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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

Malaysian Institute of Corporate Governance (458959-M) (Institut Tadbir Urus Korporat Malaysia)

THE ADVOCATE

June 2016

www.micg.org.my

18th ANNUAL GENERAL MEETING

May 24, 2016 @ The Royal Lake Club, Kuala Lumpur

Mr. David William Berry Ms. Margaret Chin

Re-elected Governors pursuant to Article 59 of the Institute’s Articles of Association.

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

Y.Bhg Tan Sri Dato’ Seri Megat Najmuddin Bin Haji Megat Khas

Tan Sri retired accordance to Section 129(6) of the Companies Acct, 1965. However, he

remains as MICG Honorary Patron.

AGM in progress

Public Consultation Paper No. 2/2016

Proposed Draft of the Malaysian Code on

Corporate Governance 2016

2 Subissions were made to Securities Commission:-

a) One by MICG; b) Another from MIA-MICG Round Table

Discussion on 7 June 2016.

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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 2016. 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 2016’.

Another significant event was the MICG Annual General Meeting held on 24 May 2016. 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 1998. 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

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Keynote Address By:

YB SENATOR DATUK PAUL LOW

SENG KUAN

Supported By:

UPCOMING PROFESSIONAL DEVELOPMENT TRAINING –

CONFERENCE & SEMINARS IN KUALA LUMPUR

REGISTER NOW! Special Members and Early

Bird Discount. Seats are limited!

(For more information, please contact

Aida/Afiqah/Imen at 03 7957 6799)

Half Day Seminar on ‘The New Malaysian Code on Corporate Governance 2016’ in

Penang, 8 August 2016

Half Day Seminar on’ Fraud Risk Management’, 8 September 2016

(9.00 am – 12.30 pm)

2nd Members’ Breakfast Talk, 9 August 2016

Half Day Seminar on ‘Amendment’s to Bursa Listing Requirement’,

21 July 2016 (1.45 pm – 5.00 pm)

Half Day Seminar on ‘The New Malaysian Code on Corporate Governance’, 21 July

2016 (9.00 am – 12.30 pm)

SEMINARS:

CONFERENCE:

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‘DIRECTORS DUTIES, BUSINESS ETHICS & GOVERNANCE SEMINAR,

28 APRIL 2016 @ ISTANA HOTEL, KUALA LUMPUR’

PROFESSIONAL DEVELOPMENT TRAINING - SEMINARS

Welcome address by En. Megat Mizan,

Governor of MICG

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.

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’.

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HALF-DAY SEMINAR ON ‘AMENDMENTS TO BURSA LISTING REQUIREMENTS’

BY MR LEE MIN ON,

ON 1ST JUNE 2016 @ THE ROYAL LAKE CLUB, KUALA LUMPUR

Dato’ Yusli Mohamed Yusoff

and Mr. Lee Min On

Pre-seminar morning coffee

Welcome Address by Mr. David William Berry

Speaker Mr. Lee Min On

Eighty participants attended this seminar

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HALF-DAY SEMINAR ON ‘FRAUD RISK MANAGEMENT’ BY MR LEE MIN ON,

ON 6TH JUNE 2016 @ 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

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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 2016.

EXCLUSIVE BREAKFAST TALK

MEMBERS’ BREAKFAST TALK &

DIALOGUE WITH BOARD OF GOVERNORS ON 21 APRIL 2016

21 APRIL 2016 @ THE ROYAL LAKE CLUB, KUALA LUMPUR

MEMBERS ARE INVITED TO ATTEND THE EXCLUSIVE BREAKFAST TALK 20 JULY 2016 @ CPA AUSTRALIA OFFICE

(Limited to 25 MICG members) (Please contact iman@micg.org.my should you

wish to attend) (FIRST COME FIRST SERVE BASIS)

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

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.

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COURTESY VISITS

NEWS & EVENTS

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 2016.

Courtesy visit to Malaysian Institute of

Certified Public Accountants (MICPA) on 13

April 2016

2nd Dialogue with Universities and special guest,

Mr. Alan Kirupakaran from the Prime Minister’s

Department, at MICG, on 31 May 2016

A courtesy visit to TAR University College on 28

March 2016.

Second from right - YBhg Datuk Dr Tan Chik

Heok, President of TARC

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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 info@micg.org.my

NEW LOOK AND FEEL

MICG website is currently under construction, with completion

due by July 2016.

A small ceremony organised by Bank Rakyat for supporting the PICG programme.

PARTNERS IN CORPORATE GOVERNANCE PROGRAMME

Courtesy Visit to Bank Rakyat on 31st May 2016

Dato’ Yusli Mohamed Yusoff receiving a gift of appreciation from President/CEO Bank Rakyat, Dato' Mustafha Hj. Abd. Razak

A group photo with senior executives of Bank Rakyat

COMING SOON www.micg.org.my

Stay tuned!

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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 2012. This was then followed by the Bursa Malaysia Revamped Listing

Requirement in 2001 and Guidelines on Internal Audit Function for Public Listed Companies in 2002.

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.

RESEARCH CONTRIBUTION FROM UNIVERSITIES IN MALAYSIA

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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

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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 2010. 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.

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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 2016.

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.

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BOARD OF GOVERNORS

Y.Bhg Dato’ Yusli Mohamed Yusoff – President

Mr David William Berry – Deputy President

Mr Albert Saychuan Cheok – Vice President

Ms Margaret Chin

En Megat Mizan Nicholas Denney

Y.Bhg Dato’ Seri Abdul Rahman Haji Ali

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

46350 Petaling Jaya, Selangor Darul Ehsan, Malaysia.

Website: www.micg.org.my

Tel: +603 7957 6799 Fax: +603 7957 3722 / 7957 2722

Email: info@micg.org.my

IN ADVANCE TO ALL OF YOU.

WISHING YOU A BLESSED & JOYOUS HARI RAYA!

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.

SELAMAT BERPUASA &

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