MIA By-Laws — Short Notes

1) Big Picture: What are the MIA By-Laws?

• Who? All professional accountants registered with MIA.
• Why? To protect the public and uphold trust in the profession.
• How? By setting ethical principles and rules for professional conduct and practice.

Two main parts:

Part A — Professional Ethics (largely aligned with IFAC Code of Ethics)

Part B — Professional Conduct & Practice (how firms/members should behave in practice)

2) The 5 Fundamental Principles (Remember: IO-PCD-C-PB)

Integrity — Be honest and straightforward.

Example: Don’t backdate invoices or “massage” numbers.

Objectivity — Don’t let bias, conflicts of interest, or pressure influence your judgment.

Example: Don’t let friendship with a client sway your audit opinion.

Professional Competence & Due Care — Keep your knowledge up-to-date and do work carefully.

Example: Read latest MFRS/MPERS updates; plan and review your work.

Confidentiality — Protect client information; share only with proper authority.

Example: Don’t discuss client results on social media.

Professional Behaviour — Follow laws/regulations and avoid actions that discredit the profession.

Example: Avoid misleading advertising or disparaging other firms.

Quick check: If a choice/decision would make the profession look bad to a reasonable person, it probably breaches Professional Behaviour.

3) Conceptual Framework (3 Easy Steps)

When facing an ethical issue:

1. Identify threats (What could harm compliance with the principles?)
2. Evaluate significance (Are the threats significant?)
3. Apply safeguards (What actions reduce the threat to an acceptable level?)

If threats can’t be reduced to an acceptable level, decline or end the engagement.

The 5 Threat Categories (remember SSAFI)

1. Self-interest (personal/financial interest)
2. Self-review (reviewing your own work)
3. Advocacy (promoting a client’s position)
4. Familiarity (too close/long association)
5. Intimidation (pressure or threats)

Simple examples

1. Self‑interest: Big outstanding fees → pressure to please client.
2. Self‑review: Your firm prepared the client’s accounts and also audits them.
3. Advocacy: Publicly defend a client’s tax dispute you audit.
4. Familiarity: Same senior audits same client for 10+ years; becomes too trusting.
5. Intimidation: Client threatens to replace you unless you “tone down” findings.

Typical safeguards - Rotate staff/partners; consult an independent reviewer; reduce/clear overdue fees; modify scope; involve additional experts; decline certain non‑assurance services.

4) Independence (for Audit/Assurance)

1. Independence of mind: Ability to make an unbiased judgment.
2. Independence in appearance: A reasonable third party would see you as independent.

Common red flags & simple responses

1. Gifts/Hospitality: Accept only if minor and not intended to influence. When in doubt, decline and record it.
2. Loans: From audit client banks are okay only if under normal lending terms.
3. Fees: Very low fees can risk quality → ensure sufficient resources/time or reconsider.
4. Referral fees/commissions: May create self‑interest threat → disclose/assess/apply safeguards or avoid.
5. Long association: Rotate key partners/staff; get an EQCR (engagement quality control review).
6. Family/personal relationships: Remove affected staff from the engagement; disclose and take safeguards.

5) Client Acceptance/Change of Auditor (Key Steps)

1. Talk to predecessor auditor (with client’s permission) to understand reasons for change.
2. If client refuses permission, predecessor should tell proposed auditor that permission was refused.
3. Proposed auditor then reassesses whether to accept (possible red flags).
4. Consider competence, resources, ethical issues, and independence before accepting.

6) Non‑Assurance Services to Audit Clients (Watch for Self‑Review)

1. High risk: Preparing accounting records/financial statements, valuation services that affect the audit, internal audit outsourcing that impacts the financial statements.
2. Lower risk (usually okay with safeguards): Training, general technical advice, administrative support (non‑decision making).
3. Rule of thumb: If your work will be audited by you, it’s likely a self‑review threat.

7) Marketing & Professional Behaviour

1. Ads must be truthful, not misleading, and not discredit the profession or competitors.
2. Don’t guarantee outcomes (“best audit in Malaysia - guaranteed”).

8) Confidentiality in Practice

1. Share client info only with: client permission, legal/professional duty, or court order.
2. Discuss sensitive matters in private; secure files; follow firm policies.

9) Quick Decision Tool (Diploma Fast-Flow)

ASK:

1. Which principle could be affected?
2. Which threat(s) apply (SSAFI)?
3. Can I eliminate/reduce the threat with safeguards?

Yes → Document and proceed.

No → Decline/withdraw.

10) Mini Scenarios (Practice)

A. Client offers an expensive trip before year-end testing.

Threat: Self‑interest/familiarity → Decline; record; consider rotation/extra review.

B. Bank audit client offers staff a standard car loan at published rates.

Independence okay if normal terms; document and ensure no preferential treatment.

C. Proposed auditor can’t contact predecessor due to client refusal.

Red flag. Predecessor discloses refusal; proposed auditor reassesses acceptance.

D. Your firm is asked to prepare the client’s financial statements and also audit them.

Self‑review threat → Separate teams, strong safeguards; if still significant, decline one service.

E. Partner’s close relative becomes client CFO.

Familiarity threat → Remove partner from engagement; consider additional safeguards.

13) Audit Fees 

What is a “reasonable” audit fee?

1. Reflects scope, time, expertise, complexity, risk and quality controls needed.
2. Agreed in writing (engagement letter): basis (time‑cost/fixed/capped), billing schedule, out‑of‑pocket costs, and how changes in scope are handled.

Ethics hotspots & why they matter

1. Lowballing (very low fee) → risk to Professional Competence & Due Care (insufficient time/resources → quality suffers).
2. Contingent fees (depend on outcome) → not permitted for assurance engagements; can severely threaten objectivity.
3. Overdue fees (large/unpaid from prior year) → may resemble a loan to the client → self‑interest threat.
4. Fee dependence (one client/related group forms a big share of your firm’s fees) → threat to independence/objectivity.

Typical safeguards

1. Ensure adequate staffing/time; adjust fee or decline if quality can’t be maintained.
2. For overdue fees: request settlement (or a substantial part) before signing the audit report; add independent review.
3. For fee dependence: rotate senior personnel, add EQCR/second partner review, disclose to Those Charged with Governance (TCWG); consider withdrawing if threats can’t be reduced.
4. No contingent fees for audits/assurance; for non‑assurance, assess and document threats/safeguards.

Quick scenarios

1. Client insists on a fee too low to cover required procedures → Re‑scope or decline; document.
2. Prior‑year fees remain unpaid close to sign‑off → treat as a self‑interest threat; seek payment and add safeguards; consider not issuing until addressed.
3. One listed client pays ~30–40% of small firm revenue → apply strong safeguards; if still significant, consider resignation.

12) Glossary (Plain English)

1. Safeguards: Actions to reduce threats (e.g., rotate staff, independent review).
2. EQCR: Engagement Quality Control Review - an extra, independent check.
3. Reasonable third party: An informed outsider - would they think you’re independent?

One-Page Summary (Cheat Sheet)

1. 5 Principles: Integrity, Objectivity, Competence & Due Care, Confidentiality, Behaviour
2. 5 Threats: Self‑interest, Self‑review, Advocacy, Familiarity, Intimidation
3. Steps: Identify → Evaluate → Safeguard → Decide
4. Independence: Mind + Appearance
5. Red Flags: Lavish gifts, preferential loans, very low fees, long association, family ties, self‑review work

If in doubt: Step back, consult, document, and do the right thing.