ABSTRACT

This internship report serves the purpose to record the details of my industrial

training which was conducted in SH Chin & Co ( also known as SH Chin), which is

one of the audit firms in Puchong area. This report will cover the details of my

internship in the assurance and tax department for a duration of six months which

began from 14th March, 201 till 11th September, 2016 at SH Chin which is located at

IOI Business Park, Bandar Puchong Jaya, Selangor.

Students who are undertaking the accounting degree in Multimedia

University (MMU) are compulsory to undergo an industrial training at one of the

MIA listed audit firms (audit firms which had been certified by Malaysian Institute

of Accountants) for a period of six months prior to graduating. Students are allowed

to make their own choices to enter any audit firms to do their internship, as long as

the audit firm is recognized and certified by MIA. This is to ensure that the students

will be getting the exposure to involve in accounting related works instead of other

non-accounting related works. The objectives of having this industrial training are

to give exposure to the students to the real working life, enable the students to

develop a deeper understanding on the course which they are undertaking and to

provide the appropriate work-related trainings to them in the field of accounting

profession.

i
 In this internship report, I will write and elaborate about the experiences and

occurrences which I had encountered and those things which I had learnt during the

entire internship period. For example, the activities or tasks which I had carried out

or involved in as well as those challenges and limitations which I had faced during

this internship. Besides that, an overview of the company and the clients‟ company

which I had gone through my six months of internship will be illustrated in this

report.

My experience as an audit and tax interns for six months has given me a lot

of exposure to the auditing and taxation field. It had provided me the opportunity to

get to know what the process of auditing and the taxation is and the steps involved

throughout the process. It had benefited me in many ways and one of the greatest

benefits for me is to be able to gain valuable experience by getting involved directly

in the tasks relating to auditing. Those first-hand experience and knowledge which I

had gained during this internship period are not something which I can simply learn

from textbooks or lecture classes. Besides that, I am able to apply those knowledge

and theories which I had learnt during my classes to my daily works.

In overall, this training program is a good learning opportunity for me. Now

I‟m able to expose myself to the corporate world and technical knowledge regarding

audit. I also have chance to apply the theoretical knowledge that I obtained in MMU

into the actual task given. Therefore, I found that this industrial training is extremely

helpful for the student.

ii
 ACKNOWLEDGEMENT

I am feeling grateful to be able to go through my internship which lasted for

six months with SH Chin. It was a memorable experience for me because I got to

learn a lot during the entire internship programme. It had brought me a lot of

valuable meanings in various aspects and I believe that these will be the valuable

lessons and guidelines for my future career. I appreciate the opportunity given to

gain all these experiences had helped to bring me to different aspects of thinking and

interpretation. Moreover, this industrial training had helped to strengthen and

develop my soft skills such as communication skills, time management skill and

interpersonal skill. Therefore, I feel that it is important for me to express my greatest

gratitude to all the wonderful people who had contributed and helped me in different

ways throughout this period.

First of all, I would like to thank Multimedia University and the Faculty of

Management (FOM) for their efforts in conducting this industrial training which

benefits the students in different aspects. The help of our coordinator of the

Industrial Training Programme, Ms. Rapiah and Ms Sellywati and my supervisor,

Ms. Azleen in assisting the students throughout this internship period are also greatly

appreciated. Whenever we have any doubts, they will be there to answer our

questions patiently and help us to clarify those matters which we are unsure of.

Besides that, I would like to express my greatest gratitude to SH Chin which

had provided me the wonderful opportunity to undergo my industrial training with

iii
the firm. SH Chin had provided a great and pleasant training to me and this had

helped me to gain a better understanding of my tasks here. I would also like to thank

all the people whom I had met during my internship period in SH Chin. These

include my seniors, colleagues and the other staffs here who had helped me a lot

along these six months. Thanks to my audit manager, Mr Kwan Chin Keong and all

the seniors had provided me the supervision and guidance to me along this journey.

Not to forget, my senior Ms. Lee Yi Xuan who had taught and guided me a lot in the

tasks allocated to me. They had helped me to achieve a better understanding in the

auditing field by sharing their knowledge with me. Moreover, their friendly

characters had made me feeling warm and grateful to be able to work with them

under the same engagement.

In a nutshell, I would like to dedicate special thanks to my family and my

friends for their continuous support and understanding during this period. It will be

somehow stressful to work in an auditing field due to the workload and strict

timelines, nevertheless, their encouragement had helped me to face the challenges

which I met with more strengths, patients and positive mind.

iv
Table of Contents

ABSTRACT ........................................................................................................................i

ACKNOWLEDGEMENT ............................................................................................... iii

LIST OF PICTURES ...................................................................................................... vii

LIST OF DIAGRAMS ................................................................................................... viii

LIST OF TABLES ............................................................................................................ix

1. INTRODUCTION ABOUT THE FIRM.................................................................... 1

1.1.OVERVIEW OF SH CHIN & CO ................................................................ 1

1.2.HISTORY OF SH CHIN & CO.................................................................... 2

1.3.SERVICE PROVIDED ................................................................................. 2

1.4.CORE VALUES AND VISION ................................................................... 3

1.5.OFFICE LOCATION ................................................................................... 4

2. ORGANISATION STRUCTURE OF THE FIRM .................................................... 5

3. KEY PERSONILITIES .............................................................................................. 7

4. METHODOLOGY ................................................................................................... 13

5. CONTENT ............................................................................................................... 15

5.1.OVERVIEW ............................................................................................... 15

5.2.TRAINING ................................................................................................. 16

5.3.SOFTWARE COVERAGE ........................................................................ 18

5.4.AUDIT (ASSURANCE) ............................................................................. 23

5.5.TAXATION ................................................................................................ 73

6. AUDIT ENGAGEMENT AND ASSIGNMENTS .................................................. 81

v
7. DISCUSSION ON FINDINGS, ANALYSIS AND FINDINGS WITH REGARD
USEFULNESS OF THE TRAINING ...................................................................... 83

8. LIMITATION OF THE TRAINING ....................................................................... 86

9. SCOPE FOR FUTURE TRAINING IN THE FIRM TO DO 3 YEARS

PRACTICAL TRAINING IN THE FIRM TO BECOME A MEMBER OF MIA. . 88

10. CONCLUSION AND RECOMMENDATION ....................................................... 89

11. REFERENCES ......................................................................................................... 91

12. APPENDIX .............................................................................................................. 91

vi
LIST OF PICTURES

Picture 1. SH Chin Logo .................................................................................................... 1

Picture 2. SH Chin & Co Services ..................................................................................... 2

Picture 3. SH Chin & Co location map ............................................................................ 19

Picture 4. Audit Express Main Window .......................................................................... 19

Picture 5. BrassTax Main Window .................................................................................. 21

Picture 6. BrassTax Individual Window .......................................................................... 22

Picture 7. Lower NRV and Selling Price Test ................................................................. 41

Picture 8. Tax Expense Summary - Disclosure................................................................ 60

Picture 9. Audit Express Refresher Course Certificate .................................................... 92

Picture 10. Group picture with SH Chin‟s and the partner‟s (StanleyCo) staff ............... 93

Picture 11. Group picture of celebration of birthday for the birthday month .................. 93

Picture 12. Group picture with the Partner (StanleyCo) Directors .................................. 94

Picture 13. Group picture with the SH Chin & Co audit team......................................... 94

vii
LIST OF DIAGRAMS

Diagram 1. Company values .............................................................................................. 3

Diagram 2. Organization Chart .......................................................................................... 5

Diagram 3. Nature of Work ............................................................................................. 15

Diagram 4. List of Software............................................................................................. 18

Diagram 5. BrassTax Procedures ..................................................................................... 22

Diagram 6. Audit Procedure Chart .................................................................................. 25

Diagram 7. Test of Assertion on Property, Plant and Equipment .................................... 30

Diagram 8. Short Term Borrowing - Audit Objectives and Assertions ........................... 51

Diagram 9. Audit Working Paper - Term Loan ............................................................... 54

Diagram 10. Audit Working Paper - Dividend ................................................................ 61

Diagram 11. Audit Working Paper - Expenses ................................................................ 65

Diagram 12. Type of Audit Report .................................................................................. 70

Diagram 13. Taxation - Nature of Assignement .............................................................. 75

viii
LIST OF TABLES

Table 1. Training List ...................................................................................................... 17

Table 2. Audit Working Paper - FS Tab .......................................................................... 28

Table 3. Audit Working Paper - Balance Sheet Part 1..................................................... 29

Table 4. Audit Working Paper - Balance Sheet Part 2..................................................... 49

Table 5. Audit Working Paper - Income Statement ......................................................... 62

Table 6. Audit Working Paper - Statutory Audit ............................................................. 68

Table 7. List of Clients..................................................................................................... 81

ix
1. INTRODUCTION ABOUT THE FIRM

1.1. OVERVIEW OF SH CHIN & CO

SH Chin & Co located at Suite 15, 6th Floor, Pusat Perdagangan IOI,

,Bandar Puchong Jaya, 47170 Puchong Selangor, Malaysia.

Picture 1. SH Chin Logo

SH Chin & Co is an independent audit, tax and advisory firm registered with

the Malaysian Institute of Accountants (MIA), providing comprehensive range of

services to a broad scope of clients from private individuals to international

corporations.

SH Chin & Co audit services include regulatory and compliance audit,

financial statement audit, management and operational audit, financial due diligence

review, special review and certification, reporting accountants for submission to

authorities and internal audit.

Company values:

„Integrity, professionalism, openness relation and hardworking‟

1
1.2. HISTORY OF SH CHIN & CO

SH Chin & Co is counted as a young audit firm as it was establish on 2011.

But, we can say that the firm has been well establish as it has more than 250 clients

up to today. The office has always been located at Pusat Perdagangan IOI.

On the early year, there is only one audit manager with one audit staff. But,

in two years the firms has managed to have three audit associates together with

additional four to five intern. Currently, the firm has one audit partner, one audit

manager and three audit associates (please refer to Diagram 2. Organisational Chart)

1.3. SERVICE PROVIDED

Picture 2. SH Chin & Co Services

2
1.4. CORE VALUES AND VISION

SH Chin & Co.‟s vision is to provide a good and professional service besides

developing the business of company and the clients. Organizational values refer to

the positive qualities that need to be practised by the employees in an organization.

The main importance of SH Chin & Co is to encourage their employees to practise

all these core values in order to achieve the objective of the company which is to

provide the clients with innovative and reliable professional services and solutions

by helping them to achieve success in near future. They understand that each and

every client, regardless of size, is unique. So they listen to understand client‟s

financial needs and then proceed to develop successful business plans to make

client‟s goals and dreams a reality. The company values that are practised by SH

Chin & Co are as shown in the Diagram 1.1 as follows:

Integrity Professionalism Openness Relational Hardworking

Diagram 1: Company values

3
1.5. OFFICE LOCATION

SH Chin & Co located at Suite 15A, 6th Floor, Pusat Perdagangan IOI,

Bandar Puchong Jaya, Puchong 47170 Selangor, Malaysia.

SH Chin & Co
6F-15A, IOI Business Park,
Bandar Puchong Jaya,
47170 Puchong, Selangor

Picture 3. SH Chin & Co location map

4
2. ORGANISATION STRUCTURE OF THE FIRM

Audit Partner
Chin Soo Har

Director
Samuel Lai

Audit Manager
Kwan Chih Keong

Senior Associate
Yi Xuan

Audit Associate
Tan Boh Yee Jefferd

Intern
Intern 1 Intern 2 Intern 3 Intern 4

Diagram 2. Organization Chart

As a small medium firm, the organization structure was not contain many

hierarchy. SH Chin & Co has only six hierarchy which is Audit Partner which is

Mr. Chin Soo Har, director, audit manager, one audit senior and two audit

associate. Most of the time the firm will have four to five audit intern on the

bottom line of the organization chart.

5
 As we can see above, the audit manager Mr. Kwan Chih Keong will

review all the audit works before we pass it to the audit manager. Most of the

audit planning will be done together with the audit manager which include

deciding the risk assessment, audit planning and detail procedure need to be

taken (strategize stage).

The senior associate will assist Mr. Kwan Chih Keong to oversee all the

audit progress of the audit associates and interns. All the audit personnel need to

send weekly report to Ms. Yi Xuan that comprises of the detail progress of the

audit and tax task that have been given.

The task is given directly by audit manager to each personnel. Most of

the time, one client will be handled by one audit personnel (either intern, audit

associate or senior associate) depending on the complexity of the case. One audit

personnel can have four to six clients at one given time.

When it is necessary to go out for field audit, two or more audit personnel

will be assigned together on the task in order to reduce the audit time. Even

though the field audit has be done by two or more personnel, the finalization of

the audit will only be assigned to one personnel. By means that particular

personnel will be responsible for the whole audit. This system ease audit

manager to monitor the progress of each audit case since every client has one

person in charge.

6
3. KEY PERSONILITIES

The auditors‟ professional behavior always plays essential roles in their

works. The collapse of Arthur Andersen as a consequence of the Enron debacle and

other financial fiasco have raised question about the integrity of the accounting

profession. Thus, maintaining upright key personalities are fundamental to audit

outcome.

Strong ethical characteristic is the first aspect of key personalities that as an

auditor must have. It is vital for an auditor to be objective in judgment and

pronouncement. This is considered the baseline set of characteristic that is expected

of all auditors in order to achieve a successful audit.

Excellent technical knowledge will be placed among the important aspect of

key personalities, as an auditor must maintain appropriate technical skills throughout

his or her career. Keeping up with the latest accounting standards is deemed

necessary in order audit process will be successful.

SH Chin & Co has one audit partner, Mr Chin Soo Har. He started his career

in this industry in 1985 when he was admitted as an associate member of the

Chartered Association of Chartered Accountants. He started his membership in

Malaysian Institute of Accountant since 1986. He graduated from University of

Malaya for his post graduate programme on MBA degree majoring in Business

Administration.

7
 Mr Chin Soo Har has been in public practice since 1998, with more than 18

years of external audit experience. He start his career by working with a small

Chartered Accountant firm where he spends about five years doing auditing,

accounting and taxation works. His post qualifying experience is with an

international firm of accountants during which time he was involved in the audit of

public listed companies and was also engaged in receivership assignments.

Besides, as the manager of SH Chin & Co, Mr. Kwan always point out that

as an auditor we are not stop learning as there will be always changes and it is

necessary to understand it. Besides, attending numerous training sessions is required

in order to maintain appropriate technical skills. If the auditor is not current with the

technical rules, we could easily miss something and issue an inappropriate opinion.

Thus, as an auditor we must willing to learning endlessly. Continuous

Learning is the ability to apply strategies which support learning and the ability to

adapt to change. This means that auditor needs to keep educating own self and keep

up with current world situation. As important as technical and ethical characters are,

these are only fundamental as an auditor. But, auditor also need to possessed

additional characteristics and values such as vision and instinct, integrity, able to see

in bigger picture, people skills, decision making ability, leadership and superior

communications skills.

The good auditor will have an ability to instinctively understand the client‟s

business is all about and create a picture of any probable issues and arrive at

8
conclusion that fits with the vision of the business. It is needed an inquiring mind

and strive to learn from all experience encountered in client situation throughout

auditor career to be able to develop instinct and vision. Instinct will be polished so

long with the experience of working as an auditor. It is true that instinct will be

developed over the years of experience, since the after working cases by cases, we

will be more sensitive to some small flag and understand which and which area need

to be focused on the audit process.

Next is integrity, objectivity and independence are set in the top key

personality of an auditor need to possess. Auditor need to be trustworthy but also

have confidence and resilience when faced with complex problem. Integrity implies

not merely honesty but fair dealing and truthfulness. Objectivity refers to having

independence in mind. It is the state of mind which has regard to all considerations

relevant to the task in hand. The need for objectivity is particularly vital when the

auditor opinion is likely to affect rights between parties and decision they take. As

auditor is serving public interest, they have to safeguard their objectivity and

independence as well as integrity.

Afterward, able to see in bigger picture be the next vales an auditor must

have. Auditors need to be able to understand the client‟s business and industry. By

understanding this area in deep the audit can be carried on better since the auditor

can quickly frame a picture of the client‟s business organization and key attributes

within in. This means that the auditors need to be able to find the connections and

9
linkages within the organization and find which area needs to be focused on during

the audit process which means the auditor needs to be able to see in the big picture.

This key personality is required as the auditor needs to develop thorough

understanding on the client‟s business as a whole.

Another value that an auditor needs to possess is the ability to deal with their

clients regardless of their situation, education background and others. An auditor

needs to have exceptional people skills which will ease the audit process since client

will be more helpful to them. As SH Chin & Co majority of clients is small and

medium company, sometimes their accountant does not have adequate accounting

knowledge that put an auditor works harder than usual. This key personality will

help the auditor to complete the audit process as we are able to engage good

relationship with the client.

In certain cases, client will not be much helpful as they feels like someone is

looking over their shoulder and trying to point out mistake on their part. Thus, the

auditor that able to put client at ease will be much respected by the client. And at the

end they will be more willing to open up to the auditor. This value is not just

applicable during interaction with client but also with the audit team. Auditor need to

be a team player as the entire team is working toward a same goal. Building

understanding toward one another will help the team to finish their work effectively

and efficiently.

10
 Other characteristic value is decision making ability which is needed as the

auditor has to determine what is relevant and what is not. Once the audit evidence is

accumulated, making a decision over this information can be a challenge. Thus,

auditor must work on their ability to conclude and make a final call from all the

evidence and audit process has been taken. The decision making sometimes can be

hard. There is a tendency to put off the decision, and trying to wait for more

information from client side. This can drag an audit process and might cause the

client to lose confidence in their auditor. Being strong and effective decision maker

is one of the value of an auditor should have.

Leadership also plays a central role in the success of the audit process. A

good auditor must strive to become a successful leader. This characteristic will bring

the firm to rise as well-run audit can be directly linked to leadership.

The last but not least, a good auditor must have superior communication

skills. This characteristic will allow auditor to have connection and rapport with

other, not just the fellow team, manager, and partner but also gain more relation with

the clients. It will give a great impact on the audit process since good

communication will always lead to better understanding and capture the information

as a whole and complete. It is essential that all auditors need to have superior

communication skills as they have to deliver message and explain to the client on

audit related procedure in order to gain useful information for audit purposes.

11
 In a nutshell, the characteristics of good auditor start with the basics of sound

technical ability and solid ethical foundation. The auditor need to serve beyond the

„rules and regulation‟ mindset of profession since they have to be able to see in the

big picture, having vision and instinct, have exceptional people skills, be a good

leader and have superior communication skill.

12
4. METHODOLOGY

Methodology indicates the techniques or approaches used in completing a

study which may derived to interpret or solve various nature of problems within the

scope of a particular discipline. The same goes to this study where I used some

qualitative approaches in accumulating some relevant and necessary data to

complete my report efficaciously.

The very first method that I used in order to obtain information‟s is

interview. As we all are aware of, interviews can be done by either face to face or

by electronically devices. In today‟s world, quite a lot of interviews took place

electronically. In my case, I took initiative to enquiry about the history and

background of company by interviewing the key personnel who is Mr Chin, the audit

partner of SH Chin & Co. I decided to interview Mr Chin relating to the history of

SH Chin & Co, because there were no other specific sources where I was able to

gather information from. The interview with Mr Chin on the history and background

of SH Chin & Co took place on 5th August 2016, Friday at 2.00pm in the office.

Following this, the other method that I used to collect information is physical

observation. I believe that, this is one of the convenient and effective ways to obtain

information to complete a study as the needed information‟s can gathered by

watching over things attentively. Physical observation refers to the act of watching

attentively towards something by using our 5 senses. Five senses indicate the sense

of sight, taste, smell, hearing and touch. But the main sense that I used to acquire

13
data to complete my study is my eye sight and hearing sense. In an audit firm many

problems arises with ease. All these problems can be identified easily, if we use our

senses assiduously to detect the cause of the problem. I discovered some of them

during my internship period especially when communicating with the senior staffs‟

or clients.

Last but not least, I used online research in order to gather essential data‟s

upon completing my report. In this globalization world, a person is able to obtain

any information‟s at his fingertips. Hence, I made use this type of approach in order

to obtain sufficient data‟s to complete my report. The online research methods are

the most beneficial and systematic way or discovering new and relevant data‟s

needed to complete my report. The main websites that I used during the course of

completion of this report are the Malaysian Institute of Accountants (MIA) website ,

Inland Revenue Board of Malaysia (IRB) website and Malaysian Accounting

Standards Board (MASB).

14
5. CONTENT

5.1. OVERVIEW

In general, the working scope is comprises into two part: first is audit work

which is included audit planning, fieldwork, issue audit report and audit follow up

and second is tax compliance work that cover computation of tax payable as well as

filling tax return and assist client in all of their tax queries.

It will be best describe if it is started from elaborating the detail of training

before the real works started to be given. Next, the overview of software used during

the internship period, the nature of assignment and detail description on the audit

procedures and lastly describe each particular case/client that have been handled for

both audit and tax works.

Training
Orientation Audit
On the job training Audit planning Tax
Audit training Field work Tax payable
Tax training Issue audit report computation
Follow up Filing tax return
Assist client on tax
queries

Diagram 3. Nature of Work

15
5.2. TRAINING

The training is divided into several type where induction or orientation is

come in the first place. On the first day of the internship, brief and comprehensive

orientation has been given. This covers the introduction of the organization

procedures, rules and regulation. Besides, introduction to the manager, audit seniors

and the other employees is given on this particular day.

It was short and informative orientation given by the human resources person

which also included the basic training on administration work such as the procedure

to send letter, usage of photocopy machine, booking meeting room (for meeting with

the client), receive and transfer phone call, email usage and procedure need to be

taken when doing field work.

Next, the senior audit is the one that assist us on the training in audit work

where first we have to familiarize our self with the audit working paper of the firm.

We have given our time to review and go through the audit working paper in detail.

Since SH Chin & Co adopted on the job training, I have been given one client

(Turnstone MM2H Sdn. Bhd.) as my first audit case as a platform to understand the

basic audit procedure.

Next, I also had been given training by the audit manager for one full day.

This training cover the detail explanation of the audit working paper that the firm

currently using. This is given in the second week of internship.

16
 Date Location Detail training Trainee
Mr. Kwan Chih Keong
21 March 2016 Office Audit working paper training
(Audit Manager)
Audit working paper training Mr. Kwan Chih Keong
27 April 2016 Office
(deferred tax) (Audit Manager)
Audit express training
(Audit Express Refresher
28 June 2016 Cyberjaya AXP trainee team
Course) – Certificate is given
as seen on appendix
Mr. Kwan Chih Keong
8 August 2016 Office Audit working paper training
(Audit Manager)
11 August Mr. Kwan Chih Keong
Office Brasstax
2016 (Audit Manager)
Table 1. Training List

The first training coverage is just basic audit procedure as well as

understanding the important of audit planning (include doing risk assessment,

choosing sample and materiality calculation).

I have been given five times training in total which comprise of four audit

training and one tax compliance training. I also have the opportunity to go for Audit

Express training which is held at Audit Express office at Cyberjaya. The training is

eight hours long as Audit Express Refresher Course which mainly cover the basic

audit express procedure. In this training, the main focus is preparation of cash flow

using the system since many of the trainees has been facing the same problem while

preparing cash flow.

17
5.3. SOFTWARE COVERAGE

It can be denied that in this modern day, technology has been play an integral

part in every part of human life. We are all agree that the vast growing of technology

has changed the trend of human workforce. Every industry including audit firm in

general has adapt with the changes by adopting software to ease their work.

Audit Express
• Audit planning
• Generate audit working paper
• Generate figure for audited financial statements

Brasstax
• Tax computation
• Draft tax return

Diagram 4. List of Software

SH Chin & Co has been using Audit Express by AXP Group to assist the

auditor from the audit planning till drafting audited financial statements. Moreover,

the firm used Brasstax to assist on the tax computation analysis and drafting tax

return.

18
5.3.1. Audit express

Picture 4. Audit Express Main Window

First of all, we have to use the audit key master from past year to working

on. In order to update to the current year, we have to go to client database and

click on update the date. Next is we have to key in the date of the AGM.

After that, we have to go to audit planning, and paste the client trial

balance in the pasting board. This is the first step to key in the management

account pre-audited amount. Next, account grouping need to be made to assign

each particular account to the correct nature group (whether it is a fixed assets,

current assets, non-current assets, current liabilities or current liabilities). This

step is very important since it will affect the final result on the financial

statements.
19
 Next, after the unaudited account has been keyed in, we can extract the

report and use the rounding figure to be keyed in to audit working paper. Here,

audit working paper is ready and audit procedure on test of detail and other

substantive test might be performed.

After the audit working paper has completed, we have to key in all the

adjustment to the audit express to get the balance after audit. Then after ensure

all the account and adjustment is properly recorded, we have to do the cash flow

and transitional spreadsheet ready and it can be directly imported to audited

financial statements.

20
5.3.2. BrassTax

Picture 5. BrassTax Main Window

This software basically covers wide range of platform to assist tax agent

on the computation of Company tax return together with the detail analysis.

When we open the software, ID and password are required to be filled in. Once

you are inside, the main window will show the client list as the picture 4 above.

Next we have to select the particular client to go to the individual

window. Once we are in, there are few basic step that we have to do and the rest

is depend on the client financial statements performance as well as its business

activity.

21
 Complete section Complete section L.
Create new tax filling C. Summary of tax Company financial
and payments information

Complete section P,
Complete section A. Q, R in order to get
Key in analysis of
Statutory, total,
account
chargeable complete draft tax
return

Key in additional,
disposal and other Generate capital
related transaction for allowance
asset

Diagram 5. BrassTax Procedures

Picture 6. BrassTax Individual Window

22
5.4. AUDIT (ASSURANCE)

Audit is the examination of the financial statements of an organization as

presented in the annual report. The financial statements report includes a balance

sheet or statement of financial position, an income statement or statement of

comprehensive income, a statement of changes in equity, a cash flow statement, and

notes comprising a summary of significant accounting policies and other explanatory

notes.

The purpose of an audit is to form a view on whether the information

presented in the financial report, taken as a whole, reflects the financial position of

the organization at a given date. Thus there is various audit procedure need to be

taken in order enable the auditors to generate their opinion towards the report itself.

5.4.1. Nature of Assignment

Throughout six months internship period, I individually have been given

total of 31 companies and assist senior audit to help on audit process on 2

companies. The assignment will be complete audit work from the audit planning,

carry out audit procedure until the draft of report itself.

Besides, there is other assignment that I have to complete such as casting

the audited financial statements, administration assignment such us ensure all

important document has been properly kept in the audit permanent file, ensure all

confirmation letter is received and assisting clients on inquiries.

23
 The detail task will be explained in detail in the next section under audit

procedure. There will be an extensive description in working paper since it is a

heart of audit process as the main result of audit is to issue an opinion that

provide a reasonable degree of assurance in material aspect and give a true and

fair view in accordance with the financial statement.

In order to generate the audit report, the auditor needs to gather all the

„evidence‟ or we call it supporting documents on each of the material aspect.

Thus, the audit working paper will be the guideline and assist auditors

throughout the audit process.

5.4.2. Audit Procedure

As we talk before, the objective of the auditor is to obtain sufficient

appropriate audit evidence regarding the assessed risks of material misstatement

through designing and implementing appropriate responses to those risks. Thus,

there is a particular procedure design in order to complete the audit and generate

audit report.

24
 Desk Audit

Discussion with Appointment on

Audit Planning
audit manager field audit

Field Audit

Audit field Perform audit Gather audit Audit field ends

begins procedures evidence

Audit Manager Get the

Complete Audit Audit report confirmation
reviews the
Working Paper issued from Client
work done

Diagram 6. Audit Procedure Chart

There are two audit procedure which is substantive procedure and test of

controls. Substantive procedure is an audit procedure design to detect material

misstatement at the assertion level which comprises of test of details and

substantive analytical procedures. Test of controls is audit procedure designed to

evaluate the operating effectiveness of controls in preventing or detecting and

correcting, material misstatements at the assertion level.

25
5.4.2.1. Audit Planning

I have to perform APM (audit planning memorandum) on the

beginning of the audit which covers describing the client business activity,

general information and the preliminary analysis of the client financial

statements before the audit process take part. It is important for the auditor to

assessed risk of material misstatement at relevant assertion level for each

class of transactions, account balance and disclosure so that the audit process

can carry out smoothly.

After performing the APM, the auditor can foresee whether the risk

assessment shows that they have weak internal control, thereby requiring the

auditor to obtain audit evidence to determine whether the control are

operating effectively. This means that I have to extend and further the

substantive procedure.

Next, the audit procedure of each account will be carried out

differently depending on the nature of the transaction itself. It has to be

highlighted that the next procedure has to be adequate for the auditor to draw

opinion towards the client financial statements. (Please refer to 5.4.2.2. Audit

Working Paper for detail breakdown for the audit procedure).

26
5.4.2.2. Audit Working Paper

The audit working paper are series of detail audit trail include the

documents which record all audit evidence obtained during financial

statements auditing, internal management auditing, information systems

auditing, audit procedure perform and the conclusion of each part that have

been audited.

Audit working papers are used to support the audit work done in

order to provide assurance that the audit was performed in accordance with

the relevant auditing standards. Every firm must have different audit working

paper which it will be altered on each different client since the case might be

difference on one another.

SH Chin & Co has adopted combination of audit working paper that

generated from the audit system that we used (Audit Express) together with

the additional working that has been provided by the audit manager. The

audit working paper is presented in excel document which have many tabs

which serve its particular audit procedures.

The global professional audit standards body, has issued practice

advisory stating the goals of audit working papers are to document the

planning, performance, and review of audit work; provide the principal

support for audit communication such as observations, conclusions, and the

final report; facilitate third-party reviews and re-performance requirements;

27
 and provide a basis for evaluating the internal audit activity‟s quality control

program.

Since audit working papers are the property of the auditor. In order to

keep professional ethic, it cannot discover to third party without consent of

the client unless limited specified situations mentioned in ISA 230

Documentation and required by law, the examples are court order, for public

interest and so on.

There are some limitations on this report on the detail elaboration on

the audit working paper itself since it is not proper to disclosed it on here.

Thus, general overview will be more applicable for this case.

Balance Sheet item (Part 1)

Tabs Detail Tabs Detail

FS1 Balance Sheet FS6 Client Journal Entries

FS2 Income Statement FS7 Opening Balance Adjustment

FS3 Statement of Changes in Equity FS8 Opening Balance Verification

FS4 Audit Adjustment FS9 Disclosure Item

FS5 Reclassification Adjustment

Table 2. Audit Working Paper - FS Tab

The above table is showing FS tab on the audit working paper that

consist of the main body of financial statements such as balance sheets,

28
 income statements and statement of changes in equity. Each particular tab

will shows figure before and after audit has been done. The adjustment will

be made in FS4, FS5, FS6, and FS7 depending on the nature of adjustment.

Next is the main part of the audit working paper where its comprise

of individual account in the balance sheet as well as the income statement.

This part is where the forms of documentation may be written which

included flowchart, manual, narrative note, checklist or questionnaire.

Tabs Detail Tabs Detail

A Property, Plant and Equipment H Trade Receivable

C Investment Property I Other Receivable

D Investment K Due from Director

G Inventories L Cash and Cash Equivalents

Table 3. Audit Working Paper - Balance Sheet Part 1

A. Property, Plant and Equipment

Audit procedures are performed in order to test financial statement

assertions. Therefore, the first step in explaining an audit procedure is to identify

the assertion that needs to be tested. The assertions that covers in the audit of

property, plant and equipment (section A in audit working paper) are as follows:

completeness, occurrence, valuation and allocation, classification, accuracy,

rights and obligation and cut off.

29
 Accuracy Completeness

Occurence Classification

Rights and
Valuation
obligation

Diagram 7. Test of Assertion on Property, Plant and Equipment

First, completeness means that all transaction either is disposal, addition,

revaluation of property, plant and equipment have been recorded in the financial

statements and disclosed properly in the notes to the financial statements where it

is necessary.

In order to ensure the completeness of all transaction regarding property,

plant and equipment, I have to gather the audit evidence such as purchase

invoice, sales and purchase agreement and other related documents and it need to

be agreed with what stated in the client‟s account balance.

30
 Next, as we vouched with the proper audit evidence I have to ensure the

occurrence of the transaction which means all the transaction and events that

have been recorded actually took place. Where the client property, plant and

equipment listing shows assets name and quantity, I have to ensure that it is

agreed with the real condition.

In the working paper, we also need to ensure whether the client valuate

and allocate each assets (property, plant and equipment) correctly. The common

mistake that I have encountered during 6 months internship is many of the client

did not separate the land and building value and record it as once.

Thus, an adjustment needs to be made so that valuation and allocation

assertions are fulfilled. As all item have been included in the financial statements

at appropriate amounts according to the company policy and relevant financial

reporting framework, a disclosure still need to be made when it is necessary.

In addition, the property, plant and equipment have to be appropriately

presented and disclosed which part of the classification and understandability

assertions. The disclosure also needs to be made understandable to the users

which use simple language and state matters clearly and concisely.

The working paper under this section has to provide detail as follows in

order to be disclosed in the financial statements: the cost of fully depreciated

31
items, net book value of asset sunder hire purchase agreement, and net book

value of assets charge under financial institution.

Next, I have to ensure that each particular asset have been recorded at the

correct amounts in order to test the accuracy assertion. The procedure need to be

taken is vouched the asset with the amount appearing in the particular supporting

documents.

The reasonable test on depreciation needs to be made in order to

complete the test of accuracy. I have to compare the depreciation charge on the

year by the client with the correct depreciation according to the relevant financial

reporting framework. An adjustment need to be made where there is material

difference on the reasonable testing.

Then, I have to ensure that the client has the rights and control over the

said property, plant and equipment listed on their assets listing. Thus, documents

such as car card registration, title deeds and register of charged need to be

obtained and we have to state clearly on the working paper by putting a tick

mark and detail explanation.

In addition, we need to test the existence which means that the assets are

physically present/belong to the entity on the reporting date. Last but not least, I

have to ensure that the particular transaction have been recorded in the correct

accounting period and it is not fall under previous or last year period.

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C. Investment Property

Investment property is property (land or a building – or part of a building

or both) held (by the owner or by the lessee under a finance lease) to earn rentals

or for capital appreciation or both, rather than for use in the production or supply

of goods or services or for administrative purposes or sale in the ordinary course

of business.

This item is fall under the scope of IAS 40 Investment property included

within the definition stated are land held for long-term capital appreciation, land

held for a currently undetermined future use, building owned or held under

finance leased by entity and leased out under operating leases, a vacant building

that is being held to be leased out under operating lease and property that is

being constructed or developed for future use as investment property.

The audit will be focused in reviewing the policies and controls around

acquiring investment properties, depreciating investment properties that are

carried at cost, measurement of investment properties that are carried at fair

value, management of investment properties as well as the disposal of the

investment properties.

First of all, I have to request the title deeds of the said investment

properties or register of charged when the investment properties is charged under

bank institution. Then, ensure the amount disclosed is agreed to the sales and

33
purchase agreement and the depreciation is carried properly according to the

financial accounting framework which is at cost.

Second, where the Company disposes their investment property, I have to

obtain the sales and purchase agreement and request the register of discharge if

the said investment property is under finance lease. Ensure that the recorded

investment property disposals represent the actual disposal and it is recorded

properly included the gain or loss on disposal.

The rest of the procedure will be quite similar with the procedure carry

out on the test of assertion of property, plant and equipment. I have to vouch to

the correct supporting documents in order to ensure the accuracy, completeness,

occurrence, existence and the valuation assertion. At the end of the work done,

we disclosed the essential fact on the notes to the account.

D. Investment

Statement on Auditing Standards no.81 on Auditing Investment issued by

the American Institute of CPA‟s auditing standards board provide guidance for

auditing the existence, ownership, completeness and valuation assertions for

investment.

In addition, IAS 39 on Financial Instruments has covers the broad scope

on guideline of all types of financial instrument. As well as IAS 28 Investment

also mention facet description on auditing investments such as bonds, stocks, etc.

34
The framework above provides guidance about the evidence or procedure needed

to corroborate assertions related to securities investments. Securities are issued in

either debt or equity form.

First, I have to obtaining evidence about the existence of the said

investment either it is stocks or bonds. I have to perform physical inspection

where it is applicable, confirmation to the issuer and custodian by obtaining the

written supporting documents or similar agreement where stated the investment

in details.

I have to provide a tick mark with a description that the said investment is

agreed with to the supporting documents that I have gathered such us stocks

certificates, bonds certificate, etc. This is to ensure the existence, ownership and

completeness of the said investments.

Next, to test the assertion on valuation, I have to perform a test whether

the investment carried at cost or fair value or when the fair value of investment

carried at cost, it needed to be disclosed in the financial statements.

In the audit working paper to test the ownership and valuation at the

reporting date procedures is differ from investment in quoted entities, unquoted

entities and others (such as club membership). The procedures needed for

investment in quoted entities are check the number of equity or debt instruments

to statements issued by Bursa Malaysia Depository Sdn. Bhd. under the name of

35
the entity as at reporting date and check the market value of the investment to the

published price at the reporting date.

On the other hand, to test the ownership and valuation assertion for

investment in unquoted entities procedures as follows is needed: check the

number of equity or debt instruments to share certificates to ascertain that the

entity is registered owner as at the reporting date, second if the investees do not

issue any share certificates, I have to check the investment to the other external

sources that mention the details of the investment, and last I have to conform the

share of net tangible assets to the latest audited financial statements and obtain a

copy of audited financial statement.

Next is the calculation of goodwill where there is acquisition of

subsidiary/associate. This should be in accordance with FRS 10 to ensure that

purchased goodwill and intangible assets are charge to the profit and loss account

in the period they are depleted.

The standards take the view that goodwill arising on an acquisition (the

cost of acquisition less the aggregate of the fair value of the purchased entity‟s

identifiable assets and liabilities) is neither an assets nor an immediate loss in

value. If on the test of recalculation of goodwill, there is a material difference an

adjustment needs to be made and disclosed as necessary in the notes to the

account.

36
 During the internship period, I have handled two clients who are needed

to perform goodwill test (test on subsidiary and/or associate). The first client was

only has one subsidiary where own 100% of the subsidiary shares, thus I have

not find much difficulties in testing the goodwill. On the other hand, my second

client has one associate which they bought the shares in two different date. This

make the calculation on the goodwill little bit more complicated and I have to

ask my audit manager to explain the detail computation in order to get the end

figure tally.

Next, different audit procedure needs to be done if there is a disposal of

financial instruments. I have not yet get to handle a client which dispose their

financial instruments but in the audit working paper stated that we have to

vouched to the sales proceeds to contract notes, sales and purchase agreements

and other external evidences, check the sales proceed to the bank-in-slip and

recalculate the accuracy of the gain or loss on the disposal of financial

instruments and last if it‟s an material disposal, I have to cross-reference to the

minutes of those charged with the governance.

There is much more test need to be done in a different type of situation,

but I have not yet managed to do it since there is no client required such test such

as intangible assets movement where I have to test the reasonableness of the

accumulated impairment in order to ensure the accuracy criteria.

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G. Inventories

The test of assertion need to be made in audit inventories is existence,

completeness, rights and obligations, valuation and presentation/disclosure. First,

in the existence testing, procedure as stock taking need to be done to test whether

the inventories in the client balance is exist at the date tested. Next, an analytical

procedure needs to be made in order to test the valuation.

G.1. Existence (Stock Take)

One of the main assertions relating to stocks are existence. In the given that

the inventory is material to the financial statements the auditors shall obtain

sufficient appropriate audit evidence regarding the existence as well as the

condition of the inventory by attend at physical inventory counting unless

impracticable.

I have attended in total of two stocks taking, first with the audit manager and

the second one only with the other intern. Before the stock take we will have

a brief discussion with the audit manager regarding the client business

overview and what the important area need to be taken into account and he

also will highlight the probable risk.

Once we reached the client premises, we have to request for the stock listing

and choose the sample by materiality level. There is two way of doing stock

take, floor to list and list to floor.

38
For the first way, floor to list, I have to choose the material stock that appears

in the client warehouse and check whether the quantity is disclosed correctly

on the client inventory listing.

Second, for the list to floor, I have to choose the material stock that appears

in the client stock listing and start counting or checking whether it is the

same amount in the client warehouse.

If there are items in the inventory that are of unusually high value, I will

spend extra time counting that inventory, ensuring that they are valued

correctly, and tracing them into the valuation report that carries forward into

the inventory balance in the general ledger.

If the client keep their inventories in different place, we have to go for the

location that have significant amounts of inventory. The next essential

document is inventory confirmation letter which is signed by the custodian

that stated how much the inventory worth as at the reporting date.

In the test count or stock count, we have to assure that all item are tagged and

proper amounts are shown on the tags, determine the tags and summary

sheets are controlled and reconciled, and where there is a discrepancies a

reconciliation need to be done, ensure there is no empty boxes and obsolete

item and establish cut off by documenting last receiving report and shipping

documents.

39
G.2. Completeness (Analytical Procedures)

In order to conform the completeness an analytical procedure need to be

made such as comparison test with the industry average, prior year closing

stock and trend analysis.

I used to attach graph and table analysis on this section to shows the trend

more clearly and detail. The next is I have to examine nonfinancial

information related to the inventory such as the nature of the inventory itself.

For restaurant the closing stock used to be a food and beverages which will

obsolete easily, thus having a high closing stock will not be logical as

compare to the car dealer company which might have more closing

inventories since their goods is not easy to be obsoleted.

G.3. Rights and Obligation

I have to scrutinize the purchase requisition, purchase order, receiving report,

vendor invoice and cancelled check or payment file to ensure the rights and

obligation. This is to ensure that the inventory is owned by the client as the

reporting date. All the documents stated above have to be tally one another

and should have correct reference number one to another documents.

G.4. Valuation/Allocation

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In this assertion the procedure as follows need to be done: first compare the

recorded costs with replacement cost by examine vendor price lists to

determine if the recorded cost is less than current prices. By calculating

inventory turnover ratio we might reveal the obsolete inventory. The test of

lower cost and NRV need to be done as well.

Picture 7. Lower NRV and Selling Price Test

41
 G.5. Disclosure/Presentation

The presentation of inventory and related account needs to be appropriately

presented and disclosure in the report. All necessary disclosure such as

valuation, cost flow assumptions and significant inventory transaction need

to be stated adequately in the notes to the account.

This by inquire the management about consignments, major purchases and

current commitments to purchase, and pledging/factoring arrangements.

Obtain and evaluate management representation letter for information

relevant to inventory.

H. Trade Receivables

To audit the trade receivable, the audit working paper has prepare few

check list on the audit procedure need to be done to ensure the occurrence of the

receivables. First, I have to get the debtor aging which shows the detail

outstanding balance of each debtor as well as the period of the debt.

Next, I have to choose either one of two following audit procedure which

are verified the amount with the subsequent collection or verified by the invoice

which made up such balance. Need to take note that I have to send debtor

confirmation letter as well as part of the audit evidence to ensure the amount

outstanding is check with what disclosed in the client as at reporting date.

42
 Furthermore, I have to inquiry whether any legal action has been taken

(sending letter of demand) and inquiry the reason for the slow payments. Lastly,

discuss the allowance for doubtful debts to be made with the manager where it is

necessary.

I have to review the subsequent credit notes to ascertain that provision is

made for credit notes related to the invoice dated before the reporting date which

will help on the discussion regarding provision of doubtful debt.

Analytical procedure also can be done on audit the trade receivable such

us calculate the debtor‟s turnover and compare with the previous ratio. The detail

description on the changes (increase or decrease) in ratio should be describe in

detail.

Other than all the procedures stated above, I have to prepare and sent the

debtor confirmation letter. The confirmation of accounts receivable is a generally

accepted auditing procedure and should be performed in all audit engagements,

except the one or more of the following circumstances:

1. Account receivables is immaterial to the financial statements

2. It is expected that the use of the confirmation would be ineffective.

3. The auditor‟s combined assessed level of inherent risk and control risk is low

which means that analytical procedures or other substantive test of details is

43
 sufficient to reduce audit risk to an acceptably low level even without the

confirmation letter.

I. Other Receivables

The audit procedure for other receivable is varying depending on the

nature of the receivable itself. But for all we have to ascertain that accounts

receivable reflected in the balance sheet exist, are for valid transactions, and

include all authentic obligations of third parties and recoverable as at reporting

date by inspecting external evidence.

If it is a deposit (rental or utilities), it need to be check with the rental

agreement to ensure that the amount is refundable and valid. For other receivable

such as GST receivable, we need to vouch to the relating external evidence such

as form GST03 to find whether the amount is correctly disclosed in the client

balance.

Last, the disclosure item which will be disclosed in the notes to the

account need to be written in the audit working paper as well with a detail

explanation.

K. Due from Director

One of the more important and yet more difficult aspects of a financial

statement audit is the identification of related parties and transactions with the

44
related parties. This aspect of the audit is important because of (1) the

requirement under generally accepted accounting principles to disclose material

related party transactions and certain control relationships, (2) the potential for

distorted or misleading financial statements in the absence of adequate

disclosure, and (3) the instances of fraudulent financial reporting and

misappropriation of assets that have been facilitated by the use of an undisclosed

related party.

The amount due from director is fall under related party transaction

which need to be disclosed properly in the financial report. Financial statements

must include disclosures of material related party transactions, other than

compensation arrangements, expense allowances, and other similar items in the

ordinary course of business.

The disclosures must include as follows:

1. The nature of the relationship(s) involved.

2. Description of the transactions, including transactions to which no amounts

or nominal amounts were ascribed, for each of the periods for which income

statements are presented, and such other information deemed necessary to an

understanding of the effects of the transactions on the financial statements.

45
3. The amounts of transactions for each of the periods for which income

statements are presented and the effects of any change in the method of

establishing the terms from that used in the preceding period.

4. Amounts due from or to related parties as of the date of each balance sheet

presented and, if not otherwise apparent, the terms and manner of settlement.

L. Cash and Bank

(This description bellow is also applicable to section AA. Short term

borrowing and CC. Term loan)

The first and most important task above all is to get a clear understanding

about the processes and procedures that the organisation applies so at the very

beginning of the audit and to make effective audit plan, by talk with the

management about the business processes.

To audit “Cash and Cash equivalents”, I have to write the bank

information in detail in the audit working paper such as the bank accounts, types

of bank accounts, number of bank accounts, purpose of each bank account,

banking facilities arrangements and agreements, overdraft facilities, bank

guarantees, Authorized signatories, Authorization matrix, bank payment process,

bank receipt process, petty cash payment process and petty cash top up process.,

daily petty cash holding limit.

46
 Sending bank confirmation is practically important to determine that the

recorded balance in the client account is correct. If there is a difference, I have to

reconcile the bank statement with the bank book balance. Most of the time, the

client has prepare the bank reconciliation on a monthly basis. But, I still have to

perform the bank reconciliation at least one at the end of the year.

After re-performing bank reconciliation, I have to confirm the accuracy

of the record of the bank book so I will have to do is to cross match the amounts

with the figures that bank confirmed via bank confirmation letter.

After re-performing the bank reconciliation, I have to check whether the

reconciling items have been subsequently cleared or not by scrutinize the

subsequent bank statements after the year end. Sample need to be picked for this

test. If the said transaction is not cleared, I have to inquiry to the management

and provide detail explanation in the audit working paper. For the cash, obtain

cash confirmation is necessary and write the name of the person who handle the

cash.

The audit procedure for fixed deposit are check the balance to the balance

confirmed by the financial institution, review the confirmation letter on whether

the bank deposit are pledged for credit facilities and recalculate the interest

receivables based on the terms of the deposits slips.

47
We have to be careful in the cut off period in calculating the interest since most

of the fixed deposit has different maturity period compare with the accounting

period of the company. Thus, re-calculate the interest receivable on the said

financial year is important to ensure the accuracy assertion.

48
 Balance Sheet item (Part 2)

Tabs Detail Tabs Detail

AA Short term borrowings II Other payables

BB Finance lease KK Due to director

CC Term loan LL Taxation

HH Trade payables RR Dividend

Table 4. Audit Working Paper - Balance Sheet Part 2

AA. Short Term Borrowings

Short-term debt is an account shown in the current liabilities portion of a

company's balance sheet. This account is made up of any debt incurred by a

company that is due within one year. The debt in this liabilities account is

usually made up of short-term bank loans taken out by a company, among other

types.

The value of the short-term debt account is very important when

determining a company's performance. If the account is larger than the

company's cash and cash equivalents, this suggests that the company may be in

poor financial health and does not have enough cash to pay off its short-term

debts.

The first, and often the most common, type of short-term debt is a

company's short-term bank loans (or in another word bank overdraft). These

49
types of loans arise on a business' balance sheet when the company needs quick

financing in order to fund working capital needs.

Second is company‟s account payable which is trade payable and other

payables which will be describe in detail in section HH. Trade payable and II.

Other payables. Lease payments also sometimes be short-term debt when the due

payment is fall under 12 months period which will be describe in section BB.

Hire Purchase Payable.

Last, taxes are sometimes categorized as short-term debt. If the Company

owes quarterly taxes (GST) that have yet to be paid it could be considered a

short-term liability and be considered as short-term debt.

But in this section AA. Bank Borrowing only covers bank overdraft since

the rest of short-term borrowing has its own section.In the audit of bank

borrowing, the audit objectives and assertions is almost similar with the audit

process on section L. Cash and Bank. The audit procedure are as follows:

analytical procedure by compare current year balances with prior year and ensure

reasonableness of changes during the year and inquiry to the management if

there is any unexpected changes.

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Existence, Rights & Obligation
•Short term borrowings on the balance sheet represent valid claims by
banks/other third parties

Completeness
•Ensure that all short term borrowings have been accounted on a timely basis

Valuation
•Ensure that liability is recorded at the correct amount

Presentation & Disclosure

•Ensure that short term borrowings have been presented, classified and disclosed
in the financial statements in accordance with the requirements

Diagram 8. Short Term Borrowing - Audit Objectives and Assertions

Next is the test of detail which included confirm the correct amount of

debt and last test the accrued interest by obtain a schedule of accrued interest

expense. Test and trace the total and the individual amounts and it should be tally

with the interest expenses that recognize in the client income statements. If there

is difference on the amount in the bank confirmation and on the book, I have to

perform bank reconciliation which the procedures are all the same like doing

bank reconciliation in the bank section L. Cash and Bank.

Other than the procedure above, I have to obtain the offer letter from the

bank and file it on the permanent file as well. After I obtain the offer letter, I

have to classify bank facility between secured and unsecured based on the offer

51
letter. For the secured facilities utilized, I have to cross-reference with the

Register of Charged and agree to the assets pledge to the bank facility that stated

in section A. Property, Plant and Equipment.

Next, cross-reference to the minutes or circular resolution also necessary

and review those minutes to ascertain that all new facility are accounted for in

the financial statements.

BB. Finance Lease

As I mentioned before, finance lease here refer to hire purchase payable.

The first task I have to do is to list down each individual hire purchase payable as

shown in the client balance sheet.

Hire purchase is a type of borrowing. It is different from other types of

borrowing because the party does not own the goods until they have paid in full

amount of the agreed price. Under an HP agreement, the party hire the goods and

then pay an agreed amount by installments basis.

Here are the list of audit procedures need to be made: agree the opening

balance to previous year audit working paper, and if there is addition during the

year I have to obtain all the related documents such as finance lease agreement

and it needed to agree to those charge with governance and cross-reference with

the resolution to ascertain that all finance lease liabilities are accounted in the

financial statements.

52
 Next, scrutinize the bank-in slip or inspect payments during the year and

ascertain that unpaid outstanding payments are included as current liabilities.

The last procedure is to ascertain the unexpired interest is calculate properly and

charge to profit and loss. Most of my client has sum of digit method to calculate

the hire purchase interest payables. Thus, I have to re-performed and re-calculate

and pass adjustment if the difference is material hence I just need to highlight to

the management and carry out to the next audit.

CC. Term Loan

A term loan is a monetary loan that is repaid in regular payments over a

set period of time. Term loans usually last between one and ten years, but

possible to last as long as 30 years in some cases. A term loan usually involves

an unfixed interest rate that will add additional balance to be repaid.

Since the period of term loan is more than 12 months period, this debt

will be shown in the client long term liabilities or non-current liabilities, where

the 12 months portion will be disclosed in the current liabilities.

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 Bank institution name

Bank account number

Bank address

Type of facility

Security

Interest rate

Repayment term

Diagram 9. Audit Working Paper - Term Loan

As term loan has a specified repayment schedule and a fixed or floating

interest rate. I have to provide all this information in the audit working paper by

obtain the term loan agreement as well as obtain bank confirmation. The detail

that needed to be disclosed in the audit working paper are bank name, bank

account number, bank address, type of facility (as stated in the agreement),

security, interest rate, repayment term and denominated currency.

The important in audit of term loan is to scrutinize the movement either it

is drawdown, repayment of the principal and the interest. I have to re-calculate

the interest charge and check whether the client has recognize the interest in their

income statement correctly.

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 Some of the term loan payment not just principal and interest but it may

be bank charge, miscellaneous charge and insurance as well. I have to ensure that

all payment is recorded properly so that the end balance of the term loan check

with the bank confirmation letter.

HH. Trade Payables

Testing accounts payable provides evidence about the most significant

current liability of many companies. In common, it called "trade payables" when

the obligation is related to acquisition of goods for resale or manufacture.

Accounts payable reference the obligations to vendors for purchases of

inventory, supplies, or services on credit. Purchases related to accounts payable

may be reported at the gross method or the net method. When testing accounts

payable, assertions about purchases and cost of goods sold are also involved. The

most important is to test the completeness since we do not want the company

understated their liabilities. I have to perform reconciliation on their account

payable ledger with the control account. Perform a purchase cut-off test to

determine if goods for which title has passed are appropriately accounted for.

Analytical procedure such us calculate the trade payable turnover is

important where there is unusual relation, I have to inquiry to the management

and perform further detail investigation.

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 Trace subsequent payments to recorded payable and match to the cheques

issued subsequent to year end with related payable. Cheques should be issued

only for payables that existed on the balance sheet at the year end. Any cheques

that cannot be matched may represent an unrecorded liability at year end. Since

the Company may delay recording a liability to improve their current ratio.

Send confirmation letter to all the creditor and check the balance with the

client book balance. Here, my audit manager always asked us to send for those

creditor who are active supplier which means small and zero balance should be

sampled as well as the large balances.

It need to be noted that audit the trade payable is not based on coverage

as the trade receivable but based on the most active supplier. So, it may show

that the end balance is very small or zero, but an audit procedure on sending

confirmation letter still needs to be done as we need to minimize the risk on

unrecorded liabilities.

II. Other Payables

Other Payables represents current payables other than Dividends Payable

and Income Taxes Payable. These payables are expected to mature within one

year or an operating cycle, whichever is longer.

Other Payables includes Payables/due to employees, shareholders,

officers, directors (other than loans, dividends). In the audit working paper, other

56
payable will be divided into three section which are sundry payable, advanced

and accrual.

The audit procedures are check the payments subsequent to the reporting

date to authorized payment vouchers and bank statement and inspect outstanding

amounts to invoices from vendors. Check the amount balance by inspecting

external documents.

For accrual, other than ensure the balance stated match with the external

documents, I have to compare the accruals to the previous year balance and

inquiry if there is material difference. Recalculate the accruals portion also

necessary by reference to the suppliers invoice. In case of there is a provision, I

have to review the reasonableness of the provisions with other related accounts

and ensure that the additional provision recognized comply with the

requirements of the standards.

KK. Due to director

When auditing related parties, the objectives for the auditor are those of:

- Recognizing fraud risk factors that may lead to material misstatement of the

accounts due to fraud, and

- To conclude whether, on the basis of the evidence obtained, the financial

statements achieve fair presentation, as far as related parties are concerned,

57
 and the related party requirements in the applicable financial reporting

framework have been met.

The audit procedures need to be taken in amount due to director other

than obtain confirmation letter from each director that stated the amount due to

them is breakdown the amount and describe the nature of expenses that build to

amount due to director. In the audit working paper, it need to be mentioned the

name of the director and the breakdown as well as the movement of the amount

due to director.

LL. Taxation

This section divided into nine sheet which provide a comprise audit

working paper on the tax reconciliation together with the deferred tax and tax

computation in order to give the provision on the tax expenses for the period.

During my six months internship period, I find that deferred tax

reconciliation is one of the most times consuming. It is always challenging to do

deferred tax reconciliation since it always has a different way of approach on

each situation depending the client overall account balance.

First of all we have to key in all the general information such as the tax

rate for the year and other tax incentive and deferred tax information in order the

template can proceed with the computation.

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 Next, I have to key in the movement in current tax liability and analysis

the provision in prior years whether there is under or over provision. I have to

copy all the tax installment made and file in on the tax and audit file as a part of

audit procedures.

Next is the reconciliation of property, plant and equipment. I have to key

in the cost, accumulated depreciation, net book value and depreciation charge for

the period for each accounting and tax base amount. This information is needed

to do computation on deferred tax assets and liabilities.

In case there are account which will made up deferred tax, we also need

to key in to the given template such as unrealized foreign exchange gain, assets

under hire purchase, any provision for inventories or trade payables or trade

receivables and other necessary account that has different carrying amount and

tax based.

Next is the tax computation detail which will be needed to get the tax

expense during the year. Since the firm is small firm, we do not have separate tax

department so we need to compute the tax provision by our own.

Next, the deferred tax detail computation. In this part adjustment need to

be made where there is material changes in deferred tax assets/liabilities. Other

than that proper disclosure on deferred tax asset need to be made on the notes to

the financial statements.

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 Picture 8. Tax Expense Summary - Disclosure

In addition, the second last part on taxation is the tax expense summary

which comprises on current tax expense and deferred tax expense. This

computation is the one that will be disclosed in the financial report under the

notes to the accounts. A reconciliation of tax expense need to be made as well in

order to shows the tax effect of each items. Last part on taxation is detail

movement in deferred tax.

RR. Dividend

In this section is important to get the copy of dividend certificate and

cross-reference to the resolution made. The audit procedures are necessary to

ascertain the unclaimed dividends are deposited as unclaimed monies in

accordance with the acts.

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 Where there is dividends declare during the year it has to agree to the

minutes of those charged with governance and or shareholders‟ minutes. I have

to recalculate the dividends declare to ensure that the amount is correctly

calculated and ascertain that there is sufficient tax credit to declare dividends,

where applicable.

If there is payment during the year, I have to scrutinize the dividend

voucher and bank statements (cheque issued or bank-in slip) and it has to agree

with the dividends vouchers.

RR. Dividend

Revaluation Reserve

Share Premium

Diagram 10. Audit Working Paper - Dividend

In the situation where there is dividend proposed it has to agree to

minutes of those charged with governance and perform re-calculation of the

dividend propose as well. I have to ascertain that the proposed dividends are not

recognized as liability. In this section, there are three main point need to be

disclosed which are dividend, revaluation reserve and share premium. I have not

yet have the chance to do revaluation reserve and share premium as all my client

that given to me does not have such transaction.

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 Income Statement

Tabs Detail Tabs Detail

IS10 Revenue IS40 Other Operating Expenses

IS20 Cost of Sales IS50 Finance Cost

IS30 Administrative Expenses IS60 Other Operating Income

Table 5. Audit Working Paper - Income Statement

IS10. Revenue

As part of a financial audit, the auditor must assess the inherent risk

associated with the revenue cycle and perform tests to determine it is relatively

free of error or fraud. The inherent risk for this cycle is related to the cutoff dates

for particular types of sales and the pressures from management to misstate

revenues. By conducting so-called substantive tests and tests of controls, the

auditor can provide some assurance that the revenues of the company are

recorded accurately.

The issues in the revenue is whether the revenue is properly stated as it is

since sometimes the management feels pressure to misstate revenues to

encourage investor or upper-level management or the board of director. Thus

various audit procedure has been designed in order to minimize the risk and to

determine whether it is relatively free of error. The audit working paper mention

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all the procedure and as an auditor I have to write in detail all the notes or

findings throughout the audit process.

First of all analytical procedure such as compute the gross profit margin,

revenue cycle and do two years comparison need to be done. Monthly revenue

analysis and revenue and purchase comparison need to be attached as well. It is

best describe when we attached the graph and tables on this part of audit working

paper.

Next, I have to do sales cut off by inspect the external source documents

such as sales invoice and delivery order. After the sales cut off is done, I have to

perform test of details by selecting sample. Normally, 25 samples is needed and

the scope will be differ depending on the client preliminary review. After the

sample is chosen, the audit procedure is to ensure the invoice is match with the

description item and quantity with the delivery order, ascertain that cancelled

sales are properly validated and accounted correctly, recalculate the invoice to

ascertain that they are arithmetically correct and unit prices are correctly

extracted from the approved price list, and trace sales invoice to sales journal and

it has to agree to the total amount of the sales journal to general ledger. Where

there is transaction in foreign currencies, I have to ascertain that the transactions

are translated correctly.

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IS20. Cost of Sales

Depending on the nature of the business, cost of sales may come in

different form. Thus, it is important to understand which and which account

should be included as cost of sales. Cost of goods sold testing is often conducted

at the same time that inventory testing on the balance sheet is completed. Cost of

sales may be a sensitive part where fraud is likely to take place for example

fictitious vendors to paying themselves for goods never received by the

company, overestimating cost of sales at the time so the expenses can be reduced

in future periods or just merely adjust the cost of sales to get the desirable profit

margin.

There are several procedure need to be done on audit of cost of sales.

First, the analytical procedure is to identify the potential misstatements. I have to

compares the client figure with the past performance, industry result and

expected performance.

Next, overview the control procedures and risk assessment. Perform

walkthrough of the purchase procedures and ensure that all the control

procedures have been taken carefully. Cut off testing has to be done as well, by

inspecting the external source of documents and ensure that all purchases has

been keyed in the correct accounting period. Cut off is important since many

company tend to manipulate their performance by adjusting next year or current

year purchases and defer them to the next accounting period or vice versa.

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 Last but not least is performing test of detail, by vouched all the

documents from the purchase requisition, purchase order, purchase invoice and

payment. SH Chin & Co always use 25 samples where the samples is chosen by

using interval, 25 top large purchase or totally random. Where there is material

misstatement, inquiry to the management and pass adjustment if the auditors feel

it is necessary or else put a disclosure in the notes to the financial statements.

Expenses:

IS30. Administration Expenses

Expenses

IS40. Other Operating Expenses

IS50. Finance Cost

Diagram 11. Audit Working Paper - Expenses

Companies have many types of internal controls related to expenses.

Some invoices may require certain levels of signatures, and others may require a

written contract. One of the first steps in an audit is to evaluate paid expenses

against how closely they follow the internal controls. Since many of SH Chin &

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Co client is small and medium enterprises, their internal control is not as strong

as it should be. Most of the time, there will be only one personnel who handle all

the authorization of the expenses until issuance of cheque or payments.

Thus, as the low internal control may expose greater risk, a detail and

thorough test of control have to be done in order to provide a reasonable

assurance of the true and fairness of the financial statements.

In my opinion, doing audit process in the expenses part always takes

more time than the other section since there are many part need detail attention,

given that I have to provide the tax computation on the particular client. This

means that I have to take into account all those tax sensitive account and go

through it all and ensure all supporting documents is available in order to prevent

any dispute in the future.

Here is some of the misstatement I have found during my internship:

capitalized an expenses, travel and entertainment expenses account that do not

have documentation, expenses significantly above or below industry norms,

assets classify as expenses, the expenses was not for business purposes (tax

sensitive), and expenses is not recorded in correct account (for example

advertising expenses key in under transport charges).

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 First of all, after key in all the expenses, I have to perform analytical

procedure which focuses on those high fluctuation expenses and inquiry to the

management for the reason behind it.

Next, we have to start to do test of detail for all the expenses that more

than PML and tax sensitive. The expenses such as salaries, rental, and

management fee might use reasonableness test and takes adequate sample to

ensure that there is no mathematical misstatement on the recorded amount in the

client general ledger. Some of the expenses need to check or tie with the other

part in the balance sheet. For example, hire purchase interest has to be tally with

the payment made on the interest in suspense account as well as term loan

interest has to be tally with the interest column in the section CC. Term Loan.

Mr. Kwan, as audit manager always highlight that it is important to link

the entire figure to ensure that the entire related amount is tally and there is no

discrepancy as it will make the statement of financial position imbalance.

Where there is material misstatement, adjustment need to be made and

detail description on reason of the adjustment has to be written properly. It

always be emphasized that all the working on audit working paper has to be done

exceptionally.

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 Statutory Audit

Tabs Detail Tabs Detail

SS Share Capital Register of Director, Manager
SS-3
SS-1 Register of Members and Secretaries
SS-2 Register of Charges XX Minutes Review Summary

Table 6. Audit Working Paper - Statutory Audit

SS. Statutory Audit

(This section will cover SS, SS-1, SS-2, SS-3)

Audits are primarily aimed at protecting a company‟s shareholders. They

help investors gain confidence in a company and reflect the company‟s true

business health and performance. Statutory means anything regulated by laws of

the state. Statutory audit is the official inspection of a company‟s accounts.

First, obtain the Company‟s memorandum and articles of association to

ensure the authorized share capital and other detail regarding the Company

business. Where the issued shares amount will be stated in the form 24, and the

additional of authorized share capital will be mentioned in the form 11 and form

28.

Most of the statutory audit will dealing with form submitted to CCM. I

have to make a copy of all the related documents, file in the audit permanent file

and place a cross-reference under the audit working paper.

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 Next is to fill up detail of register of transfer and register of member in

the audit working paper together with the cross-reference and file the necessary

documents. In section SS-2. Register of charges, I have to write all the particular

charges in brief and clear.

Next, section SS-3. Register of directors, managers and secretary will

refer to the form 49. I have to type in all the detail, this information will be used

on the filling of tax return to LHDN so it is important to input all the data

correctly.

XX. Minutes Review Summary

Section XX. Minutes will be the summary of the minutes (annual general

meeting, extraordinary general meeting, directors‟ resolution, shareholders‟

resolution). It is divided into several part which I have to write it accordingly:

changes in shareholders/transfers of shares, changes in directors, approval of

capital expenditures, capital commitments, and annual general meeting/adoption

of accounts, major contracts/agreement and other matter.

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5.4.2.3. Audit Report

An audit report is a written opinion of an auditor regarding an entity's

financial statements.

Unqualified Opinion

Qualified Opinion

Adverse Opinion

Disclaimer of Opinion

Diagram 12. Type of Audit Report

Unqualified opinion, if the financial statements are a fair

representation of an entity's financial position. An opinion is said to be

unqualified when the Auditor concludes that the Financial Statements give a

true and fair view in accordance with the financial reporting framework used

for the preparation and presentation of the Financial Statements. An Auditor

gives a „Clean opinion‟ or „Unqualified Opinion‟ when he or she does not

have any significant reservation in respect of matters contained in the

Financial Statements.

A Qualified Opinion report is issued when the auditor encountered

one of the two types of situations which do not comply with generally

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accepted accounting principles, however the rest of the financial statements

are fairly presented. This type of opinion is very similar to an unqualified or

"clean opinion", but the report states that the financial statements are fairly

presented with a certain exception which is otherwise misstated.

Adverse opinion, if the financial statements were materially

misstated. An Adverse Opinion is issued when the auditor determines that the

financial statements of the client are materially misstated and, when

considered as a whole, do not conform with GAAP.

Disclaimer of opinion commonly referred to simply as Disclaimer, is

issued when the auditor could not form and consequently refuses to present

an opinion on the financial statements. This type of report is issued when the

auditor tried to audit an entity but could not complete the work due to various

reasons and does not issue an opinion, which can be triggered by several

situations. For example, the auditor may not be independent, or there is a

going concern issue.

I have not yet drafting qualified neither opinion nor adverse opinion.

Many of my clients has a going concern issues thus a unqualified opinion

was issued with an explanatory notes which state that the client has

shareholder‟s deficit and or the Company net current liabilities is exceeding

its net current asset, thus a going concern might be an issue.

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The typical audit report contains three paragraphs, which cover the following

topics:

1. The responsibilities of the auditor and the management of the entity.

2. The scope of the audit.

3. The auditor's opinion of the entity's financial statements.

The audit report usually two pages long. After I draft the audit report,

it will be review by audit mangers, and again Mr. Chin Soo Har as our audit

partner will review it again and do some alteration where it is necessary.

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5.5. TAXATION

The work that I did is tax compliance assignment which is assisting client in

their duty to inland revenue for paying their tax and ensure that the tax computation

comply with the tax rules, for example by declaring income, filing a return, and

paying the tax due in a timely manner.

Basically, I have to do audit and tax compliance work for most of the clients

that have been assigned to me. Thus, the audit working paper on the expenses has to

be in detail on the tax sensitive item since we have to treat all the expenses

accordingly whether it is allowable for deduction or not.

5.5.1. Tax compliance procedure

Governments enact laws to determine how companies and other

taxpayers should be taxed. These laws are then interpreted by taxpayers, taxing

authorities and, ultimately on occasion, by the courts. Thus, the most essential

part of working on computation of Company‟s tax return is how clear we

understand the public ruling and the other related laws.

It is a general principle that taxpayers have a right to manage their tax

affairs provided they act within the law. Equally they should also be able to

access independent advice on their tax position. However, this rules and

regulation always come with the complexity and sometimes it is not always clear

where lines should be drawn.

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 Thus, our main task is to assist the client on their tax return computation

which complies with the legal and regulatory obligations for taxation. We also

assist them in any disputes in relation with Inland Revenue Board. It is needed to

be highlighting here that before accepting any clients and to continue to work

with the existing clients; it has to be ensured that the client intends to comply

with their legal and regulatory obligation in relation to taxation. As a tax agent,

we do not let client to run away from tax thus the integrity and reliability of the

management is important.

5.5.2. Nature of assignment

The main task that I was assigned is to do Company‟s tax return which

comprise with their detail analysis on their tax computation. In order to do the

tax computation, these following documents are needed:

1. Audited financial statements

2. Detail expenses (breakdown is given as necessary)

3. The Company detail (5 major shareholders, directors, etc)

Thus, I have to ensure that all required documents has been provided.

Second, I have to inquiry to the management if there is incomplete breakdown.

After all done, I can start to do the tax computation using BrassTax. (the

procedure was given in the Section. 4.3.2. BrassTax)

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 Next assignment is to remind client on their tax payable (either tax

installment or the tax payable after the tax return is filled). I have to inform the

client to pay the tax outstanding when I send the draft of tax return or as soon as

I submit the tax return on LHDN (Lembaga Hasil Dalam Negeri) website.

The other tax assignment is to follow up on occasional cases. Sometimes,

LHDN sent letter for client regarding their tax payable, but it has a discrepancy

with the tax position on our computation. So, I have to inquiry to LHDN and ask

them to breakdown the tax payable in detail and do a reconciliation.

Tax Return

Tax Computation

LHDN Inquiry

Diagram 13. Taxation - Nature of Assignement

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5.5.3. Highlighted topic

During the six months period of internship, I have expose myself to more

depth Malaysia taxation which I feel that it is needed to be shared.

5.5.3.1. Malaysia Tax Rate

With effect from year of assessment 2016, Income tax is calculated at the

Malaysian tax rate of 19% (2015: 20%) of the estimated assessable profit for

the year. Taxation for small and medium scale company with a paid-up

capital of RM2,500,000 and below are calculated at the rate of 19% (2015:

20%) on the chargeable income of up to RM500,000. For chargeable income

in excess of RM500,000, the statutory rate of 24% (2015: 25%) is applicable

as announced in the Malaysian Budget 2014. Consequently, deferred tax is

measured using this tax rate.

5.5.3.2. Goods and Services Tax

In this section, I would like to focus on the block and non-block input tax

since I have found that it is necessary to understand this account in order to

do right analysis on the allowable or non-allowable expenses.

Input tax is the GST incurred on any purchase or acquisition of goods and

services by a taxable person for the purpose of making a taxable supply in the

course or furtherance of business.

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Input tax will include any flat rate addition which an approved person under

a flat rate scheme would include in the consideration for any taxable supply

of goods made by him in a prescribed activity under the scheme.

A person is entitled to claim input tax if he is making a taxable supply and

satisfies the following criteria:

1. Input tax has been incurred

2. Input tax is allowable

3. He is a taxable person, i.e. a person who is or is liable to be registered

4. Goods or services acquired in the course or furtherance of business

5. Goods or services made in Malaysia or any supply made outside

Malaysia which would be a taxable supply if made in Malaysia.

Block input tax incurred by a taxable person in respect of the following

supplies shall be excluded from any credit under GST:

1. Supply or importation of passenger motor car

2. Hiring of a passenger motor car

3. Club subscription fee for recreational or sporting purposes

4. Medical and personal accident insurance premium or takaful contribution

5. Medical expenses

6. Family benefit

7. Entertainment expenses to a person other than employees or existing

customers

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Most of the times, the accountant will do the breakdown and there will be not

much problem for the tax agent to differentiate the block input tax. But,

many of them will have one GST expenses account which sometimes

included both block input tax and non-block input tax.

The non-block input tax is the GST input tax that allowable by Kastam to be

claimed but the client did not do so. Thus, this expenses will need to be

added back as the client supposed to claim but they did not do so.

5.5.3.3. Taxation on Advance Payments

On 29 December 2015, the Finance Act 2015 ("FA") received the royal

assent and was passed into law. One of the amendments introduced in the FA

affects the taxation of advance payments, and signifies a departure from the

previous tax treatment for advance payments.

Prior to the year of assessment ("YA") 2016, it was generally accepted that

business income is assessed to tax at the time of accrual or derivation of

income, instead of at the time of receipt. Therefore, advance payments

received by a taxpayer for, amongst other things, services which have yet to

be rendered, would only be subject to income tax once the services have been

rendered.

In Malaysia, there was previously some ambiguity as to whether advance

payments for services that have yet to be rendered would be brought to tax in

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the year in which it was received, by virtue of Section 24(1)(b) of the

Malaysian Income Tax Act ("ITA"). However, this ambiguity was largely

addressed by the Malaysian High Court in the case of Clear Water Sanctuary

Golf Management Berhad v Ketua Pengarah Hasil Dalam Negeri, which held

that Section 24(1)(b) would not apply to advance payments, and as such

advance payments for services which have not yet been rendered would only

be recognized for tax purposes once the services have been rendered.

The provisions of the FA seeks to introduce two amendments to Section 24

of the ITA with respect to payments for services, and these amendments shall

take effect from YA 2016 onwards.

First, Section 24(1)(b) of the ITA has been amended to apply to "services

rendered or to be rendered". Therefore, any debt owing in respect of services

that have been performed, or which will be performed, will be taxable in the

period in which the debt is owing.

Secondly, a new Section 24(1A) has been introduced to stipulate that any

sum received by a person in respect of any services to be rendered or the use

or enjoyment of any property shall be treated as gross income for the relevant

period in which the sum is received, notwithstanding that there is no debt

owing in respect of such services or use or enjoyment.

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In other words, this new provision seeks to subject advance payments for

services to be taxed in the year of receipt, notwithstanding that the services

have not yet been performed and there is no debt owing. This is the case even

if the payment is refundable, and represents a departure from established

taxation principles whereby business income would only be assessed to tax

once it has accrued. It also raises some questions as to whether Section 24 as

it is now sits well with current accounting principles on income and revenue

recognition, as well as contractual law principles.

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6. AUDIT ENGAGEMENT AND ASSIGNMENTS

No Company Business Activity Assignment

1 Turnstone MM2H Sdn. Bhd. Dormant. Audit and Tax
2 Fox Trafic Sdn. Bhd. Providing traffic survey Audit and Tax
3 Winfert Sdn. Bhd. Wholesaler for plant Audit and Tax
fertilizer
4 Edmas Industry Sdn. Bhd. Wholesaler for wiring, Assisting senior in
drilling EDM accessories audit field
5 Trilogue Consulting Sdn. Bhd. Business consultant Audit and Tax
6 Active lifestyle Fitness (M) Sdn. Providing gym and Audit and Tax
Bhd. fitness equipment
7 Thanaram Varish Sdn. Bhd. Wholesaler of frozen Assisting senior in
food audit field
8 Freak Fitness Nutrition Sdn. Bhd. Dormant. Audit and Tax
9 Dengkil Paper Mill Sdn. Bhd. Dormant. Audit and Tax
10 Qips Packaging (M) Sdn. Bhd. Provision of packaging Audit and Tax
services.
11 Pronto Coffee Sdn. Bhd. Food and beverage cafe Audit and Tax
12 Oriental International Property Real estate agent Audit and Tax
Sdn. Bhd.
13 Sinar Auto Detailing Sdn. Bhd. Providing car wash Audit and Tax
services
14 Rentas Sentosa Sdn. Bhd. Dormant Audit and Tax
15 SK Tang Business Consultancy Business consultant Audit and Tax
Sdn. Bhd.
16 Environmental Project Partners Providing environmental Audit and Tax
Sdn. Bhd. social solution
17 Arena Binaniaga Sdn. Bhd. Dormant Audit and Tax

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18 Gremio Development Sdn. Bhd. Real estate agent Audit and Tax
19 Artisan Coffee Sdn. Bhd. Food and beverage cafe Stock take
20 CAE Auto Supply Sdn. Bhd. Trading on automotive Stock take
accessories
21 Evoke Interactive Sdn. Bhd. Event management Audit and Tax
consultancy service
provider.
22 Winsome Hook Sdn. Bhd. Food and beverage cafe Audit and Tax
23 PWJ Sdn Bhd Construction company Audit and Tax
24 Spectrum Ingredients Sdn Bhd Food ingredient supplier Audit and Tax
25 Serene Grace Sdn Bhd International property Tax
development consultancy
services.
26 Ben KKO Korean Restaurant Restaurant Audit Admin
Sdn. Bhd. Work
27 Infra Dot Com Sdn Bhd Trading on internet Audit and Tax
wiring supplier
28 Restoran Nasi Kandar Ibramsha Restaurant Audit Admin
Sdn Bhd Work
29 Rampai Esteem Beauty Sdn Bhd Providing beauty Audit Admin
treatment services and Work
trading in cosmetics
products.
30 Sakado Autoparts Sdn Bhd Repairing and trading of Audit Admin
used car accessories, Work
spare parts and other
related products.
31 Tharros Enterprise Sdn Bhd Used car dealer. Tax
Table 7. List of Clients

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7. DISCUSSION ON FINDINGS, ANALYSIS AND FINDINGS WITH

REGARD USEFULNESS OF THE TRAINING

Multimedia University has been providing golden opportunity for each

undergraduate to practice their knowledge through practical training. Yet, usefulness of

this practical training towards undergraduates very much depends on their determination

and commitment to learn. After completing my six months period of practical training, I

cannot deny that the amount of knowledge gained from experience was so incredible for

a fresh undergraduate like me. Of course, main objective of this practical training was to

connect every undergraduate between what they learnt in book to real life working

environment. Similarly, this program also allows us to judge which career path should

be taken to build our ideal career block. During my practical training, I see improvement

on myself in difference aspect ranging from interpersonal skill to computer soft skills.

Venture in audit industry brought me nearer to more paper works and documents

presentation environment. As such, I found the importance to present neat working

papers in easy understanding language. Neat working papers allowed people to gain

easier understanding on what was presented. Good language also contributed towards

better output which directly prevent reviewer from guessing what was presented.

The training itself does not focus only on presentation of work but

communication and social skill also play an important role. Worked under the same

require me to maintain healthy communication with colleagues. Showing good positive

attitude as well as willing to learn attitude projects better impression towards audit

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seniors and managers which indirectly encourage them to give more comments on

improving my performance.

As an auditor, most of the audit engagements require us to deal with client

personally. Although we will only establish communication with client for only a short

period of time, but I found that showing a good impression during first encounter will

determine the communication level between auditor and client. In additional, using right

methods while dealing with client play important roles especially requesting for

assistance. Making request politely and patiently indirectly helped in gaining

corporation from client that fasten our job without delay or outstanding.

Time planning and management was among what I learnt as well. With deadline

on our audit task, I learnt to manage time effectively by spending optimum time for each

task. Work fast yet maintain good quality of output was another lesson learnt as well so

that we can complete the audit in allocated time.

Working in computer oriented environment where computer is use to carry out

every audit task beginning from audit planning to audit completion. Hence, I realized the

importance to master as computer knowledge in order to work more efficiently and

effectively. Besides that, I found my knowledge in using Microsoft Words and Excel

improved significantly throughout my training. This is because most audit work will be

presented in Words or Excel forms. Thus, keeping update knowledge of computer

software in this computer oriented culture will definitely help in working speed.

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 Lastly, politics was something that cannot be avoided in working environment.

However, I learnt that being aware of politic issues in the firm helped in surviving in

working world. Since anything done may get either complement or criticism, I learnt to

make judgment of both positive and negative outcome before making decision. With

that, I‟m able to behold myself in surviving from office politics.

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8. LIMITATION OF THE TRAINING

During these 6 months of practical training in SH Chin & Co, it is undeniable

that interns have a lots of benefits. I have enjoyed working in SH Chin. However, there

are certain areas that could be improved.

Firstly, it would be convenient for the students if the practical training is place

right before the graduation. By doing this, students would be more prepared while

entering the industry and might be able to perform better in the training. It would also

raise the impression of the industry towards students of Multimedia University for

equipping knowledge and skills that are required. As for now, most students as same

batch with me had completed certain important subjects such as Advance Audit,

Advance Taxation, Accounting Theory, and other advance accounting subjects. This

may improve and make me more understanding in the audit and tax field when doing

assignment. By lacking of the exposure of these certain knowledge and skills, it would

cause the students to face difficulties in handling certain sections. In my case, I‟m lucky

to have my internship in the final and last semester compare to the other student who

lack of knowledge on those important skills might faced great difficulty in handling

sections at the beginning few weeks as they need to spend extra efforts in doing their

own research prior to the audit engagement. Besides, by completing the subjects before

entering the industries, it would also provide convenience for the students and the

employers.

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 Other than that, although I have chance to handle the whole sections of working

audit in those engagement such as dormant company and minor active company but I

don‟t have the chance to handle those huge major company such as those listed or

consolidation company because these company mainly might be handle by senior as it is

more complicated. In addition, it does not mean that interns in same company will have

same opportunity, yet it depends on the group‟s assignment and engagement. From a

trainee‟s point of view, I sincerely hope that communication could be done between

university supervisors and company‟s personnel so that the work allocated and exposure

obtained by students could be fair and even.

Last but not least, I wish to have more time to perform audit in some

engagements, because the work load is too much since we are handling more thank a

single client on the same time due to we are the tax agent as well. Thus, it is insufficient

time for us to perform those work done. Therefore, it is crucial that the supervisor could

allocated more time for those engagements that have heavy workload, to create a quality

working paper instead only quantity.

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9. SCOPE FOR FUTURE TRAINING IN THE FIRM TO DO 3

YEARS PRACTICAL TRAINING IN THE FIRM TO BECOME A

MEMBER OF MIA.

SH Chin will definitely provide me with a good learning environment for my 3

years working experience which is compulsory requirement to become a member of

Malaysia Institute of Accountant (MIA). Despite joining the big fours audit firm, which

are KPMG, Ernst and Young, PWC and Deloitte, SH Chin has provide a better exposure

in terms of different kinds of industry area due to SH Chin consider a small firm with a

bunch of small and specific diversified client base that I have been through in the past 6

months and it improves my communication and other related skills. Therefore, I have

already made up my mind in continue my future career as an auditor for next 3 years

after graduate and I also have decided to take up professional qualifications such as

ACCA or CPA in the near future, as I believe degree is not enough to fully understand

the audit procedures.

In overall, SH Chin is indeed an excellent audit firm for any graduates

employment and become a member of MIA after three years of employments. I also

hope that I would be able to apply the knowledge and skills that I have learnt in

Multimedia University in these four years into my future career.

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10.CONCLUSION AND RECOMMENDATION

10.1. CONCLUSION

In conclusion, I consider myself very fortunate to work in SH Chin during

internship period. The office is very strategic, and I have a good team who willing to

taught and guide us with patient. I was told by some colleagues that they have not such

opportunity to experience internship in their university life. In overall, I think practical

training is a very helpful to students as it is a great stepping stone for us to gain

experience and learn to adapt to working culture before pouring ourselves completely

into the society. I enjoyed working in audit department because of the exposure of

different types of industry; it does broaden my knowledge towards different kind of

accounting knowledge.

Besides that, six months period of practical training allows me to have clear view

on roles and responsibility as an auditor besides gaining improvement on

communications, interpersonal and other soft skills. Most importantly, I was exposed to

the professionals‟ life of auditors which affect me directly in keeping professional in

every aspect especially as an auditor.

I truly suggest every trainee and juniors who are about to undergo the training,

do enjoy every moment of it. It really helps out a lot in the future. The experience I have

gained through this practical training is valuable. Hence, little piece of advice and

recommendation, audit is a valuable learning process, saviour every seconds of it.

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 10.2. RECOMMENDATION

Although I was in the office for six months period, there are some

recommendations that can be done to bring SH Chin to higher level.

Firstly, I would like to recommend SH Chin to widen the working space both

audit and tax department. As employee in audit department is majority assets in the

company, it also consumes most of the office place. Shortage of audit staff can be

clearly seen during peak season where each of the audit staff handles more than one case

during peak season. Shortage of audit staff might influence the quality of work during

peak season instead of off-peak season. As a result, the shortage of audit staff might

influence the quality of work during peak-season where the audit staff might not fully

done the audit by in accordance as based on the accounting standard.

Besides that, I feel that SH Chin should recruit more audit senior into the firms.

Although the firm already hire accommodate manpower of audit for coming peak season,

but most of them are fresh graduates and interns. The scenario caused imbalance ration

between number of experience and inexperience staffs which will affect the efficiency

and effectiveness of audit in audit field due to lack of audit experience among new staffs.

Last but not least, most of the SH Chin employees are Chinese and Chinese

educated, therefore most of the staff speaks mandarin during workplace, the

management should strongly enforce English speaking in workplace as English is

international language and it also show that the staff in SH Chin seems more

professional.

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11.REFERENCES

i. SH Chin & Co Malaysia.

Retrieved August 26, 2016, from http://www.shchin.com/

ii. Gst Guide for Input Tax Credit.

Royal Malaysian Customs Department. Retrieved August 26, 2016, from

http://gst.customs.gov.my/en/rg/SiteAssets/specific_guides_pdf/ Input tax

guide 050413 -latest version with Cover.pdf

iii. LHDNM.

(2016, September 1). Lembaga Hasil Dalam Negeri. Retrieved September

1, 2016, from http://www.hasil.gov.my/

iv. Malaysian institute of accountants members online handbook.

Retrieved September 1, 2016, from

http://www.mia.org.my/handbook/guide/

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12.APPENDIX

A. Audit Express Refresher Course Certificate

Picture 9. Audit Express Refresher Course Certificate

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B. Pictures with the staff

Picture 10. Group picture with SH Chin‟s and the partner‟s (StanleyCo) staff

Picture 11. Group picture of celebration of birthday for the birthday month
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Picture 12. Group picture with the Partner (StanleyCo) Directors

Picture 13. Group picture with the SH Chin & Co audit team

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