) An application made pursuant to by-law A-4.4(1) shall be supported by a certificate from
a licensed physician or hospital in the case of sub-paragraph (a) or supported by any
other relevant documents in respect of sub-paragraph (b), wherever appropriate.

(3) The decision of the Council on an application made pursuant to by-law A-4.4(1) shall be
final.

A-4.5 For the purpose of this by-law, the CPE cycle is three consecutive calendar years commencing
on:

(a) the first day of the calendar year in which these by-laws come into force; or

(b) the first day of the calendar year in which the member is first admitted to the Institute;

whichever is the later.

A-4.6 This by-law does not affect the operation of the existing Guidelines on Continuing Professional
Development as issued by the Council with effect from 1 March 1992 and as amended from time
to time, for the purpose of the CPE year ending on 31 December 2001.

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BY-LAWS (ON PROFESSIONAL CONDUCT AND ETHICS)

APPENDIX I

ACCREDITED STRUCTURED LEARNING ACTIVITIES/PROGRAMMES

(a) CPE courses and conferences organised by the Institute or by the Institute jointly with other
professional bodies or by other organisations endorsed by the Institute.

(b) CPE courses and conferences organised by the recognised bodies as listed in Part II of the
First Schedule to the Act.

(c) Courses and conferences organised by other accredited organisations.

(d) Participation in formal groups and formal self-study programmes designed specifically for
members.

(e) Studies undertaken for the purpose of preparing for a post-qualification course.

(f) Studies undertaken after qualification with a view to preparing the member for a postgraduate
degree.

(g) Suitable courses run by a university or appropriate institution.

(h) Relevant courses run by a firm in public practice, an industrial company or other business
organisation.

(i) Correspondence courses, audiotape or videotape packages, courses of programmed texts or


other individual study programmes that are relevant or related to the accountancy profession,
which require participation by the member.

(j) Writing of technical articles, papers or books for publication.

(k) Working as a lecturer, instructor or discussion leader on a structured course will entitle the
member to obtain a maximum of 50% of the minimum CPE credit hours (repeat presentations of
the course will entitle the member to not more than 30% of the minimum CPE credit hours for
this purpose).

(l) Service as a member of a committee of the Institute and its branches will entitle the member to
obtain a maximum of 2 CPE credit hours for each meeting attended by the member in respect
of the committee or the branch of the Institute as the case may be.

(m) Attendance at Annual General Meetings, Extraordinary General Meetings and Members'
Dialogues of the Institute will entitle the member to obtain a maximum of 2 CPE credit hours for
each occasion.

(n) Service as a member of a committee of any one of the recognised bodies as listed in Part II of
the First Schedule to the Act and other related bodies, will entitle the member to obtain a
maximum of 2 CPE credit hours for each meeting.

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BY-LAWS (ON PROFESSIONAL CONDUCT AND ETHICS)

UNSTRUCTURED LEARNING ACTIVITIES/PROGRAMMES

(a) Reading technical, professional, financial or business literature.

(b) Use of audio tapes, videotape, correspondence courses etc. That are related or relevant to the
accountancy profession (where no participation is required).

(c) Participation in meetings, briefing sessions or discussion groups not organised by the Institute
or by any of the recognised bodies as listed in Part II of the First Schedule to the Act and other
related bodies, but which have relevance to the accountancy profession.

APPENDIX II

Example of a CPE Record

Type of Learning

Activity Hours

Reading technical briefs and journals Unstructured 10

The Institute’s Continuing Professional Education


Structured 8
course on 'Deferred Taxation'

One-day course on 'Current Developments in Taxation'


organised by MACPA, ACCA, CIMA and CPA Australia Structured 6

Two evening talks on 'Financial Planning for Retirement'


and 'Management Services for the Smaller Business' Structured 3
organised by the Institute

National Accountants Conference organised by the


Structured 16
Institute

Technical research on accounting and auditing matters


Unstructured 10
for practical work purposes

Home study for changes in relevant legislation, for


Unstructured 5
example Budget speech and tax amendments

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BY-LAWS (ON PROFESSIONAL CONDUCT AND ETHICS)

BY-LAW A-5: CONFIDENTIALITY

A-5.1 A member acquiring or receiving any confidential information in the course of his professional
work shall not use or appear to use that information for his personal advantage or for the
advantage of a third party.

Explanatory Note:

There are many ways in which a member could turn to his own personal advantage or to the
advantage of a third party, information acquired in the course of his professional duties. A
member should not only refrain from misuse of such information but should also refrain from
acting in such a manner as might make it appear that he has misused such information. A
simple example lies in a member's dealing in the shares of a company with which he has a
professional association at such a time or times as might make it seem that he was turning to
his own advantage information obtained by him in his professional capacity.

A-5.2 Information confidential to a client or employer acquired or received by a member in the course of
his professional work shall not be disclosed except where:

(a) consent to do so has been obtained from the client, employer or other proper source; or

(b) there is legal right or duty to disclose; or

(c) disclosure is compelled by process of law.

Explanatory Note:

(i) In the course of his work a member may find himself faced with conflicts between his
loyalty to his employers or colleagues on the one hand, and his duties as a member of
a profession or as a citizen on the other hand. When faced with such conflict a member
should make disclosure only with proper authority or where there is a professional
obligation, a right, a legal requirement or a public duty to disclose.

(ii) Where a member is in doubt as to whether he has a right or duty to disclose he should,
if appropriate, initially discuss the matter fully within the organisation in which he works.
If that is not appropriate, or if it fails to resolve his problem, he should take legal advice.

(iii) If a member is requested to appear in court as a witness against a current or former


client or employer as the case, he should normally refuse until served with a subpoena
or other form of witness summons.

(iv) He should answer any questions that are put to him, even though he may thus
disclose information obtained in a confidential capacity but he may appeal to the Court
for guidance on whether he is obliged to answer particular questions.

(v) If the Court directs a member to produce any documents in his ownership or
possession in Court, then he should do so. He will generally be warned in advance of
the intention to call for such documents.

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(vi) If a member is requested to assist the police, the Inland Revenue Board or other
authority by providing information about the business affairs of his client or employer in
connection with enquiries being made, he should first enquire under what statutory
authority the information is demanded. Unless he is satisfied that such statutory
authority exists he should decline to give any information until he has obtained
authorisation from his client or employer. If such authority is not forthcoming and the
demand for information is pressed the member should not accede unless so advised by
his solicitor. The position is the same whether the enquiries relate to a civil or criminal
matter.

(vii) A member may disclose or produce such information, documents, or records without
the consent of his client or employer where disclosure is reasonably necessary to
enable him to sue for fees, or to defend an action for negligence or otherwise, or to clear
himself of suspicion of a criminal offence, or to resist a penalty under the provisions of
any written law.

A-5.3 A member shall not use any specific confidential information acquired by virtue of his position as
an auditor, adviser, consultant, officer or employee in any corporation or other entity to gain,
directly or indirectly, an advantage for himself or for any other person.

Explanatory Note:

Information acquired by a member in the course of his duties and to which he would not
otherwise have access should not be used for personal advantage nor for the advantage of a
third party.

A-5.4 A member shall endeavour to ensure that by-laws A-5.1 to A-5.3 are observed by all his partners
and/or employees.

BY-LAW A-6: DESCRIPTIONS AND DESIGNATORY LETTERS

A-6.1 Every member in describing himself as an accountant in Malaysia shall use the designations
“Chartered Accountant”, "Licensed Accountant" or “Associate Member” with the designatory
letters “C.A.(M)”, “L.A.(M)” or “A.M.(M)” respectively.

A-6.2 A member shall always use the designations and/or the designatory letters mentioned in by-law
A-6.1 in precedence to all other designatory letters indicating membership of other professional
bodies including the recognised bodies which are specified in Part II of the First Schedule to the
Act.

A-6.3 Subject to by-law A-6.2, a member may use in conjunction with the abovementioned
designations or the abovementioned designatory letters any letters or words or a combination of
letters and words to indicate -

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(a) membership of other professional bodies including the recognised bodies which are
specified in Part II of the First Schedule to the Act;

(b) possession of academic degrees or diplomas of institutions of higher learning or any


academic post-graduate qualification from institutions of higher learning; or

(c) possession of civil or military honours or decorations.

A-6.4 A member in public practice shall describe his firm as a firm of “Chartered Accountant” or
“Chartered Accountants” or as a firm of "Licensed Accountant" or "Licensed Accountants" as
appropriate, save as may otherwise be allowed pursuant to by-law A-9 and by-law B-3 herein.

A-6.5 (1) Every member in public practice who signs any reports or other documents in his
professional capacity either as an individual or for and on behalf of his firm shall only
use the designations “Chartered Accountant” or “Chartered Accountants” or "Licensed
Accountant" or "Licensed Accountants" to describe himself and/or his firm in the report
or documents.

(2) Every member in public practice shall ensure that his firm complies with by-law
A-6.5(1).

BY-LAW A-7: ATTENTION TO CORRESPONDENCE AND ENQUIRIES

A-7.1 Every member must reply to professional correspondence and enquiries expeditiously.

BY-LAW A-8: ACTS DISCREDITABLE TO THE PROFESSION

A-8.1 An act discreditable to the profession or "unprofessional conduct" includes gross carelessness,
neglect and incapacity in the performance of professional duties, impropriety in professional
conduct and conduct unbecoming of an accountant.

A-8.2 A member shall not commit any act discreditable to the profession which shall include but is
not confined to the following:

(a) retention of client records after a demand is made for them provided always that a
member may exercise his right of lien over such records in respect of unpaid fees
legitimately due to him;

(b) making or permiting or directing another to make false and misleading entries in the
financial statements or records of an entity;

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BY-LAWS (ON PROFESSIONAL CONDUCT AND ETHICS)

(c) assisting in any manner any of his clients to evade tax;

(d) wilfully and with the intention to defraud:

(i) issuing any cheque or

(ii) becoming a party to the issuance of any cheque;

(e) negligently or carelessly or incompetently carrying out his professional work;

(f) acting in any manner which significantly threatens or appears to threaten his integrity or
objectivity or professional independence;

(g) making, preparing, attesting or certifying any statement or declaration which he knows
to be false, incorrect or misleading, or open to misconstruction by reason of any error,
omission or suppression of a material fact or otherwise;

(h) pleading guilty to or has been found guilty of, acting fraudulently or dishonestly in any
criminal proceedings before a Court of law in Malaysia or in any country whose
judgments are registrable in Malaysia;

(i) being found to have acted fraudulently or dishonestly in any way, or negligently or
carelessly in his professional work, in any civil proceedings in a Court of law in
Malaysia or in any country whose judgments are registrable in Malaysia;

(j) being declared a bankrupt in a Court of law in Malaysia or in any country whose
judgments are registrable in Malaysia.

A-8.3 Any act or default in breach of these by-laws shall prima facie give rise to a complaint of
unprofessional conduct within the meaning prescribed thereto in the Malaysian Institute of
Accountants (Disciplinary) Rules 2001.

BY-LAW A-9: ADVERTISING, PUBLICITY AND SOLICITATION

A-9.1 Any advertisement, publicity or solicitation by a member or by a member firm whether by that
member or the firm or otherwise shall -

(a) be conducted in manner consistent with the good standing and reputation of the
accountancy profession and not contain anything that is likely to bring discredit to the
member, to the Institute or to the accountancy profession;

(b) contain only matters of fact which are true, and the manner of notification must not be
misleading or deceptive;

(c) be in good taste and professionally dignified;

(d) not contain exaggerated claims of the services offered, the qualifications possessed or
the experience gained;

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BY-LAWS (ON PROFESSIONAL CONDUCT AND ETHICS)

(e) avoid belittling, or claiming superiority over, or denigrate the work of other members or
member firms;

(f) not contain unjustified claims to be an expert or specialist in a particular area; and

(g) be carried out in accordance with the relevant legislation, where applicable.

A-9.2 A member can -

(1) include his name, designatory letters and, by way of introduction, the organisation he is
attached to, his position together with such other personal particulars as are usual
when -

(a) submitting articles, letters or other contributions to the press; and/or

(b) participating in radio, television or internet programmes.

(2) in writing a book or article for publication on a professional subject, quote therein his
designation and designatory letters, the organisation he is attached to and his position
together with such other personal particulars as are usual for such publications.

(3) in giving lectures and participating in seminars and forums, provide in any promotional
material produced in connection therewith his name, designatory letters, the
organisation he is attached to and his position together with particulars of any special
qualification or specialised knowledge directly relevant to the subject-matter of the
lecture, seminar or forum.

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PART B: APPLICABLE TO MEMBERS IN PUBLIC PRACTICE

BY-LAW B-1: PROFESSIONAL INDEPENDENCE

B-1.1 (1) In addition to any other legal prohibitions, a member in public practice shall not
knowingly consent to be appointed, and shall not knowingly act, as auditor for any
company and shall not prepare for or on behalf of a company, any report required by the
Companies Act 1965 to be prepared by an approved company auditor if-

(a) he is not an approved company auditor;

(b) he is indebted to the company or to a corporation that is deemed to be related


to that company by virtue of section 6 of the Companies Act 1965 in an amount
exceeding Ringgit Malaysia Two Thousand and Five Hundred (RM2,500.00);

(c) he is -

(i) an officer of the company;

(ii) a partner, employer or employee of an officer of the company; or

(iii) a partner or employee of an employee of an officer of the company; or

(iv) a shareholder of a corporation whose employee is an officer of the


company;

(d) he is responsible for or he is the partner, employer or employee of a person


responsible for the keeping of the register of members or the register of holders
of debentures of the company;

(e) any member of his immediate family is -

(i) an officer of the company; or

(ii) a partner, employer or employee of an officer of the company; or

(iii) a partner or employee of an employee of an officer of the company; or

(iv) a shareholder of a corporation whose employee is an officer of the


company.

(2) The prohibition in sub-paragraph (e) of by-law B-1.1(1) shall not apply where the relevant
member of the member’s immediate family is an employee of the company who is not a
key management personnel of the company, that is, a person having authority and
responsibility for planning, directing and/or controlling the activities of the company.

(3) For the purposes of by-law B-1.1(1), a person shall be deemed to be an officer of a
company if he is an officer of a corporation that is deemed to be related to the company

17
BY-LAWS (ON PROFESSIONAL CONDUCT AND ETHICS)

by virtue of section 6 of the Companies Act 1965 or except where pursuant to the
Companies Act 1965, the Minister if he thinks fit in the circumstances of the case
directs otherwise, if the person has, at any time within the preceding period of twelve
(12) months, been an officer or promoter of the company or of such a corporation.

B-1.2 The requirements of by-law B-1.1 shall also apply where a member in public practice or his firm
is requested to act as the reporting accountant in connection with offers to the public of shares
in or debentures of a company.

B-1.3 (1) A member in public practice or his firm shall not knowingly accept appointment as
auditor or reporting accountant of a company or other entity if-

(a) he or his partner(s) holds directly or indirectly any interest in the company or
other entity;

(b) any member of the immediate family of the member or that of his partner(s)
holds directly or indirectly any interest in the company or other entity.

(c) he is or was, within the period concerned or within the preceding period of
twelve (12) months-

(i) an officer or employee of the company or other entity, or

(ii) a partner of or in the employment of an officer or employee of the


company or other entity; or

(d) he has a direct or indirect material financial interest (other than fees due to him
for services rendered) in the company or other entity.

Explanatory Note:

(i) Personal relationships can affect objectivity. There is a particular need,


therefore, for a firm to ensure that its objective approach to any assignment is
not endangered as a consequence of any personal relationship. A dependent
child of a member although no longer a minor may affect objectivity.

(ii) Financial involvement with a client may affect objectivity. Such involvement can
arise in a number of ways of which a shareholding in a company upon which
the firm is retained to report is a typical example.

(iii) In Malaysia, the appointment of an auditor is also governed by the Companies


Act, 1965.

(iv) The provisions of by-law B-1.3(1)(a) above are not intended to preclude a
beneficial holding in an authorised unit trust or listed investment trust which
holds shares in a client company, except where the unit or investment trust is
itself a client on which the member or his firm reports.

(v) To ensure an objective approach to assignments, member firms are expected


to ensure that their employees who are involved in the audit engagement
whether directly or indirectly, do not hold any interest in the client. Member
firms are expected to take the necessary measures to ensure compliance.

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BY-LAWS (ON PROFESSIONAL CONDUCT AND ETHICS)

(2) The prohibition in sub-paragraph (b) of by-law B-1.3(1) above shall not apply if-

(a) the interest held by the member’s immediate family or by his partner’s
immediate family in the company or other entity does not give rise to a
significant threat to the professional independence, integrity or objectivity of the
member or his firm; and

(b) the member or his firm has appropriate safeguards in place that will effectively
and adequately preserve the professional independence, integrity or objectivity
of the member or his firm.

B-1.4 In addition to by-law B-1.3(1) above, a member in public practice or his firm shall not knowingly
accept appointment as auditor or reporting accountant of a company or other entity if that
member or his firm also provides public practice services other than audit services (non-audit
services) to that company or other entity, whereby the provision of such non-audit services
would create a significant threat to the professional independence, integrity or objectivity of the
member or his firm.

Explanatory Note:

(i) For the purposes of this by-law, the member,

(a) if already providing non-audit services, then before accepting an appointment to


act as auditor or reporting accountant; or

(b) if already appointed as auditor or reporting accountant, then before accepting


an engagement to provide the non-audit services,

has to exercise his judgment and evaluate whether the provision of non-audit services
would create a significant threat to the professional independence, integrity or
objectivity of the member or his firm in carrying out the audit or review engagement
which cannot be reduced or eliminated by appropriate safeguards, in which case the
member or his firm shall decline the appointment as auditor or reporting accountant, or
decline the non-audit engagement, as the case may be.

(ii) The following activities by the member or his firm or any of his employees give rise to a
significant threat to the professional independence, integrity or objectivity of the member
or his firm in carrying out the audit or review engagement which cannot be reduced or
eliminated by appropriate safeguards except by refusing the appointment as auditor or
reporting accountant, or by declining the non-audit engagement, as the case may be -

(a) assuming a managerial role or making managerial decisions or taking


responsibility for such decisions, for the client;

(b) authorising, executing or consummating a transaction or otherwise exercising


authority on behalf of the client;

(c) preparing source documents or originating data, in electronic or other form,


which evidences the occurrence of a transaction (for example, purchase orders,
payroll records and customer orders) or making changes thereto, whereby such
documents or data are subsequently the subject matter of the audit or review
engagement;

(d) preparing accounting records/financial statements or prospective financial


information, whereby such financial statements or prospective financial

19
BY-LAWS (ON PROFESSIONAL CONDUCT AND ETHICS)

information are subsequently the subject matter of the audit or review


engagement, as the case may be;

(e) providing non-audit services which have a material impact or which may
significantly influence the preparation of the financial statements or prospective
financial information of the client, which are subsequently the subject matter of
the audit or review engagement;

(f) operating his firm in the same office of the client’s business or registered
offices;

(g) total fees arising from the provision of the non-audit services to the client
represents 20% or more of the member’s individual revenue or the firm’s annual
total fees for two (2) or more consecutive financial periods.

(iii) Sub-paragraph (ii)(g) above shall not apply to members in public practice for the first
three (3) years from the commencement or establishment of their respective firms.

B-1.5 A member in public practice who is a partner in or an employee of a firm shall not accept
appointment as liquidator of a company where the member or any other partner or employee of
the firm is, or in the previous two (2) years has been, receiver of any of the assets of that
company.

B-1.6 (1) Where a company is insolvent, a member who is a partner or employee of a firm shall
not accept appointment as liquidator of the company if the firm or the member or any
other partner or employee of the firm has, or during the previous two (2) years has had,
a continuing professional relationship with that company.

(2) Where the company is solvent, such appointment shall not be accepted without careful
consideration being given to the implications of acceptance in that particular case.

Explanatory Note:

A "continuing professional relationship" as referred to in by-law B-1.6 above does not arise
where the relationship is one which springs from the appointment of the firm or of the member
by, or at the instigation of, a creditor or other party having an actual or potential financial interest
in the company to investigate, monitor or advise on its affairs.

B-1.7 (1) A member in public practice shall not knowingly consent to be appointed, and shall not
knowingly act, as liquidator for any company if-

(a) he is not an approved liquidator;

(b) he is indebted to the company or to a corporation that is deemed to be related


to the company by virtue of section 6 of the Companies Act 1965 in an amount
exceeding Ringgit Malaysia Two Thousand and Five Hundred (RM2,500.00);

(c) he is -

(i) an officer of the company; or

20
BY-LAWS (ON PROFESSIONAL CONDUCT AND ETHICS)

(ii) a partner, employer or employee of an officer of the company; or

(iii) a partner or employee of an employee of an officer of the company; or

(iv) a shareholder whether directly or indirectly, of the company;

(d) any member of his immediate family is:-

(i) an officer of the company;

(ii) a partner, employer or employee of an officer of the company; or

(iii) a partner or employee of an employee of an officer of the company;

(e) he becomes bankrupt;

(f) he assigns his estate for the benefit of his creditors or makes an arrangement
with his creditors pursuant to any law relating to bankruptcy;

(g) he is convicted of an offence involving fraud or dishonesty punishable on


conviction by imprisonment for three (3) months or more; or

(h)any member of the immediate family of the member or that of his partner(s) holds
directly or indirectly any interest in the company .

(2) Sub-paragraphs (a), (c), (d) and (h) of by-law B-1.7(1) above shall not apply to -

(a) a members' voluntary winding up; and

(b) a creditors' voluntary winding up, if by a resolution carried by a majority of the


creditors in number and value present in person or by proxy and voting at a
meeting of which seven (7) days' notice has been given to every creditor stating
the object of the meeting, it is determined that those sub-paragraphs or any of
them shall not apply.

(3) The prohibition in sub-paragraph (d) of by-law B-1.7(1) shall not apply where the relevant
member of the member’s immediate family is an employee of the company who is not a
key management personnel of the company, that is, a person having authority and
responsibility for planning, directing and/or controlling the activities of the company.

(4) The prohibition in sub-paragraph (h) of by-law B-1.7(1) above shall not apply if-

(a) the interest held by the member’s immediate family or by his partner’s
immediate family in the company does not give rise to a significant threat to the
professional independence, integrity or objectivity of the member or his firm;
and

(b) the member or his firm has appropriate safeguards in place that will effectively
and adequately preserve the professional independence, integrity or objectivity
of the member or his firm.

(5) For the purposes of by-law B-1.7(1), a person shall be deemed to be an officer of a
company if he is an officer of a corporation that is deemed to be related to the company
by virtue of section 6 of the Companies Act 1965 or has, at any time within the

21
BY-LAWS (ON PROFESSIONAL CONDUCT AND ETHICS)

preceding period of twenty-four (24) months, been an officer or promoter of the company
or of such a corporation.

B-1.8 A member in public practice who is a partner in or employee of a firm shall not accept
appointment as receiver or as receiver and manager of a company where the firm or the
member or any other partner in or an employee of the firm has, or during the previous two (2)
years has had, a continuing professional relationship with that company.

Explanatory Note:

A "continuing professional relationship" as referred to in by-law B-1.8 above does not arise
where the relationship is one which springs from the appointment of the firm or of the member
by, or at the instigation of, a creditor or other party having an actual or potential financial interest
in the company to investigate, monitor or advise on its affairs.

B-1.9 (1) A member in public practice shall not knowingly consent to be appointed, and shall not
knowingly act, as receiver of the property of a company if-

(a) he is an undischarged bankrupt;

(b) he is -

(i) a mortgagee of any property of the company; or

(ii) an auditor of the company; or

(iii) an officer of the company or of any corporation which is a mortgagee of


the property of the company; or

(iv) a shareholder of the company or of any corporation which is a


mortgagee of the property of the company;

(c) he is not an approved liquidator or the Official Receiver;

(d) any member of the immediate family of the member or that of his partner(s)
holds directly or indirectly any interest in the company.

(2) The prohibition in sub-paragraph (d) of by-law B-1.9 above shall not apply if-

(a) the interest held by the member’s immediate family or by his partner’s
immediate family in the company does not give rise to a significant threat to the
professional independence, integrity or objectivity of the member or his firm;
and

(b) the member or his firm has appropriate safeguards in place that will effectively
and adequately preserve the professional independence, integrity or objectivity
of the member or his firm.

B-1.10 Where a partner in or an employee of a firm has been receiver of any of the assets of a
company, neither the firm nor any partner in or employee of the firm shall accept appointment

22
BY-LAWS (ON PROFESSIONAL CONDUCT AND ETHICS)

as auditor of the company, or of any company which was under the control of the receiver, for
any accounting period during which the receiver acted or exercised control.

B-1.11 No member in public practice shall give any assistance or his services by the use of his name
or in any other manner to advance or promote any illegal activity of a client.

B-1.12 A member in public practice shall inform a client of the nature of any business connections,
affiliations or interests which might influence his judgment or impair his impartiality in the
provision of services to such client.

BY-LAW B-2: METHOD OF PRACTICE

B-2.1 (1) A member in public practice shall not use a trade or association name or any other
impersonal or fictitious names under which to practise the profession.

Explanatory Note:

The term "trade or association name" means a business name that is not a personal
name or a composite of personal names.

(2) No member in public practice shall practise as a chartered accountant or licensed


accountant other than -

(a) in his own name, or

(b) in the name or names of his partner or partners, being chartered accountants
or licensed accountants; or

(c) in the name of a firm existing at the time of the coming into operation of the Act
or formed thereafter provided that the partners in Malaysia are eligible to be
registered as chartered accountants or licensed accountants.

(3) Every member prior to commencement of public practice, shall apply to the Institute for
approval of the proposed name of his intended firm or practice.

(4) Where an application is made pursuant to by-law B-2.1(3) above, the Council must be
satisfied that the proposed name of the intended practice does not duplicate the name
of an existing firm of chartered accountants or licensed accountants and is not a name
which in the opinion of the Council is undesirable, before approval is granted.

(5) The decision of the Council in respect of by-law B-2.1(4) shall be final.

(6) No member in public practice shall allow the name of his firm to be used by any
organisation to conduct business that is incompatible to public practice by members of
the Institute.

23
BY-LAWS (ON PROFESSIONAL CONDUCT AND ETHICS)

B-2.2 (1) Subject to by-law B-2.4, no member in public practice shall allow any person who is not
a member of the Institute to practise in partnership with him as a chartered
accountant/licensed accountant or to practise in his name as a chartered
accountant/licensed accountant.

(2) No member in public practice shall allow his firm including any branches of his firm to
be under the management and control of a person who is not a member of the Institute.

Explanatory Note:

It is the duty and responsibility of a member in public practice to ensure that any
branch of his firm is under the management and control of a member of the Institute.

(3) A member who at the time of the coming into operation of these by-laws has any
branch of his practice which is under the management and control of a person who is
not a member of the Institute shall comply with by-law B-2.2(2) above either by -

(a)appointing a member of the Institute to manage and control the said branch of the
firm; or

(b) dissolving the said branch of the firm.

(4) No member in public practice shall report or express an opinion on financial statements
examined for the purposes of such report or opinion by a person other than a member of
his firm or of his staff, unless such other person is also a member in public practice,
except for entities which are incorporated or operating outside Malaysia.

(5) No member in public practice shall assist by any means and in any manner whatsoever
any person who practises or holds himself out as a chartered accountant, auditor, tax
consultant, tax adviser or any other like description in contravention of the Act or any
other law for the time being in force in Malaysia.

B-2.3 (1) A member who is not entitled to be a member in public practice shall not -

(a) hold himself out to be a member in public practice in any manner whatsoever;

(b) provide public practice services as a chartered accountant, auditor, tax


consultant or tax adviser or any services of a similar nature that may indicate or
be likely to lead persons to infer that he is a member in public practice or
qualified by any written law to practise the profession of or is in practice as a
chartered accountant.

(2) Notwithstanding by-law B-2.3(1), the aforesaid member may carry on the work of a tax
consultant or a tax adviser if he is authorised to do so under section 153 of the Income
Tax Act 1967.

(3) A member who is registered with the Institute as a licensed accountant is not precluded
by by-law B-2.3(1) from carrying on any practice in which he was professionally
engaged immediately before the coming into operation of the Act.

24
BY-LAWS (ON PROFESSIONAL CONDUCT AND ETHICS)

B-2.4 (1) A member may subject to these by-laws, participate whether as a director and/or
shareholder in a limited or unlimited company which offers taxation, tax advice and
taxation consultancy services, provided that in doing so -

(a) the member and/or the company shall not contravene any written law; and

(b) the company shall not in any way be described as Chartered Accountants or
Licensed Accountants.

(2) Where members participate as directors and/or shareholders in limited or unlimited


companies in the manner as stated in by-law B-2.4(1), such members shall -

(a) be deemed for the purposes of these by-laws to be members in public practice
and the provisions of the rules of the Institute and these by-laws with the
appropriate modifications, shall apply to such members; and

(b) cause the companies to comply with these by-laws if such members hold the
majority interest and/or voting rights whether directly or indirectly in the
companies.

B-2.5 (1) Every member in public practice shall -

(a) register his firm with the Institute by informing the Institute in writing of the
name and address of his firm and the addresses of his branches and any other
relevant particulars requested by the Institute;

(b) inform the Institute of any changes in respect of the particulars referred to in
sub-paragraph (a) within one (1) month thereafter;

(c) if his firm is associated with any other firm of accountants, register such
association whether local or overseas with the Institute and this must be
supported by evidence; and

(d) upon registration of his firm with the Institute, lodge an annual return with the
Institute by 31 January of each calendar year despite the fact that there may be
no changes in particulars to his firm.

Explanatory Note:

Where the member is practising in a partnership, only one partner of the firm is
required to lodge the annual return on behalf of the firm.

(2) Upon registration of the member’s firm pursuant to by-law B-2.5(1) above, such firm
shall be issued with a certificate of registration by the Institute, whereby the certificate
of registration shall -

(a) state the firm’s registration number and that the firm is a member firm of the
Institute;

(b) be displayed at the premises of the member’s firm; and

(c) be surrendered by the member to the Institute upon the dissolution of the firm
or change of name of the firm.

(3) A member in public practice whose firm has been duly issued a certificate of
registration pursuant to by-law B-2.5(2) above and who is in compliance with these

25
BY-LAWS (ON PROFESSIONAL CONDUCT AND ETHICS)

by-laws, may insert the logo of the Institute on the top of the letterhead of his firm
whereby -

(a) the words "Member firm of Malaysian Institute of Accountants" shall be


inserted under the logo;

(b) the logo shall be either in full colour or in black and white and shall be in
accordance with the guidelines issued by the Council from time to time on the
use of the logo.

(4) Every member in public practice shall state his/her firm's number immediately after or
below the firm's name, in official letters, accounts, invoices, official notices,
publications, bills of exchange, cheque, receipts, requisition forms and other like
documents issued by the firm.

Explanatory Note:

The firm number means, in the case of firms providing audit services, the number
allocated by the Registrar of Companies when the firm was first registered with the
Registrar, or in the case of firms providing public practice services other than audit
services, the number allocated by the Institute.

Explanatory Note:

The purpose of this by-law is to provide convenient access to the public when they want to
check whether a firm is registered with the Institute and to do a search on member firms.

BY-LAW B-3: ADVERTISING, PUBLICITY AND SOLICITATION

Subject to by-law A-9 and the following provisions, members in public practice may seek publicity for
their services and achievements and may advertise their services and products.

B-3.1 (1) Promotional material issued by member firms whether directly or indirectly may contain
any factual statement, the truth of which a member is able to justify, but it shall not
make unflattering references to, or unflattering comparison with, the services of others.

(2) Any solicitation or promotional activity by a member in public practice or his agent or
the member firm, shall be carried out without coercion or harassment.

Explanatory Note:

Solicitation or promotional activity in respect of potential clients personally or through


direct mail is acceptable within reasonable limits subject to any legal prohibitions in
respect of direct mailing. However, care must be exercised to ensure that follow up
communications are terminated when the recipient has so requested either directly or
indirectly. Any continued contact subsequently can be regarded as coercion or
harassment which is considered unprofessional conduct.

26
BY-LAWS (ON PROFESSIONAL CONDUCT AND ETHICS)

B-3.2 A member in public practice, being the partner or proprietor is responsible for -

(1) the form and the content of any advertisement or publicity, whether by the member
personally, by his firm or any other person on behalf of the member or his firm; and

(2) any solicitation or promotional material which is expressly or impliedly authorised by


the member or his firm.

B-3.3 Where a member in public practice, being the partner or proprietor is aware of any impropriety in
any advertisement or publicity relating to him and/or his firm, he shall use his best endeavours
to procure the rectification or withdrawal of the advertisement or publicity.

B-3.4 A member in public practice, being the partner or proprietor is responsible for any infringement
of by-law B-3 or by-law A-9 by a firm or a company affiliated to his firm practising under the
same or similar name unless the member of that firm, being the partner or proprietor, can prove
that -

(1) he has taken all reasonable steps to ensure compliance with the form as well as the
substance of by-law B-3 and by-law A-9; and

(2) the infringement was beyond his control in the first place.

Explanatory Note:

For the purposes of this by-law, a firm or a company is deemed to be affiliated with the
member’s firm practising under the same or similar name if the firm or company is controlled by
such persons or parties or otherwise under the common control, ownership or management of
the member’s firm that a reasonable and informed third party having knowledge of all relevant
information would reasonably conclude as being a part of the member’s firm.

B-3.5 (1) A member in public practice shall not respond to advertisements to tender for
professional work except for proposals for nonrecurring professional or specialist work
(including management consultancy services).

(2) The prohibition in by-law B-3.5(1) above does not extend to assignments or projects
undertaken for or on behalf of the Government, government departments and/or
agencies and statutory bodies.

Explanatory Note:

Certain organisations, either because of legislative requirements or otherwise, may call


for submissions or tenders in relation to professional services offered by members in
public practice.

(3) In reply to a public advertisement or an unsolicited request to make a submission or


submit a tender, the member in public practice shall -

(a) if the appointment may result in the replacement of another member in public
practice, state in the submission or tender that before acceptance, the
opportunity to contact the other member in public practice is required so that
inquiries may be made as to whether there are professional reasons why the
appointment should not be accepted; and

27
BY-LAWS (ON PROFESSIONAL CONDUCT AND ETHICS)

(b) if the submission or tender is successful, contact the existing accountant in


accordance with the applicable provisions of by-law B-8.

BY-LAW B-4: CLIENTS' MONIES

B-4.1 (1) A member in public practice is strictly accountable for all clients' monies received by
him.

(2) Such monies shall be kept separate from all other monies in the hands of the member
or his firm and shall be applied only for the purposes of the client.

Explanatory Note:

(i) Clients' monies should be paid without delay into a separate bank account
which may be either a general account or an account in the name of a specific
client but which shall in all cases include in its title the word 'client'. Any such
account is referred to herein as 'a client account'.

(ii) Where a member or his firm receives a cheque or draft which includes both
clients' monies and other monies he should cause the same to be credited to a
client account. Once the monies have been received into such client account,
the member may withdraw from that account such part of the sum received as
can properly be transferred to the office account of the member’s firm in
accordance with the principles set out below.

(iii) Save as referred to in paragraph (ii) of this explanatory note, no monies other
than clients' monies should be paid into a client account.

B-4.2 (1) Drawings on a client account shall be made only:

(a) to meet payments due from a client to the member or his firm for professional
work done by the member or his firm for that client provided that:

(i) the client has been informed in writing, and has not disagreed, that
money held or received for him will be so applied; and

(ii) a bill has been rendered;

(b) to cover disbursements made on a client's behalf; or

(c) to or on the instructions of a client.

(2) Money held by a member in public practice as stakeholder shall be regarded as clients'
money and shall be paid into a separate bank account maintained for the purpose or
into a client bank account.

(3) Every member in public practice shall at all times maintain records so as to show
clearly the money he has received, held or paid on account of his clients, and the
details of any other money dealt with by him through a client account, clearly

28
BY-LAWS (ON PROFESSIONAL CONDUCT AND ETHICS)

distinguishing the money of each client from the money of any other client and from his
own money.

BY-LAW B-5: LOANS TO AND FROM CLIENTS

B-5.1 (1) No member in public practice nor his firm shall knowingly in any manner whatsoever
make a loan to a client, or guarantee a client's borrowings, or accept a loan from a
client or have borrowings guaranteed by a client or be indebted to a client at any time in
a sum exceeding Ringgit Malaysia Two Thousand and Five Hundred (RM2,500.00).

(2) Where indebtedness of any amount is specifically prohibited under any law for the time
being in force in Malaysia, that law shall apply.

BY-LAW B-6: FEES AND COMMISSION

B-6.1 Professional fees charged by members in public practice shall be a fair reflection of the value of
the work performed for the client, and shall take into account inter alia -

(a) the skill and knowledge required for the type of work involved;

(b) the level of training and experience of the persons necessarily engaged on the work;

(c) the time necessarily occupied by each person engaged on the work; and

(d) the degree of responsibility and urgency that the work entails.

Explanatory Note:

(i) In order to carry out the professional service for which he is engaged, a member in
public practice must first consider the instructions of his client in conjunction with any
statutory duty relating thereto and then discharge his responsibility by applying to the
affairs of his client the professional skill and knowledge which he and his staff have
acquired through training and experience.

(ii) The member’s fees for that service should provide him with appropriate remuneration for
the time and skill which he has personally devoted to his client's affairs and the
responsibility he has accepted together with reimbursement of and a suitable margin of
profit on his overhead expenses and the salaries of his staff for whose work he takes
responsibility.

(iii) Fees should therefore normally be computed by reference to the above factors (a) to (d).

29
BY-LAWS (ON PROFESSIONAL CONDUCT AND ETHICS)

(iv) It is neither usual nor necessary for bills submitted to clients to be fully detailed but the
member's records should be adequate to enable this to be done if required either to
satisfy the client or in the unfortunate event of it becoming necessary to take legal
proceedings to recover unpaid fees.

B-6.2 (1) No member shall charge an unrealistically low professional fee.

Explanatory Note:

A professional fee of less than Ringgit Malaysia Five Hundred (RM500.00) for audit
services shall be considered as an unrealistically low professional fee.

(2) Notwithstanding by-law B-6.2(1), a member may charge charitable bodies and non-profit
organisations low professional fees or provide free services provided always that the
provision of such services is not used as an inducement to secure professional
appointments or engagements which may arise therefrom.

B-6.3 (1) In specific circumstances where a member in public practice feels there are genuine
grounds to propose a lower fee than another member undertaking the same or similar
work (other than non-recurring or specialist work including management consultancy
services), the member shall exercise due care to ensure that the lower fee is in line with
the provisions of by-law B-6.1 above.

(2) Subject to by-law B-6.3(1), any fee proposal of less than 90% of the fee previously
charged shall be taken as prima facie evidence of a likelihood that a compromise or
lowering of professional standards will result in the carrying out of the assignment.

Explanatory Note:

(i) The fact that one member may charge a lower fee than another for undertaking the
same or similar work is not improper provided due care is taken to ensure that the client
is not misled:

(a) as to the precise range of services that a quoted fee is intended to cover (in
which connection that member should provide the client with an engagement
letter); and

(b) as to the likely level of future fees for any work undertaken for the client.

(ii) The member intending to charge a lower fee shall inform the client in the engagement
letter referred to in sub-paragraph (i)(a) above of the precise range of services covered
by the quoted fee.

(iii) In proposing a fee which is lower than that charged by another member, the member
concerned should note that the lower fee proposed is a valid reason for another member
to complain to the Institute that in the particular circumstances the acceptance of such
appointment was improper.

(iv) In addition, members are hereby put on notice that any investigation by the Institute
under such circumstances would be expected to focus on how a quote lower than the
existing fee was given when only the existing auditor has the benefit of in depth and
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BY-LAWS (ON PROFESSIONAL CONDUCT AND ETHICS)

cumulative knowledge and experience of the client and of the client's systems of
accounting and internal control.

(v) If in the course of an investigation into allegations of unsatisfactory work on the part of a
member there is evidence of the work having been obtained or retained through quoting
a fee that is not realistic in terms of the time needed and quality of staff necessary to
perform that work to a satisfactory professional standard, that factor shall be taken into
account in considering the member's conduct having regard to the obligations placed
upon the member under these by-laws.

B-6.4 Fees shall not be charged and/or instructions shall not be accepted, on a percentage or
contingency fee basis save where that course is authorised by statute or is generally accepted
practice for certain professional services.

B-6.5 (1) A member in public practice shall not directly or indirectly allow or agree to allow the
participation by any person other than another member in public practice or his
employees in the fees of his professional work.

(2) The prohibition in by-law 6.5(1) shall not apply to any member paying or agreeing to pay
any sum out of his profits or any remuneration to any retiring partner of the member's
practice or of any related practice or to the personal representatives or the spouse or
dependants of any deceased partner whether such partner had retired from practice or
not at the date of his demise or to any predecessor in the member's practice or the
personal representatives of such predecessor.

B-6.6 A member in determining audit fees shall take into consideration the Recommended Basis for
Determining Audit Fees as set out in this by-law as appendices, which shall be applicable only
to audit services rendered on or after 1 September 1994.

B-6.7 Any member in public practice who fails to comply with the provisions of by-laws B-6.1 to B-6.6
above shall be deemed to have compromised or lowered professional standards in carrying out
his professional work, and this shall represent a valid reason for a complaint to be made against
him.

B-6.8 (1) A member in public practice shall not -

(a) pay a commission to obtain a client;

(b) accept a commission for the referral of a client to another member or to a third
party; or

(c) accept a commission for the referral of the products or service of others;

where such payment or acceptance would impair or give the appearance of impairing
the objectivity, integrity or independence of the member in carrying out his professional
work.

(2) The provisions in by-law B-6.8(1) above shall not prohibit payments for the purchase of
an accounting practice or retirement payments to individuals formerly engaged in public
practice or payments to their heirs or estate.

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BY-LAWS (ON PROFESSIONAL CONDUCT AND ETHICS)

B-6.9 Payment and receipt of referral fees between members in public practice when no services are
performed by the referring party shall be regarded as commission for the purpose of by-law
B-6.8 above.

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BY-LAWS (ON PROFESSIONAL CONDUCT AND ETHICS)

RECOMMENDED BASIS FOR DETERMINING AUDIT FEES

FOREWORD

Audit Fees shall generally be based upon the degree of responsibilities, risk and skill involved and the
time necessarily occupied on the work by the partner and staff in terms of the quality and level of
competence required to meet auditing standards and statutory compliance with reference to the size,
complexity and technical input expected of the audit assignment.

The cost of time occupied, the time charge, will be based on the cost of the practice which shall include
attributable direct cost, the recovery of overheads and the appropriate return on the investment in the
practice (see Appendix I).

The time charge based on the aforementioned factors may vary from practice to practice. However,
empirical studies carried out by the Institute have shown a proportionate correlation between audit fees
charged, based on time charge, and the value of total assets or gross turnover or operating expenditure
(see Appendix II).

The value of total assets or gross turnover or operating expenditure is a fair reflection of the size and
level of transactions of an entity. Therefore, as a benchmark to assist member firms in determining audit
fees and also for the information of users of auditing services, subject to the Act and the By-Laws (on
Professional Conduct and Ethics), the Council recommends that appropriate audit fees level should be
determined in accordance with the Appendices set out herein.

Appendix I

Audit Charge-Out Rates

(A) Introduction:

Time management is essential in ensuring efficiency in audit performance while time recording
is an integral part of the documentary evidence of work performed.

Time charge shall be reflective of time spent by the partner and staff in terms of the quality and
level of competence required to meet the auditing standards with reference to the size,
complexity and technical input expected of the audit assignments.

A critical factor in maintaining the viability of a practice depends on good costing.

The determination of chargeout rate is costing for audit practice.

In the absence of a uniform basis, charge-out rates may differ due to inadequate or over
computation of the variable cost factors.

The Council therefore recommends the basis for time charging as set out below. From past
experience, cost computation based on the recommended basis will normally produce a factor
of about three times the direct labour cost.

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BY-LAWS (ON PROFESSIONAL CONDUCT AND ETHICS)

(B) Definitions

(i) "Economic time charge" shall include the following :

Labour Cost
Opportunity Cost, equivalent to the direct labour recovery cost of each staff
Appropriate Recovery of Overheads
Profit Element

(ii) The unit rate should be based on net working hours.

Net working hours:

Total chargeable hours based on the normal working days in the year of a practice net
of annual holidays, annual leave, study and examination leave and firm's holidays.

(iii) Total Labour Cost :

Actual Wage, including EPF and Socso Contribution


Training Cost, including course and examination fees
Cost of Study Leave
Gratuities
Welfare Cost

(iv) Overheads Recovery Rate:

Members may wish to adopt the absorption method which will take into account the
total net working hours of the practice. However, it may not be appropriate because the
recoverability rate of each member of staff differs. An alternative is to derive the
weighted average based on estimated administrative time of each grade of staff. The
administrative time of each staff can be determined with reasonable accuracy from the
time sheets submitted by each staff over a control period.

(C) Basis

Charge-out Rates shall be computed on the basis of economic time charge and should reflect
its recoverability. It should include direct cost and also an appropriate proportion of fixed
overheads.

(D) Calculation of Charge-out Rate

RM

Total Labour Cost XX


Direct Labour Recovery Rate represented by
Net Working Hours

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BY-LAWS (ON PROFESSIONAL CONDUCT AND ETHICS)

Add

Opportunity cost (represented by Direct Labour Recovery Rate*) XX

Add

Overhead Recovery Rate XX

Add

Profit Element XX

Charge-out Rate XX

* The element of Direct Labour Recovery Rate is effectively doubled in the calculation of Charge-out
Rate.

Appendix II

Benchmark in Assisting Members to Extrapolate Audit Fees:


Recommended Basis

(A) Introduction

Audit fees shall generally be based upon the degree of responsibility, risk and skill involved and
the time necessarily occupied on the work.

Empirical studies carried out by the Institute have shown a proportionate correlation between
audit fees charged, based on time charge, and the value of total assets or gross turnover or
operating expenditure. Therefore, for consistency and harmonisation of the fee levels, Council
recommends that it is appropriate to determine audit fees using the Total Assets or Gross
Turnover as shown in the financial statements and multiplying it with the coefficient percentages
as shown in the coefficient percentage table (Appendix III).

The choice of Gross Turnover or Total Assets as the basis must be relevant and reflects closely
to the time charge. Where it is not appropriate to use Total Assets or Gross Turnover members
may adopt Total Operating Expenditure basis which must be relevant and reflect closely to time
charge.

The guidelines for the determination of time charge is set out in Appendix I.

(B) Definitions

(i) “Total Assets” is defined as the total of all assets excluding intangible assets as shown
in the Balance Sheet.

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BY-LAWS (ON PROFESSIONAL CONDUCT AND ETHICS)

(ii) “Gross Turnover” shall mean and include:

(a) Total amount of sales including all other income and earnings for the year in the
case of all manufacturing and trading organisations:

(b) Total gross premium income including all other income and earnings for the
year in the case of all insurance organisations;

(c) Total amount of interest, discount, commission, exchange brokerage and all
other income and earnings for the year in the case of banks and other financial
institutions;

(d)Total amount of commission including all other income and earnings for the year in
the case of travel agencies, indentors, brokers and other organisations whose
principal source of income is commission earnings; and

(e)Total receipts/bills accounted for and all other income and earnings for the year in
the case of construction companies and other entities not covered under (a) to
(d) above.

(iii) “Total Operating Expenditure” n i cludes all expenses charged against gross profit to
arrive at net profit before tax but excludes direct cost of sales.

(C) Computation Examples

Example 1

Assume that the Gross Turnover is RM1,740,000 and its Total Assets amount to RM2,560,000.
The audit fees based on Total Assets and Gross Turnover will be computed as follows:-

On Total Assets:

First 100,000 at 0.8% = 800

Next 150,000 at 0.35% = 525

Next 250,000 at 0.25% = 625

Next 500,000 at 0.15% = 750

Next 1,500,000 at 0.10% = 1,500

Next 60,000 at 0.08% = 48

Total RM2,560,000 RM4,248

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BY-LAWS (ON PROFESSIONAL CONDUCT AND ETHICS)

On Gross Turnover :

First 100,000 at 0.8% = 800

Next 150,000 at 0.35% = 525

Next 250,000 at 0.25% = 625

Next 500,000 at 0.15% = 750

Next 740,000 at 0.10% = 740

Total RM1,740,000 RM3,440

However, the above determination must be matched against time charge. Therefore, different
jobs with different business activities and business structure may have the same Total Assets
and Gross Turnover but the time incurred in performing the audit may vary.

For comparison purposes, if we use the above figures that has the same gross turnover and
total assets but with different time charge for different companies audit, as follows:-

Company 1- RM3,400
Company 2 - RM3,600
Company 3 - RM4,000
Company 4 - RM4,500
the audit fees shall be determined as follows:

Company 1

Time Charge is relevant and closer to fees computed based on Gross Turnover. Thus, the
recommended fee of RM3,440 will apply.

Company 2

Time Charge is between fees computed based on Total Assets and Gross Turnover. Thus the
recommended fee will be based on time charge at RM3,600.

Company 3

Time Charge is relevant and closer to fees computed based on Total Assets. Therefore, the
recommended fee will be RM4,248.

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BY-LAWS (ON PROFESSIONAL CONDUCT AND ETHICS)

Company 4

Time Charge is higher than the fee calculated based on Total Assets. Therefore, the
recommended fee will be on time charge at RM4,500.

Example 2

In a situation where an organisation has a Turnover of RM100 million and Total Assets of
RM5,000 with total operating expenditure of RM1.5 million, it will be inappropriate to determine
audit fees using the Total Assets or Gross Turnover basis because of the extremes.

Therefore, it will be appropriate to use Total Operating Expenditure.

Based on Total Operating Expenditure of RM1.5 million, the fee computed per the coefficient
percentage table will be RM7,500 as follows :

The first 50,000 at 2% = 1,000

The next 150,000 at 1% = 1,500

The next 800,000 at 0.5% = 4,000

The next 500,000 at 0.2% = 1,000

Total RM1,500,00 RM7,500

(D) Procedures for Implementing the Change in Audit Fees Billing

(i) The revised recommended levels of audit fees shall be applicable only to assignments
commenced after 1 September 1994.

(ii) The recommended levels of audit fees are applicable only for draft accounts submitted
for audit with proper schedules. Members may wish to charge higher audit fees having
considered the reliance placed on internal control, complexity of business activity,
volume of transactions, degree of responsibility and risk, skill of staff etc.

(iii) Draft accounts submitted without proper schedules would require a member firm to
utilise more skill and knowledge as well as time spent on the assignment, and as such
the member firm should advise the client that higher audit fees may be charged for such
audit assignments.

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BY-LAWS (ON PROFESSIONAL CONDUCT AND ETHICS)

Appendix III

Coefficient Percentage Table

(i) Gross Turnover or Total Assets Basis

Gross Assets or Turnover for every ringgit of Rate(%)

RM

The first 100,000 0.8

The next 150,000 0.35

The next 250,000 0.25

The next 500,000 0.15

The next 1,500,000 0.10

The next 2,500,000 0.08

The next 5,000,000 0.075

Above 10,000,000 Negotiable

(ii) Total Operating Expenditure Basis

Total Operating Expenditure for every ringgit of Rate (%)

RM

The first 50,000 2

The next 150,000 1

The next 800,000 0.5

The next 1,000,000 0.2

Above 2,000,000 0.1

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BY-LAWS (ON PROFESSIONAL CONDUCT AND ETHICS)

BY-LAW B-7: REFERRALS

B-7.1 No member in public practice who receives an assignment by referral from another member in
public practice shall provide any other professional services to the referring member's client
without informing the referring member.

B-7.2 At all times, a member in public practice who accepts a referral from another member in public
practice shall not do anything which will impair the position of that member in the continuing
work for the client.

BY-LAW B-8: CHANGES IN PROFESSIONAL APPOINTMENTS

B-8.1 A member in public practice invited to undertake professional work additional to that already
being carried out by another member, who will still continue with his existing duties, shall as a
matter of professional courtesy, notify the other member of the work he is undertaking unless
the client gives a valid reason as to why such notice should not be given.

B-8.2 A member who accepts an appointment as a company secretary to any company in place of
another member shall not delay in effecting the change of secretary and where necessary, the
change of registered office of the company which shall include the filing of the relevant forms
with the Registrar of Companies, Malaysia.

B-8.3 (1) A member in public practice who is asked to accept nomination as auditor shall, save
where the client has not previously had an existing auditor, request the prospective
client's permission to communicate with the existing auditor and if such permission is
refused, he shall decline the appointment.

Explanatory Note:

(i) The client has an indisputable right to choose its auditors and other
professional advisers and to change to others if it so decides, subject to the
provisions of the Companies Act 1965. Acceptance of nomination as auditor
by members in public practice shall be in accordance with the provisions of the
Companies Act 1965 and the provisions of these by-laws.

(ii) Although the following paragraphs set out the basis for the replacement of an
auditor of a company, that basis is adopted as but one example of a change in
a professional appointment. It follows that the considerations arising on a
change of auditor also apply, in appropriate fashion, when a member is invited
to undertake advisory work of a recurring nature including the provision of public
practice services other than audit services in place of another accountant,
whether or not the latter is a member of the Institute. They apply whether the

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BY-LAWS (ON PROFESSIONAL CONDUCT AND ETHICS)

client is a company, an individual, a partnership or any other kind of


association, and a member invited to accept nomination or appointment as
auditor of a body other than a company should be guided by the same
considerations as those indicated in relation to a company. In the case of an
audit client they apply in respect of non-audit work as they do to audit work.

(iii) In this by-law the term 'existing auditor' means the individual or firm currently
filling or who last filled the office. The term 'member' is used to denote the
individual member or firm invited to accept appointment, whilst the term
'proposed auditor' is used when referring to the obligations of an existing auditor
to any prospective successor.

(2) No member in public practice shall accept nomination as auditor or undertake any other
professional work without -

(a) communicating with the existing auditor, if any, who is to be superseded;

(b) enquiring from the existing auditor as to whether there is any professional or
other reason for the proposed change of which he should be aware before
deciding whether or not to accept the appointment and, if there are such
reasons, requesting the existing auditor to provide him with all the details
necessary to enable him to come to a decision.

(3) The existing auditor, on receipt of a communication referred to in by-law B-8.3(2)(a)


above, shall forthwith:

(a) reply in writing, advising whether there are any professional reasons why the
proposed auditor should not accept the appointment; and

(b) if there are such reasons or other matters which should be disclosed, ensure
that he has the permission of the client to give details of his information to the
proposed auditor, and if -

(i) such permission is obtained from the client, the existing auditor shall
disclose all information needed by the proposed auditor to enable him
to decide whether or not to accept the appointment, and he should
discuss freely with the proposed auditor all matters relevant to the
appointment of which the latter should be aware; or

(ii) such permission is not obtained from the client, the existing auditor
shall report that fact to the proposed auditor.

(4) If the proposed auditor does not receive, within a reasonable time, a reply to his
communication to the existing auditor, he shall send a reminder to the existing auditor
by A.R. registered post or hand-despatch or similar means. However, if the proposed
auditor still does not receive within a reasonable time, a reply to such reminder and he
has no reason to believe that there are any exceptional circumstances surrounding the
proposed change, he shall endeavour to communicate with the existing auditor by some
other means. If he is unable to obtain a satisfactory outcome in this way, he shall send
a further letter, stating that he assumes there is no professional reason why he should
not accept the appointment and that he intends to do so.

Explanatory Note :

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BY-LAWS (ON PROFESSIONAL CONDUCT AND ETHICS)

For the purposes of determining reasonable time, the Council deems fourteen (14) days
to be a sufficient period for the proposed auditor to ordinarily expect to receive a reply
from the existing auditor and another fourteen (14) days for the proposed auditor to
ordinarily expect to receive a reply to his reminder to the existing auditor.

B-8.4 (1) A member in public practice who is the existing auditor may decline reappointment and
cease to provide audit services to a client if that particular client has not paid to the
auditor or any previous auditor of that particular client the fees due on the statutory
audit of the financial statements of the client for two consecutive financial years.

(2) If the existing auditor wishes to decline reappointment due to the above reason, he shall
decline reappointment as auditor at the annual general meeting held to consider the
financial statements of the second consecutive year of the client.

(3) Where the existing auditor seeks to invoke by-law B-8.4(1) to decline reappointment, he
shall notify the client and the Institute accordingly.

(4) If by-law B-8.4(1) above has been duly invoked by the existing auditor and notice thereof
has been duly given pursuant to by-law B-8.4(3), no other member shall take up the
appointment as auditor of that client unless the fees due to the existing auditor have
been settled in full, provided that a member may apply in writing to the Institute for
consent to take up such an appointment for valid reasons.

Explanatory Note:

An existing auditor may elect not to invoke by-law B-8.4(1) above when he seeks to
decline reappointment notwithstanding that his fees remain outstanding, in which event,
any member can take up the appointment as the new auditor for that client.

(5) Unless by-law B-8.4(1) above has been duly invoked and notice thereof has been duly
given pursuant to by-law B-8.4(3), the fact that there may be fees owing to the existing
auditor shall not be taken as a professional reason why another member should not
accept the appointment as auditor, except where the fees in dispute relate directly or
indirectly to the qualification of the audit report or other professional disagreement.

Explanatory Note :

(i) Unless by-law B-8.4(1) is invoked, the fact there are fees owing to the existing
auditor does not preclude the proposed auditor from accepting the appointment
as auditor.

(ii) Whether the proposed auditor does so accept or not is entirely a matter for his
own judgment and so, too, is the related question how far he may properly go
in assisting the existing auditor to recover those fees. Normally he would be
expected to draw the attention of the client to the fact that the fees are due and
unpaid and to suggest that they should be satisfied.

(iii) If, however, the fees are the subject of dispute, the proposed auditor would be
well advised not to allow himself to become involved in the dispute, otherwise
he may well find himself expected to express an opinion whether or not the
fees are reasonable.

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BY-LAWS (ON PROFESSIONAL CONDUCT AND ETHICS)

B-8.5 Where a member decides to accept a nomination in place of the existing auditor, the fact that
he has communicated with the latter does not preclude the existing auditor from lodging a
complaint against that member, that in the particular circumstances, the acceptance by that
member was improper.

B-8.6 (1) The existing auditor shall transfer all books and papers of the client which are or may
come into his possession to the new auditor promptly after the change in appointment
has been effected and shall advise the client accordingly.

(2) Where the new auditor requires information as to the client's affairs from the existing
auditor, lack of which might prejudice the client's interest, such information shall be
given promptly and, unless there is good reason to the contrary such as an unusual
amount of work involved, no charge shall be made for the provision of such information.

B-8.7 (1) Notwithstanding by-law B-8.6, where a legal right of lien exists, a member in public
practice may exercise that lien in appropriate circumstances.

(2) A right of lien shall only exist where all four of the following circumstances apply:

(a) the documents retained must be the property of the client who owes the money
and not of a third party, no matter how closely connected with the client;

(b) the documents must have come into possession of the member by proper
means;

(c) work must have been done by the member upon the documents; and

(d) the fees for which the lien is exercised must be outstanding in respect of such
work and not in respect of other unrelated work.

(3) Accordingly, where a member in public practice does work for a company and also for
the directors of that company in their private capacities, if the fees for work done for a
director in his private capacity are unpaid, no right of lien shall exist over the company's
documents in the light of sub-paragraphs (a) and (d) above.

Explanatory Note:

Members should consult their solicitors before seeking to exercise a lien in any but the
most straightforward of cases. Similarly a client disputing the right of lien of a member
might be persuaded the consult his own solicitors. Where the member's right of lien is
well founded the advise the client receives may change his attitude both to the lien and
the bill.

BY-LAW B-9: INCAPACITY OR DEATH OF A SOLE PRACTITIONER

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BY-LAWS (ON PROFESSIONAL CONDUCT AND ETHICS)

B-9.1 (1) A member in public practice who is a sole practitioner shall enter into an arrangement
to enable his practice to continue with minimum disruption in the event of his death or
incapacity, in either of the following ways:

(a) by entering into an agreement with another sole practitioner or with a member
firm; or

(b) by satisfying the Council that other adequate provision has been made.

(2) Members shall ensure that their executors and family will be aware, in the event of
death or incapacity, of the arrangements made for the management of the practice.

Explanatory Note :

(i) Unless appropriate arrangements have been made, the continuing incapacity or death of
a sole practitioner will cause considerable difficulty and inconvenience to his clients.
Furthermore, the resultant interruption of services will diminish the value of the practice
and may even lead to its disintegration.

(ii) It is therefore important for a sole practitioner in his own interests no less than in those
of his clients to enter into such arrangements with another member or firm as will
enable the practice to be carried on with a minimum of dislocation in the event of his
incapacity or death.

(iii) Such arrangements should be made as soon as possible and should provide, so far as
possible, for the practice to be continued as a going concern until such time as the sole
practitioner recovers or he or his representatives decide to dispose of the practice.

(iv) An arrangement, reciprocal or otherwise, between two sole practitioners may be


appropriate. Alternatively, in many cases it will be advantageous for a sole practitioner
to enter into an arrangement with a member firm.

(v) Although such an arrangement may take the form of an agreement to manage, an
arrangement for the sale of the practice on a predetermination basis may in many
cases be more satisfactory.

(vi) When such arrangements are under consideration, the compatibility of the respective
practices, especially in relation to audit procedures, fees and the general state of the
work in both offices, should be borne in mind.

BY-LAW B-10: PROFESSIONAL INDEMNITY INSURANCE

B-10.1 Every member in public practice shall ensure that his firm carries and maintains a policy of
professional indemnity insurance.

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BY-LAWS (ON PROFESSIONAL CONDUCT AND ETHICS)

B-10.2 Members are required to purchase policies from local insurance companies.

B-10.3 (1) Every member in public practice shall obtain a policy of professional indemnity
insurance with a minimum coverage of Ringgit Malaysia One Hundred Thousand
(RM100,000.00), within three (3) months from commencement of public practice.

(2) Proof of such coverage shall be required for the purpose of the annual renewal of the
member’s practising certificate issued pursuant to Rule 9 of the Malaysian Institute of
Accountants (Membership and Council) Rules 2001.

B-10.4 Where a member in public practice carries on his practice under more than one firm, that
member is required to have separate policies of professional indemnity insurance with a
minimum coverage of Ringgit Malaysia One Hundred Thousand (RM100,000.00) each, for
himself in each of the firms through which he practices.

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BY-LAWS (ON PROFESSIONAL CONDUCT AND ETHICS)

PART C: APPLICABLE TO MEMBERS IN SPECIFIC TYPES OF


PUBLIC PRACTICE

BY-LAW C-1: PROFESSIONAL CONDUCT OF MEMBERS IN SPECIFIC TYPES


OF PUBLIC PRACTICE

C-1.1 Every member shall ensure that in the performance of his duties in specific areas of public
practice, he shall abide by all the applicable laws as well as the respective code of ethics for
the time being in force which is applicable thereto.

46