THE ADVOCATE. Board of Governors. From left to right: Mr. David William Berry

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1 Malaysian Institute of Corporate Governance ( M) (Institut Tadbir Urus Korporat Malaysia) June THE ADVOCATE 18 th ANNUAL GENERAL MEETING May 24, The Royal Lake Club, Kuala Lumpur BOARD OF GOVERNORS FOR THE NEW TERM President : Dato Yusli Mohamed Yusoff Deputy President : Mr. David William Berry Vice President : Mr. Albert Saychuan Cheok Member : Dato Seri Hj. Abd Rahman Hj. Ali Member : En. Megat Mizan Nicholas Denney Member : Ms Margaret Chin@ Chan Cheng Soon Board of Governors From left to right: Mr David William Berry, Y.Bhg Dato Yusli Mohamed Yusoff, Mr Albert Saychuan Cheok & En. Megat Mizan Nicholas Denney Absent With Apologies: Dato Seri Hj. Abd Rahman Hj. Ali, Ms Margaret Chin AGM in progress CONTENTS 2 President s Message 3 Upcoming Professional Development Training - Conference & Seminars 4 Professional Development Training - Seminars 7 Members Breakfast Talk & Dialogue with Board of Governors 7 Exclusive Breakfast Talk 8 News & Events 9 Partners in Corporate Governance Programme 10 The relationship between Internal Audit Characteristic, Audit Committee Characteristic and Interaction between Internal Audit and Audit Committee on Internal Audit Contribution 12 Audit Engagement Partner Business And Financial Reporting Timeliness: Evidence from Pre- and Post-AOB 14 Board of Governors 14 Contact Us 14 Coming Soon Mr. David William Berry Ms. Margaret Chin Public Consultation Paper No. 2/2016 Proposed Draft of the Malaysian Code on Corporate Governance 2016 Re-elected Governors pursuant to Article 59 of the Institute s Articles of Association. Y.Bhg Tan Sri Dato Seri Megat Najmuddin Bin Haji Megat Khas 2 Subissions were made to Securities Commission:- a) One by MICG; b) Another from MIA-MICG Round Table Discussion on 7 June Tan Sri retired accordance to Section 129(6) of the Companies Acct, However, he remains as MICG Honorary Patron. 1

2 PRESIDENT S MESSAGE Dear Members, How time flies! We are now into our 2nd issue of The Advocate. A lot has happened since we launched our inaugural issue in early April 2016 and more new events are in store for you in the coming months. Our 1st Members Breakfast Talk was held on 21 April 2016 at The Royal Lake Club. I made a presentation on Corporate Governance Business Sustainability, which was followed by a Members Dialogue. One of the outcomes of the Dialogue was an invitation to members to join a newly set up Members CG Working Group. I continued meeting various key stakeholders to strengthen our relationships and joint partnerships in various activities to achieve greater impact and effectiveness in reaching out and influencing. Amongst them are Senator Datuk Paul Low, Minister in the Prime Minister s Office; Securities Commission (SC); Malaysian Institute of Accountants (MIA); Malaysian Institute of Company Secretaries & Administrators (MAICSA); Malaysian Institute of CPAs (MICPA); International Islamic University Malaysia (IIUM); Universiti Teknologi Malaysia International Business School; Tuanku Abdul Rahman University College (TAR UC) and Putra Business School (PBS). It is indeed an honour to be partner with likeminded individuals who are keen to bring changes to the corporate governance landscape in Malaysia. I should also mention the interest from various organisations which have accepted our invitation to join us as MICG Partners in Corporate Governance since we launched the programme in mid-february This is part of our effort to form an elite think tank working group to discuss and implement some high level Corporate Governance matters. For example, one of the important and urgent area is the Securities Commission Public Consultation Paper on the Proposed Malaysian Code of Corporate Governance Another significant event was the MICG Annual General Meeting held on 24 May A special note of thanks is due to Tan Sri Dato Seri Haji Megat Najmuddin Bin Dato Seri Dr Haji Megat Khas for his support and contribution to MICG since its inception in Although Tan Sri is no longer sitting on the Board of Governors (as he did not wish to seek re-election), he remains the Honarary Patron of MICG. Many seminars and a major Governance Symposium are lined up for members to participate after the Hari Raya Aidil Fitri celebrations. I hope you will find these programmes relevant and useful to you and your staff. Should you have other topics on your wish list, please inform the Secretariat. Please check out in end of June 2016 the MICG new website which is mobile-responsive. You may also register for your seminars and conferences online. You can reach us at info@micg.org.my should you have any question or comment for us. For our Muslim members, we wish Selamat Berpuasa. Thank you. Dato Yusli Bin Mohamed Yusoff President MICG 2

3 CONFERENCE: UPCOMING PROFESSIONAL DEVELOPMENT TRAINING CONFERENCE & SEMINARS IN KUALA LUMPUR Keynote Address By: YB SENATOR DATUK PAUL LOW SENG KUAN Supported By: SEMINARS: Half Day Seminar on The New Malaysian Code on Corporate Governance, 21 July 2016 (9.00 am pm) Half Day Seminar on Amendment s to Bursa Listing Requirement, 21 July 2016 (1.45 pm 5.00 pm) 2nd Members Breakfast Talk, 9 August 2016 Half Day Seminar on Fraud Risk Management, 8 September 2016 (9.00 am pm) Half Day Seminar on The New Malaysian Code on Corporate Governance 2016 in Penang, 8 August 2016 REGISTER NOW! Special Members and Early Bird Discount. Seats are limited! (For more information, please contact Aida/Afiqah/Imen at ) 3

4 PROFESSIONAL DEVELOPMENT TRAINING - SEMINARS DIRECTORS DUTIES, BUSINESS ETHICS & GOVERNANCE SEMINAR, 28 APRIL ISTANA HOTEL, KUALA LUMPUR By virtue of their functions, Directors carry a heavy burden of duties, obligations and responsibilities in the management of their corporations. Greater regulatory and public scrutiny of companies governance systems and practices, and increasingly frequent and visible enforcement of the legal duties of directors and officers provides an important reminder to the stewards of corporations to keep themselves abreast of the latest changes in the corporate governance landscape. The array of legislation and regulation makes it imperative that directors devote sufficient time to regularly update their knowledge and skills through an appropriate continuing education program and life-long learning. Welcome address by En. Megat Mizan, Governor of MICG Dr. Mark Lovatt, CEO of Trident-Integrity Sdn Bhd presenting on Understanding Business Integrity. Participants are all top management from both the private and public sector. Samantha Tai Yit Chan, Managing Director of Boardroom Corporate Services (KL) Sdn Bhd, discussing on Implementing an Effective & Efficient Board: A Practical Approach. 4

5 HALF-DAY SEMINAR ON AMENDMENTS TO BURSA LISTING REQUIREMENTS BY MR LEE MIN ON, ON 1 ST JUNE THE ROYAL LAKE CLUB, KUALA LUMPUR Pre-seminar morning coffee Welcome Address by Mr. David William Berry Speaker Mr. Lee Min On Eighty participants attended this seminar Dato Yusli Mohamed Yusoff and Mr. Lee Min On 5

6 HALF-DAY SEMINAR ON FRAUD RISK MANAGEMENT BY MR LEE MIN ON, ON 6 TH JUNE BAYVIEW HOTEL, PENANG Registration of participants Welcoming address by En. Megat Mizan Nicholas Denney, from MICG Board of Governors. Participants with En. Megat Mizan Nicholas Denney and Mr. Chang, CEO of Chang Kong Foo & Co (third from left) Thirty participants attended this seminar. Q & A Session with participants From left: En. Megat Nicholas Denney, Ms Lauren Peng with participants and speaker Mr Lee Min On 6

7 MEMBERS BREAKFAST TALK & DIALOGUE WITH BOARD OF GOVERNORS ON 21 APRIL 2016 MICG s first Members Breakfast Talk was well attended, attracting some 30 members. President of MICG, Dato Yusli presented a talk on Corporate Governance & Business Sustainability. Following that, the Board of Governors had a Members Dialogue session. Members found the event a good platform for networking with fellow members as well as for updates on new developments in the area of Corporate Governance. In view of the good response, Dato Yusli proposed to extend the Members Breakfast Talk to three times a year. The upcoming dates are 9 August and 15 December As mentioned in our first Members Breakfast Talk on 21 April 2016, we are forming a Members Working Group. Members who are interested to join this Working Group, please contact us at info@micg.org.my MEMBERS ARE INVITED TO ATTEND THE EXCLUSIVE BREAKFAST TALK 20 JULY CPA AUSTRALIA OFFICE (Limited to 25 MICG members) (Please contact iman@micg.org.my should you wish to attend) (FIRST COME FIRST SERVE BASIS) EXCLUSIVE BREAKFAST TALK Dr AJ. Purcell, B. Bus, B. Ec, Grad Cert Fraud Investigation, MBA, PhD, FCPA Dr AJ Purcell is the Chief Auditor of CPA Australia. He has extensive governance and internal audit experience from the private sector (aviation, banking and insurance) and the public sector (health, engineering, tertiary education). He is a member of four audit committees in local government in Victoria Australia. His academic interests are in the areas of governance and organisational misconduct. His PhD thesis related to public sector governance and audit committees. 7

8 NEWS & EVENTS COURTESY VISITS A courtesy visit to TAR University College on 28 March Second from right - YBhg Datuk Dr Tan Chik Heok, President of TARC On 8 April 2016, YBhg. Dato Yusli, Lauren Peng and Afiqah Mohamad Rafi visited the International Islamic University Malaysia (IIUM) A courtesy visit to YB Senator Datuk Paul Low Seng Kuan at the Prime Minister s Department, in Putrajaya on 11 April Courtesy visit to Malaysian Institute of Certified Public Accountants (MICPA) on 13 April nd Dialogue with Universities and special guest, Mr. Alan Kirupakaran from the Prime Minister s Department, at MICG, on 31 May

9 PARTNERS IN CORPORATE GOVERNANCE PROGRAMME Our Partners in Corporate Governance Programme (PICG) to-date; 1) Yinson Holdings Berhad 3) UEM Sunrise Berhad 2) ACCA Malaysia Sdn Bhd 4) Bank Rakyat If you are interested to find out more about PICG, please contact us at Courtesy Visit to Bank Rakyat on 31 st May 2016 A small ceremony organised by Bank Rakyat for supporting the PICG programme. Dato Yusli Mohamed Yusoff receiving a gift of appreciation from President/CEO Bank Rakyat, Dato' A group photo with senior executives of Bank Rakyat COMING SOON NEW LOOK AND FEEL MICG website is currently under construction, with completion due by July Stay tuned! 9

10 RESEARCH CONTRIBUTION FROM UNIVERSITIES IN MALAYSIA I. The relationship between Internal Audit Characteristic, Audit Committee Characteristic and Interaction between Internal Audit and Audit Committee on Internal Audit Contribution Prof Dato Dr Hasnah Haron Dr Tong Chue Qun ABSTRACT The Malaysian Code of Corporate Governance (MCCG) was first introduced in 2000 and it was then revised in 2007 and This was then followed by the Bursa Malaysia Revamped Listing Requirement in 2001 and Guidelines on Internal Audit Function for Public Listed Companies in These enacted reforms aim to promote and improve corporate governance in public listed companies in Malaysia. Bursa Malaysia has recognised the importance of internal audit as a key governance function in public listed companies, and highlighted that its roles are closely linked with audit committees. The revised MCCG Code 2007 recognises the importance of internal audit by requiring all companies to have an internal audit function. Both of these reforms have put internal audit in the lime-light as one of the means of improving risk management and governance, and also is seen as critical to preserving and enhancing stakeholder value. Given the perceived importance of internal audit as part of good corporate governance, these changes are likely to enhance the role and value of internal audit (Coram, Ferguson & Moroney, 2006). When it comes to adding value to the company, there should be no better resource of a company than internal auditing. Internal auditing becomes an important tool in helping an organisation achieve its objectives when effectively implemented. Organisations with internal audit activities are better able to identify business risks and system inefficiencies and ineffectiveness, take appropriate corrective actions, and ultimately support continuous improvement. Therefore its contribution must be monitored in order to maintain and enhance internal audit s credibility. The objectives of this study are, therefore, to investigate contribution of internal audit and its determinants such as internal audit characteristics, audit committee characteristics and interaction between internal audit and audit committee. Questionnaires were distributed to 413 public listed companies in Bursa Malaysia and 172 responses were received. 10

11 The study found that there is a significant relationship between the internal audit competency and internal audit contribution in control. Similarly, Felix et al. (2001) and Mazlina et al. (2006), found that the more competent the internal audit, the greater the internal auditors perception of their contribution to the external audits. Companies should consider the education level and types of experiences when appointing internal auditor. This finding emphasises the importance of having a certified internal auditor to be heading the internal audit unit. A suggestion to the regulatory body to consider making this a mandatory requirement. Most of the audit committee characteristic factors and interaction between audit committee and internal audit shows an insignificant result with the internal audit contribution. The insignificant findings could be due to the fact that the MCCG 2007 Code has been mandated over some time and the public listed companies may well have already embedded it in their audit committees and thus the insignificant results. These findings have implication to the revised MCCG which requires independence and financial literacy of audit committee and the Institute of Internal Auditors (IIA) to be safeguarded. This is because audit committees and internal auditors have interlocking goals, and a strong working relationship between them is essential for each to fulfill its responsibilities to senior management, board of directors, shareholders, and other outside parties. Given that internal audit is relatively new in Malaysia, companies should establish guidelines in the audit charter or ensure compliance to International Professional Practices Framework to increase the quality of internal audit which in turn could lead to a higher internal audit contribution. Key words: Internal Audit, Audit Committee, Internal Audit Contribution 11

12 II. Audit Engagement Partner Workload And Financial Reporting Timeliness: Evidence From Pre- And Post-AOB Prof Dr Wan Nordin Wan-Hussin Dr Hasan Mohammed Bamahros Siti Norwahida Shukeri There is ample empirical evidence which shows that financial reporting timeliness in Malaysia lags behind other countries. Although Malaysian listed companies predominantly adhere with the Bursa Malaysia Listing Requirements mandating audited financial statements to be released within four months after the financial year end, on average, Malaysian companies take around 100 days to issue the audited financial statements, which are significantly longer than the practices elsewhere. The Malaysian regulators view this divergence from global best practice seriously as reported by The World Bank: Bursa Malaysia is planning to shorten the deadline for submitting audited financial statements from the current four months after the end of the financial year to two months and has embarked on a consultation process with other stakeholders (Report on the Observance of Standards and Codes - Malaysia, Accounting and Auditing, 2012). Motivated by the above regulatory concern, we examined whether audit engagement partner busyness, measured by number of listed clients in the signing auditor s portfolio, influences the audit report timeliness for the period before and after the establishment of the Audit Oversight Board (AOB) in We focused on the engagement partner workload as various leading organisations such as NederlandseBeroepsorganisatie van Accountants (NBA), PCAOB and Center for Audit Quality (CAQ) in the US, Canadian Public Accountability Board (CPAB), and Accounting and Corporate Regulatory Authority (ACRA) in Singapore have advocated the use of engagement partner workload as one of the audit quality indicators (Federation of European Accountants, 2015). Our analysis of the audit market in Malaysia in 2009 indicated that one of the partners of Crowe Horwath was the engagement partner for 32 listed clients. However, subsequent to the formation of AOB, we noted there was a gradual reduction in the number of listed clients per engagement partner, reflecting a shift towards audit quality. Our results showed that over-burdened engagement partners take a longer time to complete the audit. It also showed that the partner busyness-audit delayed relationship is more pronounced under the AOB inspection regime. However this is moderated by the length of partner tenure, reflecting the knowledge spill-over effect of longer partner-client relationship. 12

13 Our study enriched contemporaneous literature that examined how the individual auditor characteristics influenced the accounting and auditing outcomes. Our study reiterated the growing importance of examining accounting and auditing outcomes at the individual partner level rather than audit firm level, and provides empirical support that the engagement partner workload is a potentially useful indicator of audit quality. Thus, we contributed to the on-going debates on the usefulness of providing disclosures on the engagement partner s client portfolio composition. Our findings have implications for regulators, audit practitioners, board of directors including audit committee members, and investors who are interested in enhancing the timeliness and integrity of financial information. One of the limitations of our study is we measure auditor busyness by considering only listed clients, due to data unavailability. Thus we may understate the level of partner busyness when partner has unlisted clients in the portfolio. Note: Earlier drafts have been presented at the Journal of Contemporary Accounting and Economics 2016 Annual Symposium in Bangkok and the British Accounting and Finance Association 2016 Annual Conference in Bath. The latest version of the paper will be presented at the American Accounting Association Centennial Conference in New York in August MICG has agreed to the publication of the above extract in its newsletter in the interests of encouraging debate as an essential element of the development of thought and progress in the field of Corporate Governance best practice. MICG has not sighted or validated the data behind the study which led to the above extract and does not express any opinion as to the findings and recommendations contained in the study or the above extract. 13

14 SELAMAT BERPUASA & IN ADVANCE TO ALL OF YOU. WISHING YOU A BLESSED & JOYOUS HARI RAYA! BOARD OF GOVERNORS Y.Bhg Dato Yusli Mohamed Yusoff Mr David William Berry Mr Albert Saychuan Cheok Ms Margaret Chin En Megat Mizan Nicholas Denney Y.Bhg Dato Seri Abdul Rahman Haji Ali President Deputy President Vice President HONORARY PATRON Y.Bhg Tan Sri Megat Najmuddin Megat Khas DIRECTOR Ms Lauren Tam Kam Peng laurenpeng@micg.org.my CONTACT US 3A-02 Block F, Pusat Dagangan Phileo Damansara I 9 Jalan 16/11, Off Jalan Damansara Petaling Jaya, Selangor Darul Ehsan, Malaysia. Website: Tel: Fax: / info@micg.org.my The MICG Newsletter is circulated strictly to members only. On the republication of articles/work of others, permission were obtained. MICG shares with members; however MICG takes no views or responsibilities on them