BUILDING THE SKILLS: LEARNING EXPERIENCE AT A CHARTERED ACCOUNTANTS FIRM
Wan Zuraida Wan Yusoff Tengku Besaruddin Shah Tengku Yaakob Reviewer
Zulkepli Bin Marzuki, CA (M) Senior Partner of MNZWAJA (Chartered Accountants)
BUILDING THE SKILLS: LEARNING EXPERIENCE AT A CHARTERED ACCOUNTANTS FIRM
Published by: POLITEKNIK SULTAN HAJI AHMAD SHAH 25350 KUANTAN, PAHANG DARUL MAKMUR COPYRIGHT©2020, Politeknik Sultan Haji Ahmad Shah Perpustakaan Negara Malaysia Data Pengkatalogan-dalam-Penerbitan Wan Zuraida Wan Yusoff, 1972BUILDING THE SKILLS: LEARNING EXPERIENCE AT A CHARTERED ACCOUNTANTS FIRM / Wan Zuraida Wan Yusoff, Tengku Besaruddin Shah Tengku Yaakob. Mode of access: Internet eISBN 978-967-0778-64-8 1. Accounting firms. 2. Accounting. 3. Auditing. 4. Taxation. 5. Government publications--Malaysia. 6. Electronic books. 657 Materials published in this book is under the copyright of the Politeknik Sultan Haji Ahmad Shah. All rights reserved. No part of this publication may be reproduced or distributed in any form of by means, electronic, mechanical, photocopying, recording, or otherwise or stored in a database or retrieval system without the prior written permission of the publisher. Printed in Malaysia by: Xtreme Techno Trading No.6, Kg. Selamat Baru, Bangunan LKNP 25050 Kuantan Pahang Darul Makmur
Contents PREFACE
i
List of Figures:
i
List of Tables:
iii
1 INTRODUCTION
-1-
1.1 Objectives of Lecturer’s Industrial Attachment Programme.
2 ORGANISATIONAL BACKGROUND AND STRUCTURE
-2-
-3-
2.1 Organisation History
-4-
2.2 Services Offered by the firm
-5-
2.2.1
Business Auditing and Advisory Services (BAAS)
-5-
2.2.3
Internal Audit Services
-7-
2.2.4
Shariah Assurance and Auditing.
-9-
2.2.5
Compliance services.
- 10 -
2.2.6
Tax Advisory and Zakat Services
- 10 -
2.2.6
Management Consultancy
- 12 -
2.3
Client Sector and Principal Activity
- 13 -
3 KNOWLEDGE AND SKILLS SHARED
- 14 -
3.1 Auditing
Error! Bookmark not defined.
3.2 Taxation
- 38 -
3.3 Accounting
- 40 -
3.3.1
Identifying and Analyzing Business Transactions
- 40 -
4 ACTION PLAN
- 48 -
5 CONCLUSION
- 52 -
REFERENCES
- 54 -
INDEX
- 55 -
PREFACE This book is written for the accounting students and lecturers to empower their skill and knowledge in the accounting field. It is based on the author’s internship experiences for 2 months in a Chartered Accountants Firm. Experiences gained during training gives true reflections in upgrading the skills required to be involved in the accounting profession. The theoretical knowledge is being practiced during actual work, however, some will face a lot of unpredictable situations that require a suitable approach in completing the tasks. This book will help you to acknowledge what kind of situation you will be facing through that requires deeper knowledge practise in a company. The theoretical and practical knowledge gathered can have a slight difference where some practices are performed are not accepted theoretically. The book provides clear exposure to the accounting, auditing and taxation work in the firm. The contents are all based in accordance with the author’s working experience in a Chartered Accountants firm. Experiential learning can be adapted based on the experiences gained in the industry which will enhance student’s knowledge and readiness to practice what they have learnt. “In its simplest form, experiential learning means learning from experience or learning by doing. Experiential education first immerses learners in an experience and then encourages reflection about the experience to develop new skills, new attitudes, or new ways of thinking.” (Lewis and Williams, 1994)
List of Figures: i
Figure 3. 1: Work Process in Auditing ...................................................... - 19 Figure 3. 2: Documents from one of the clients................................... - 20 Figure 3. 3: Permanent Audit File (PAF) ................................................. - 21 Figure 3. 4: Audit Program Cover .......................................................... - 21 Figure 3. 5: Audit Program Table of Contents ...................................... - 22 Figure 3. 6: Audit Program Background ............................................... - 22 Figure 3. 7: Audit Program Approach ................................................... - 23 Figure 3. 8: Audit Program Approach (Internal Controls) .................. - 23 Figure 3. 9: Audit Program (Income Statement) ................................. - 24 Figure 3. 10: Audit Program (Objectives) ............................................. - 24 Figure 3. 11: Audit Program (Others) ..................................................... - 25 Figure 3. 12: MNZWAJA’s Meeting Room ............................................. - 26 Figure 3. 13: Working paper for cost of sales ....................................... - 29 Figure 3. 14: Working paper for property, plant, and equipment .... - 29 Figure 3. 15: Working paper for trade payable .................................. - 30 Figure 3. 16: Current Audit File (CAF) .................................................... - 34 Figure 3. 17: Contents of CAF ................................................................. - 35 Figure 3. 18: Audit Process ...................................................................... - 36 Figure 3. 19: File Rack for PAF, CAF and Taxation file. ........................ - 38 Figure 3. 20: Taxation File ........................................................................ - 39 Figure 3. 21: The Accounting Cycle ...................................................... - 40 Figure 3. 22: Batching Accounts. ........................................................... - 41 Figure 3. 23: Journal entry. ...................................................................... - 42 Figure 3. 24: Payment and receive entry ............................................. - 42 Figure 3. 25: Sales entry ........................................................................... - 43 Figure 3. 26: Purchases entry .................................................................. - 43 Figure 3. 27: Reports prepared by the system. .................................... - 45 Figure 3. 28: General ledger reports...................................................... - 45 Figure 3. 29: Trial balance reports .......................................................... - 46 Figure 3. 30: Income Statement Reports. ............................................. - 47 Figure 3. 31: Balance Sheet Reports. ..................................................... - 47 ii
List of Tables:
Table 3. 1: The Diaries of Activities for 2 Months Attachment. .......... - 15 Table 3. 2: Audit work in Statement of Financial Position items. ........ - 37 Table 3. 3: Audit work in Income Statement items. ............................. - 37 -
iii
1
INTRODUCTION
Polytechnic’s
Transformation
Plan
encouraged
the
lecturers to undergo industrial attachment in the related industries to gain experience and parallel with the latest development in technology. Starting 2018 Lecturer’s Industrial Attachment Programme (LIA) was stated in Strategic Plan of Polytechnic as one of the KPI to be achieved. By undergoing at least one months and a maximum of 3 months attachment at related industries, lecturers can experience the real-life working environment especially for those who don’t have the experience. As a result, lecturers will be able to gather knowledge and up-to-date skill which can be shared with their colleagues and students to benefit and enrich their learning experiences. LIA provides an opportunity for learning through experiences and to reduce the gap between skills demands by industry and the content of courses.
The attachment also helped lecturers to
improve their communication skills and a better understanding of the operations of the respective organisation. This attachment also gives broader knowledge through increased awareness of the opportunities available, the diversity of the industry and personal development in a particular area. Lecturers
of
the
polytechnic
are
responsible
for
the
implementation of the teaching and learning process in their respective disciplines. Other main responsibilities are assessing the students, planning curriculum, develop and manage the course. -1-
The lecturers are also needed to assist in organising events, competitions and activities, exhibitions, industrial training visit and establishing closer ties with industry and relevant organisations. They are also required to perform research and present their research papers at the national and international level. Therefore, lecturers must be fluent in both the Bahasa Melayu as the national language and as well as English. Furthermore, they should also possess strong administrative and interpersonal skills. So, through LIA will help lecturer to give a broad view in implementing all the responsible given to them. Institutions will be encouraged to embed industry input in the curriculum to ensure their graduates match the skills requirement of the industry. Lack of industry input in curriculum design has resulted in a mismatch of skills required by the industry and the skills attained by TVET graduates. Industries demand work-ready TVET graduates who are competent and multi-skilled. LIA is one of the channels to gain input from industry and to reduce the gap of mismatch graduate’s skills with industries need.
1.1 Objectives of Lecturer’s Industrial Attachment Programme. The Department of Polytechnic Education (DPE) objectives of this program are: a)
Fulfil the targets of the human capital transformation plan towards effective professional development.
b)
Expose lecturers to the real working environment and industry best practices.
c)
Implement smart partnerships between polytechnics and industries.
d)
Relates the syllabus of learning and industry practices.
-2-
e)
Build self-confidence to be adapted to teaching and learning.
My personal objectives of this program are: a)
To upgrade practical skills competencies specific to industry practice and procedures.
b)
To upgrade pedagogical competencies and technical competencies through experience and in-service courses and training in industries.
c)
To learn the latest technology and knowledge in accounting and at the same time gain knowledge in other areas such as management, innovation, quality control circle, marketing, sales strategy, best practice and interpersonal skill in industries.
2
ORGANISATIONAL BACKGROUND AND STRUCTURE -3-
I choose MNZWAJA Kemaman Branch as a place to gain my experience because MNZWAJA is one of the industries that is collaborating with Politeknik Sultan Haji Ahmad Shah (POLISAS). It was an established Chartered Accounting firm where the main office is in Kuantan, Pahang. MNZWAJA is one of the firms who has a good relationship with POLISAS and had contributed a lot in giving talks and seminars to the students. They always involved the student’s activities in POLISAS. I am proud to be part of this firm for only 2 months starting from 3rd July until 10th September 2017.
2.1 Organisation History The accounting firm is one of the challenge businesses in providing accounting services to individuals and companies. MNZWAJA is one of the bumiputra companies that has taken the challenge to be part of this business. MNZWAJA (AF001959) was incorporated on 7 November 2008 in lieu of the merging of three firms which is MNZ Associates (AF1012) established since 1994, Wan Ali Jaafar Associates (AF1074) established 1997 and MH Associates (AF1290) established on 2001. With regards to the coalition
of
the
knowledge,
experience,
and
resources,
MNZWAJA has set the Firm’s corporate objectives to be a leading Malaysian accounting firm. From an individual to the large corporations or organizations, MNZWAJA is committed to giving their best services to their clients. It is achievable through their expertise that can assist the clients to respond to the needs rapidly and effectively. Each of MNZWAJA clients is served by at least one of their partners, executive directors or managers who are committed to providing prompt, efficient and cost-effective services. -4-
The vision of MNZWAJA is “to be the leading Malaysian accounting firm with a global presence by 2030, in accordance with Islam. The mission is to provide competent and professional services by optimizing our talented human capital and resources, exceeding clients’ expectations whilst creating values to the stakeholders.”
2.2
Services Offered by the firm
2.2.1 Business Auditing and Advisory Services (BAAS) BAAS remain the firm’s traditional key service area. Every auditing process encompasses a tailored approach based on many years of development and practice. Although each audit is different in term of size and complexity, MNZWAJA provides the same level of professionalism to all MNZWAJA clients. In the process of auditing a company, MNZWAJA professionals review the organisation’s procedures and assess the various operational and financial risks involved. MNZWAJA normally conclude the review by dispatching a management letter to the client. In accordance with the firm’s high standard of approach to meet the
client’s
expectation,
MNZWAJA
propose
suitable
recommendations for improvements in internal control and other operational aspects of their clients. All the recommendations are designed to assist in the implementation of cost saving methods as well as improving the usage of existing resources to increase productivity and profitability. An independent audit is a foundation for executive decision making in the business world.
Its function is to enhance the
reliability of data and information prepared by clients for use by investors and other stakeholders. MNZWAJA audit professionals -5-
provide a range of independent audit services based on a strong knowledge of accounting principles. These are complemented by an appropriate knowledge of business systems and acumen, processes and controls. MNZWAJA also help clients respond to need for greater transparency, improved corporate governance, and business models, based on the principles of sustainability. The services offered related to Auditing and advisory services are: 2.2.1 Statutory Audit MNZWAJA provide statutory and non-statutory audit assurance on the reality and fairness of an organisation’s financial information,
advice
on
controls
and
processing
system
weaknesses, confirmation of accounting treatments on complex transactions. 2.2.2 Financial Accounting MZWAJA offer necessary technical advice, support tools and training to help you address and deal with complex and everchanging financial accounting issues effecting the transactions – listings, valuations, share plans, corporate reporting, and structuring, etc.
Regulatory Compliance. Help to manage regulatory risks, by minimising the costs and disruptions associated with regulatory compliance at the strategic level and maximising the competitive and strategic opportunities resulting from the regulatory change. Non-Financial Performance & Reporting -6-
The need for transparent reporting brought to the fore by the onslaught of corporate scandals, help to report information the matters most to client’s stakeholders. Enhanced disclosures, nonfinancial value drivers such as market opportunities, risks, and sensitivity analysis. Systems and Procedures Assurance (SPA) Provide advice to clients on the effectiveness of their controls over financial information systems, which involves identifying revenue leakages, looking into areas involving the integrity of client’s financial data, the security and reliability on data, information requirements.
as
well
This
as
covers
their a
compliance wide
range
to of
regulatory technology
environments including accounting related software, mainframe, midrange, LAN/WAN and client server settings. Financial Reporting Standards (FRS) MNZWAJA offer a full range of FRS solutions to support and guide clients throughout the implementation process. 2.2.3 Internal Audit Services MNZWAJA offers a wide spectrum of internal audit services which is comprehensive and not limited to simply compiling process descriptions. They also generate a job profile that details all the knowledge and skills that are required for each position, conduct the interviews and help in the decision making the process. The services offered related to Internal Audit: Setting up an internal audit department Assist the organisation by determining the resource requirement, recruiting staff and developing an operating plan. -7-
At a
preliminary stage, they provide assistance to clients in performing a start-up analysis to assess the cost and benefits to be derived by the organisation from internal audit. Outsourcing and co-sourcing internal audit function. Outsourcing is when an organisation out sources the function to an external consultant. While co-sourcing is when the internal audit staff of an organisation works together with MNZWAJA to conduct any internal audit services. Outsourcing can help an organisation reduce costs, free up capital, and enhance its ability to focus on its core competencies.
It can also provide an
opportunity to tap into specific skill sets, better practices, industry and corporate audit knowledge and geographically dispersed resources.
Meanwhile, co-sourcing can supplement the
organisation internal audit program, launch projects, and help improve the effectiveness of your internal audit function. Assessment of Internal Control Provides an objective, independent review of activities, internal controls, and management information system to help the board and management monitor and evaluate internal control adequacy and effectiveness.
Evaluate the internal control
implemented in the operation of the company can assist the company to mitigate risk in achieving its objectives and goals. Enterprise Risk Management. Identify the risk possible for the company which is operation risk, market risk and propose the areas of improvement to be taken to mitigate the risk in ensuring the efficiency of the operation which leads to the successful of the business. Use a broader portfolio approach and deal with risk and opportunities affecting -8-
the creation or preservation of organisational value.
The
internal auditor core Enterprise Risk Management (ERM) role is to provide
objective
assurance
to
the
board
and
senior
management on the effectiveness of the ERM activities. This will ensure key business risks are managed appropriately and the system of internal control is operating effectively. MNZWAJA also have additional legitimate internal audit roles and consulting activities that may help to protect the internal auditor’s independence
and
objectivity
when
accompanied
by
adequate safeguards. Training The firm also has the expertise to provide training for any organisation relevant to the internal audit. 2.2.4 Shariah Assurance and Auditing. Shariah Auditing is a process where a Shariah Auditors reviews, on periodic intervals, the structure and the implementation of a Shariah-compliant
product
to
determine
whether
the
recommendations of the Shariah Supervisory Board and the Fatwa have been followed. The Shariah auditing can be either quarterly or biannually, based on the client’s preference. The services offered related to Shariah Assurance and Auditing services are: 1)
Shariah Auditing Procedures Manual for supporting internal Shariah monitoring.
2)
Period Shariah auditing and monitoring.
3)
Performing external Shariah auditing and reporting to the management and the Shariah Supervisory Board.
4)
Advising on the Shariah compliance risk identification, reputational risk, and risk management. -9-
5)
Advising on Shariah corporate governance to enhance transparency and create value by assessing the Shariah risk management and enhancing internal control management functions.
6)
Update and clarify in respect with the Islamic finance development in your preferred and/or selected countries or sectors and in respect to any Shariah, legal and financial developments.
7)
Shariah Co-ordination Services.
8)
Islamic finance training.
2.2.5 Compliance services. MNZWAJA offers reliable, timely and comprehensive GST advisory and compliance in the following areas: 1) Registration and application. 2) Planning and advisory – pre and post implementation and registration. 3) Compliance – computation, filling, and submission of GST return and adjustment. 4) Attending queries and audit by Royal Custom and Excise. 2.2.6 Tax Advisory and Zakat Services MNZWAJ Associates
tax department provides specialized
taxation services and focuses on the client’s needs in line with the changes and complexity of tax legislation. Their team of tax specialists with extensive experience can provide comprehensive tax advice. As their client, they will benefit from their tax advisory and zakat services covering: Direct Taxes:
Income Tax Compliance and Advisory - 10 -
a) Filing a tax return. b) Preparing tax computation and concurrence of tax liabilities with LHDN. c) Representing clients in formal tax appeals and objectives. d) Attend to client’s tax cases. e) Representing and assisting clients on tax investigation and tax audit.
Stamp Duty
a) Reducing liability. b) Applying for an exemption. Indirect Taxes:
Sales Tax, Service Tax, Custom Duty
a) Applying for tax/duty exemption. b) Applying for licenses. Tax Advisory:
Advising on incentives and other exemptions available under investment incentives.
Claiming special deduction and allowances for reduction of tax under double tax deductions.
Representing and assisting clients on tax investigation and tax audit.
Developing tax efficient remuneration packages.
Zakat Computation and Corporate Amil:
Advising on zakat computation for individual and companies.
Optimizing between zakat and tax for Muslim taxpayer.
- 11 -
Their tax associates are familiar and fully aware of the latest laws, regulations, and concessions and therefore can resolve any tax and zakat issues faced by their clients. 2.2.6 Management Consultancy a) Corporate Management Consultancy This division provides advisory services and assistance in the fields of corporate strategy and business development, financial management, accounting and data processing. The range of services available: b) Accounting Services:
Preparing monthly, quarterly or annual financial statements.
Distributors for accounting software.
Training on accounting services tailored to the individual
client. c) Corporate Strategy and Business Development:
Business and strategic planning.
Project feasibility.
Corporate restructuring and organizational development.
Franchise advisory and development.
d) Financial Management:
Financial modelling.
Business performance evaluation.
Costing, budget and cash flow projection.
Credit management.
e) Quality Management System: Conducting
and
implementation
of
facilitating Quality
the
development
Management - 12 -
System
to
and the
requirements of ISO 9001:2000 which will lead to the certification by an accredited body such as IAC, SIRIM QAC, etc. MNZWAJA continually review and develop our range of services to meet changing clients’ needs and to assist clients to stay abreast in the rapid developments in business management.
2.3 Client Sector and Principal Activity The clients of the firms come from various sectors, there are: 1. Construction and Engineering Contractors 2. Co-operative and Society 3. Manufacturing 4. Public Sectors 5. Management, Consultants and Services 6. Trading and Supply 7. Hotels and Travel Agency 8. Food and Catering 9. Investment and Properties Holding Company 10. Research and Development 11. Plantation 12. Transportation
- 13 -
3
KNOWLEDGE AND SKILLS SHARED
I have gained 2 months of experience works like the permanent staff at MNZWAJA Kemaman Sub-branch. During these periods I have gained experiences in three areas which are auditing, accounting, and taxation. The job is really challenging but the knowledge and experience related in this field as an accounting lecturer and assistance from my supervisor and staffs at MNZWAJA has helped me to finish the auditing and accounting statement and also taxation statement for the clients. I needed to complete all the tasks during the short and specific time given to me, facing with the incomplete unaudited account, incomplete documents to prepare the accounts record and facing with the lack of supports from clients. All these experiences needed me to have more physical and mental strength to successfully complete the work under pressure and given a timeline.
- 14 -
Table 3. 1: The Diaries of Activities for 2 Months Attachment.
ACTIVITIES
First - Third Week (3/7/17 – 20/7/17) Registration and Briefing by Assistant Manager of MNZWAJA Kemaman branch Pn. Norhazira binti Azmi. Being briefed about the firm’s background and the tasks to be carried out during my attachment. 1st Assignment due on 31st July 2017 is auditing the account of Safety check Resources & Engineering Sdn Bhd. For the year ended 31st Dec 2016. Understand the process of financial audit for the company by referring last year Current Audit File (CAF) and by a discussion with the person in charge of the company. Compare the closing balance between last year working trial balance and audited financial statement year ended 31st Dec 2015. Compare the Opening balance financial report year ended 31st Dec 2016 with audited financial statement year ended 31st Dec 2015. Transfer the opening balance from last year working of trial balance to a current year working of trial balance. Prepared the audit plan Prepared audit program ((Refer Figure 3 -1 – Figure 3 - 8; Sample of Audit Program) Prepared audit working papers. (Refer Appendix: Figure 4: Sample of Audit working papers) Did vouching for expenses and income Sending balance confirmation letter to the trade receivable, trade payable and bank. - 15 -
Sending letter of cash certificate to the clients, to confirm the balance in petty cash and cash in hand. Sent confirmation for the amount owing to directors.
Fourth – Fifth Week (23/7/17 – 3/8/17) Prepared CAF and its’ workings for Safetycheck Resources & Engineering Sdn. Bhd. Prepared the Reports and Financial Statements Year Ended 31 December 2016 for Safetycheck Resources & Engineering Sdn Bhd. Sending the Reports and Financial Statements Year Ended 31 December 2016 for Safetycheck Resources & Engineering Sdn Bhd to MNZWAJA Kuantan to review by Manager. Prepared cover letters and 8 copies of the report and financial statement and sent to the Companies Commission of Malaysia, Director of Safetycheck Resources, company secretary of Safetycheck Resources and for PAF and Taxation file. 2nd Assignment is preparing the taxation statement for Safetycheck Resources & Engineering Sdn. Bhd. for year assessment 2016. Preparing taxation computation for Safetycheck Resources. Preparing the taxation statement and send it to review by a taxation officer at MNZWAJA Kuantan branch.
Sixth – Seventh Week (6/8/17 – 17/8/17) 3rd Assignment is preparing the account statement of CMB Academy Sdn. Bhd. for the year ended 31st Dec 2016 Understand the business nature for the company by referring last year Account Statement and by a discussion with the person in charge of the company.
- 16 -
Transfer the opening balance from last year trial balance to accounts opening balance by using accounting system MYOB. This system is easy to understand and very friendly. Review all the documents of the company such as a receipt, voucher, invoices, bank statements, and all supporting documents. Transfer all the item from documents to journal in MYOB. Make a few adjustments related to depreciation and accrual to general journal. Prepared bank reconciliation. Prepared trial balance Prepared financial statement. 4th Assignment is auditing the account of CMB Academy Sdn. Bhd. for the year ended 31st Dec 2016. Understand the process of financial audit for the company by referring last year Current Audit File (CAF) and by a discussion with the person in charge of the company. Compare the closing balance between last year working trial balance and audited financial statement year ended 31st Dec 2015. Compare the Opening balance financial report year ended 31st Dec 2016 with audited financial statement year ended 31st Dec 2015. Transfer the opening balance from last year working of trial balance to this year working of trial balance. Prepared the audit plan Prepared audit program (Refer figure 3: Sample of Audit Program) Prepared audit working papers. (Refer figure 5: 3 Sample of Audit working papers) Done the sampling. Done the vouching for expenses and income. - 17 -
Sending balance confirmation letter to the trade receivable, trade payable and bank. Send letter of cash certificate to the clients, to confirm the balance in petty cash and cash in hand. Sending confirmation for the amount owing to directors.
Eighth – Ninth Week (20/8/17 – 30/8/17) 5th Assignment is preparing the taxation statement for CMB Academy Sdn. Bhd. for year assessment 2016. Preparing taxation computation for CMB Academy Sdn. Bhd. Preparing the taxation statement and sent to review by a taxation officer at MNZWAJA Kuantan branch.
Tenth Week (4/9/17 – 10/9/17) 6th Assignment is preparing the account statement of Creative Music and Ballet for the year ended 31st Dec 2016 Understand the business nature for the company by referring last year account statement and by a discussion with the person in charge of the company. Transfer the opening balance from last year trial balance to all the accounts opening balance by using accounting system MYOB. Review all the documents of the company such as a receipt, voucher, invoices, bank statements, and all supporting documents. Transfer all the item from documents to journal in MYOB. Make a few adjustments related to depreciation and accrual to general journal. Prepared bank reconciliation.
- 18 -
Prepared trial balance and financial statement. 7th Assignment is preparing the taxation statement for Creative Music and Ballet for year assessment 2016. Preparing taxation computation for Creative Music and Ballet. Prepared the taxation statement. The 1st draft of taxation statement review by Assistant Manager at Kemaman Sub Branch. Make a few corrections and the 2nd draft sent to MNZWAJA Kuantan branch to review by taxation officer.
3.1 Auditing There are six specific steps in the audit process that should be followed to ensure successful in auditing.
1
• Requesting Documents
2
• Preparing an Audit Plan
3
• Scheduling an Open Meeting.
4
• Conducting Fieldwork
5
• Drafting a Report
6
• Setting Up a Closing Meeting. Figure 3. 1: Work Process in Auditing
- 19 -
3.1.1 Requesting Documents After notifying the organization of the upcoming audit, the auditor typically requests the documents listed on an audit preliminary checklist. These documents may include original bank statements, receipts, supporting documents, ledgers, and financial statements and a copy of the previous audit report but usually, auditor just refers from Permanent Audit File (PAF) (refer to figure 2) of the company if the company is MNZWAJA client for the last year’s audit. In addition, the auditor may request organisational charts, along with copies of board and committee minutes and copies of annual return for the company. Sometimes we have a problem to get all the client’s documents at the same times. Communication between auditor and clients are very important to make sure all the documents needed is received. Without the documents is impossible the auditing can be done properly. I just involved with the small company, so all the document can be sent by the clients to my office.
Figure 3. 2: Documents from one of the clients
- 20 -
Figure 3. 3: Permanent Audit File (PAF)
3.1.2 Preparing an Audit Plan The auditor looks over the information contained in the documents and plans out how the audit will be conducted. A risk workshop may be conducted to identify possible problems. An audit plan is then drafted.
Figure 3. 4: Audit Program Cover
- 21 -
Figure 3. 5: Audit Program Table of Contents
Figure 3. 6: Audit Program Background
- 22 -
Figure 3. 7: Audit Program Approach
Figure 3. 8: Audit Program Approach (Internal Controls) - 23 -
Figure 3. 9: Audit Program (Income Statement)
Figure 3. 10: Audit Program (Objectives) - 24 -
Figure 3. 11: Audit Program (Others)
3.1.3 Scheduling an Open Meeting. Senior management and key administrative staff are invited to an open meeting. The scope of the audit is presented by the auditor. A time frame for the audit is determined, and any timing issues such as scheduled vacations are discussed and handled. Department heads may be asked to inform staff of possible interviews with the auditor. The Open Meeting will be held at the auditor office or maybe at the client office.
- 25 -
Figure 3. 12: MNZWAJA’s Meeting Room
3.1.4 Conducting Fieldwork Fieldwork is the process of gathering evidence and analysing and evaluating that evidence as directed by the approved Audit Procedures. The audit objectives and procedures should be performed so that the most important and significant audit steps are completed first. Conclusions on audit objectives will form the basis for an audit opinion. Work papers, including Audit Observation Forms, should be forwarded for review by audit management upon completion of a meaningful section of the audit rather than waiting until all fieldwork is completed. Throughout fieldwork, professional judgment should be used to: a) Determine
whether
evidence
gathered
is
sufficient,
relevant, competent, and useful to conclude on the established objectives; b) Based on the information available, reassess the audit objectives, scope, and procedures to ensure efficient use of audit resources (e.g., should the remaining audit steps be eliminated, should the objective or scope be modified, have - 26 -
more efficient procedures been identified, or should additional hours be allocated to achieve an expanded audit objective). Document changes in audit objectives, scope, and procedures in the work papers.
Fieldwork includes: 1. Gaining an understanding of the activity, system, or process under review and the prescribed policies and procedures, supplementing and continuing to build upon the information already obtained in the risk assessment process. 2. Observing conditions or operations. 3. Interviewing people. 4. Examining
assets
and
accounting,
business,
and
other
operational records. 5. Analysing data and information. 6. Reviewing systems of internal control and identifying internal control points. 7. Evaluating and concluding on the adequacy (effectiveness and efficiency) of internal controls. 8. Conducting compliance testing. A compliance test is an audit that determines whether an organization is following its own policies and procedures in a particular area. An auditor engages in compliance tests to be assured that the evidence being reviewed as part of an audit is valid. If a compliance test reveals that the policies and procedures are functioning properly, the auditor can reduce the amount of analytical review and validation procedures that would otherwise be used. The activities commonly used in a compliance test are: 
Asking employees about their duties.

Observing employees in the conduct of their duties. - 27 -
Reviewing documentation to see if procedures have been followed.
9. Conducting substantive testing. Also known as a vouching approach, which is performed by the auditor consist of tests of details of transactions and account balances, and analytical procedures. The objective of this approach is to detect material misstatements in the financial statements by examining the accounting process right from the inception and then observing the accounting process that took place regarding the identification of the transaction, measuring the monetary effect of transaction, classification of transaction and recording of the transaction. The auditor selects particular substantive tests to achieve audit objectives and considers,
among
other
things,
the
risk
of
material
misstatement of the financial statements, including the assessed levels of control risk, and the expected effectiveness and efficiency of such tests. Determining if appropriate action has been taken regarding significant audit concerns and corrective actions reported in prior audits. The objective of vouching:
To see that all transactions connected with the business have been recorded in the books of account.
To establish that no transaction which is not connected with the business has been recorded.
To verify that all recorded entries are genuine
- 28 -
Figure 3. 13: Working paper for cost of sales
Figure 3. 14: Working paper for property, plant, and equipment
- 29 -
Figure 3. 15: Working paper for trade payable
While examining vouchers the following points should be noted by the auditor:
All vouchers have been properly filed, serially numbered and arranged in order as it saves time in finding out a voucher in checking.
The date and the year of the receipt or the voucher corresponding with the cash book. The name of the party to whom the voucher is issued, the name of the party issuing voucher and the amount, etc. are correct.
Those vouchers which have been inspected by the inspector are stamped to avoid the possibility of their being produced again.
Every voucher is passed "as in order" by some responsible person whose signature should be noted.
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Amount paid appears both in words and figures. If they differ, the matter should be investigated.
For missing vouchers, the auditor should satisfy himself about the reasons of their being lost. If he is not satisfied with the explanations, he should state this fact in his report.
No help from any member of the staff of the client has been taken while vouching for the entries and checking the vouchers.
Any alteration in the voucher is duly signed by the invoice clerk.
In case of vouchers for insurance, rent, rates, and taxes, etc., the period for which the payment has been made should be noted.
Special attention should be paid to those vouchers which are using the personal name of one of the partners, directors, managers, Secretaries or any other officials of a business and which may or may not relate to the business itself. Standards for documenting fieldwork (e.g., the evidence gathered, the analyses made, the tests performed), to support the findings and conclusions are presented in the sections Work papers and Audit Observations. In general, all audit work performed should be documented. Each audit procedure should be supported by and have Document links to work papers (schedules, memos, spreadsheets) on which testing performed and results achieved are documented. The following are the most common items reviewed by auditors:
Bank reconciliation statement should have a complete list of the outstanding cheque with the cheque number, date, and amount. Also, list any details for deposits that have been made but have not yet appeared on bank statements - 31 -
List of any physical items that the non-profit has in inventory that it is intending to sell
Fixed asset and depreciation schedule (include copies of any documentation relating to donated fixed assets)
Reconciliations to support any other asset accounts
Listing of year-end accounts payable and accrued expenses such as payroll tax payable and documentation of the liability created by unused but accrued paid leave, including paid leave that carries over to the next year
Reconciliation of net assets classifications
Examples of additional documentation that auditors typically will request to review:
General ledger for the current year
Year-end trial balance and financial statements.
All grant awards and related correspondence (including proposals, commitment letters, acknowledgement letters, and reports) and contracts that resulted in revenue. Ensure that this correspondence indicates any time or purpose restrictions on the funds, or if they are unrestricted.
Schedule of Federal Awards showing federal awarding agency, pass-through agency, grant number, program name, Catalogue of Federal Domestic Assistance (CFDA) number, award amount, current year expenses, and prior year expenses
Minutes of meetings of the board of directors and committees
Personnel manual
Accounting manual or financial management policies
All contracts, including lease agreements
Payroll tax reports and timekeeping records, if kept
- 32 -

Documentation of charitable contributions: grants, gifts, and corporate sponsorships

Documentation of income earned from taxable activities (unrelated business income tax)
The working paper is the material that auditor needs to prepare to provide documented evidence of an examination and evaluation and provide a connecting link between the work which is performed and the final audit report. When working papers are prepared in good form with proper attention to layout,
design,
and
legibility,
with
complete
headings,
explanations of sources, and verification of work performed, they create a feeling of confidence in the ability of the staff member. Working papers should always convey an impression of system and order and conscientious attention to detail, coupled with a clear distinction between the important and the trivial. Information obtained through audits should be treated as confidential not only as to outsiders but also as to employees of the entity audited who would not otherwise have access to the information. Further, the working papers include information concerning the scope of the examination and the extent of selective tests made, and this information should not be available to the staff of the audited entity. Therefore, audit working papers should always be safeguarded against the possibility of their being examined by unauthorized persons.
- 33 -
Figure 3. 16: Current Audit File (CAF)
Current audit files (CAF) contain working papers relating to a single accounting period. Refer to figure 3.17 for the contents of the current audit file.
- 34 -
Figure 3. 17: Contents of CAF
3.1.5 Drafting a Report The auditor prepares a report detailing the findings of the audit. Included in the report are mathematical errors, posting problems, payments authorized but not paid and other discrepancies; other audit concerns are also listed. The auditor then writes up a commentary
describing
the
findings
recommended solutions to any problems. - 35 -
of
the
audit
and
3.1.6 Setting up a Closing Meeting The auditor solicits a response from management that indicates whether it agrees or disagrees with problems in the report, a description of management's action plan to address the problem and a projected completion date. At the closing meeting, all parties involved discuss the report and management responses. If there are any remaining issues, they're resolved at this point.
Figure 3. 18: Audit Process
The whole audit process shown in figure 8 and the usual audit work done for the Statement of Financial Position and Income Statement items can be reviewed from Table 2 and Table 3 respectively.
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Table 3. 2: Audit work in Statement of Financial Position items.
PARTICULARS
CHECKED TO
Cash and bank balances
Bank statement, confirmation sends to the bank, bank reconciliation statement, and subsequent clearance for the unperfected cheque at year-end.
Fixed deposits Investment
Fixed deposit certificate and bank statement. Central depository statement and market value of the investment at year-end.
Trade debtors
Debtors’ listing and aging.
Other debtors and Prepayments Fixed assets
Listing and nature of prepayment.
Trade creditors
Creditors’ listing.
Other creditors and Accruals
Listing provided and supporting documents.
Share capital
A statutory audit done, checked for share capital, register of members, register of transfers and annual return for the company.
Listing and calculation did to compare with client figures.
other
Table 3. 3: Audit work in Income Statement items .
PARTICULAR Receipts
Payments
Payroll
CHECKED TO Official receipts cashbook, bank statement, and general ledger. Checked to payment voucher, cheque number, cashbook, bank statement, and general ledger. Checked
to
payroll
listing
for
basic
salary,
allowance, EPF, SOCSO and net pay to the staffs. - 37 -
Figure 3. 19: File Rack for PAF, CAF and Taxation file.
3.2
Taxation
While completing the audit report, I also need to do tax computation. It was under taxation and provision for tax. Steps involved in tax computation are first, I need to compute capital allowances (initial allowances and annual allowances) of the fixed assets held by the clients. These amounts can be claimed by the client by deducting from the adjusted profit. Then, the computation started by adding profit before taxation with disallowable expenses. Disallowable expenses actually the expenses that could not generate income for the company. That’s why it would be added back to the profit before tax before deducting the capital allowances. After got the adjusted profit, the capital allowances would be deducted from there to get the statutory income. From there, we would drive the chargeable income after deducting the - 38 -
statutory income by reliefs such as self-relief, children relief and etc. according to the allowable amount by the Inland Revenue Board (IRB). After that, tax payable would be computed from the chargeable income based on the rate given by the IRB. So, after all the computation has been completed, it would be reviewed by the tax officer. If there is no mistake regarding the computation, the amount will be used in filing the tax form. The form will be sent to IRB after being approved and agreed by the client.
Figure 3. 20: Taxation File
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3.3 Accounting The accounting process is the name given to the collective process of recording and processing the accounting events of a company. The series of steps begin when a transaction occurs and end with its inclusion in the financial statements. These are involved with a few steps: 3.3.1 Identifying and Analyzing Business Transactions I start by identifying and analysing business transactions and events given by the company. Not all transactions and events are entered into the accounting system. Only those that pertain to the business entity are included in the process. The business documents or source documents prepared by the company for a year so I need to identify and analyses for a year transaction. The transactions identified are then analysed to determine the accounts affected and the amounts to be recorded. Identifying and analyzing transactions and events.
Post Closing Trial Balance.
Recording in the Journals
Posting to the ledger
Closing Entries
Unadjusted Trial balance
Financial Statements
Adjusting Entries
Adjusted Trial Balance
Figure 3. 21: The Accounting Cycle
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3.3.2 Recording in the Journals. Business transactions are recorded using the double-entry bookkeeping system in the MYOB accounting system. They are recorded in journal entries containing at least two accounts (one debited and one credited). This system is friendly and easy to use and understand even you are used for the first time. To simplify the recording process, special journals are often used for a transaction that recurs frequently such as sales, purchases, cash receipts, and cash disbursements. A general journal is used to record those that cannot be entered in the special journals.
Figure 3. 22: Batching Accounts.
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Figure 3. 23: Journal entry.
Figure 3. 24: Payment and receive an entry
- 42 -
Figure 3. 25: Sales entry
Figure 3. 26: Purchases entry
3.3.3 Posting to the ledger The system directly posting the journal to the ledger. The ledger is a collection of accounts that shows the changes made to each account as a result of past transactions, and their current - 43 -
balances. After the posting all transaction to the ledger, the balances of each account can now be determined.
For
example, all journal entry debits and credits made to cash would be transferred into the cash account in the ledger. The ending balance of cash can be determined. 3.3.4 Unadjusted Trial balance. This trial balance was printed before the adjustment is made just to test the equality of total debit. 3.3.5 Adjusting entries Adjusting entries are prepared to update the account before they are summarised in the financial statements. Adjusting entries are made for accrual of income, accrual of expenses, deferral (income method or liability method), prepayments (asset method or expenses method), depreciation and allowances. 3.3.6 Adjusted trial balances. An adjusted trial balance was printed after adjusting entries are made and before the financial statements are prepared. This is to test if the debits are equal to credits after adjusting entries are made.
- 44 -
Figure 3. 27: Reports prepared by the system.
Figure 3. 28: General ledger reports.
- 45 -
Figure 3. 29: Trial balance reports
3.3.7 Financial statements When the accounts are already up-to-date and equality between the debits and credits have been tested, the financial statements can now be prepared. The financial statement is the end-products of an accounting system. A complete set of financial statements is made up of: a) Statement of Comprehensive income (Income statement) b) The statement in changes in equity. c) Statement of financial position (Balance sheet) d) Statement of cash Flows. e) Notes to financial statements.
- 46 -
Figure 3. 30: Income Statement Reports.
Figure 3. 31: Balance Sheet Reports.
- 47 -
4
ACTION PLAN ISSUES FACED & PROPOSED ACTION PLAN
RESPONSIBLE
Goal: To ensure students can apply accounting record properly. Issue: Most of the company poor in record keeping. So this objective is important to ensure our graduate has good application in book keeping.
Lecturer’s
Action:
Fundamental of
1) Fundamental of accounting Subject lecturer needs to give actual documents
Accounting subject.
transaction in class to introduce the students with actual documents.
Practical
2) Before practical training, all accounting
Accounting
students should join practical accounting
Workshop
workshop to introduce them with book
conducted by
keeping
Accounting unit.
through
the
source
documents.
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of
RESPONSIBLE
ISSUES FACED & PROPOSED ACTION PLAN Goal: To ensure student know how to fill the documents. Issue: Most of the small company does not have proper filing documentation and unable
Document and filing workshop
to access immediately.
conducted by Accounting unit.
Action: Conduct a course especially for them to prepare document transaction and filling. All final year students need to join this course.
Goal: To ensure students can classify and differentiate between personal transaction and business transaction. Issue: Sometime the documents of business mixed with personal transactions. Actions:
Practical
Include personal documents in practical
Accounting
accounting course (In action plan (1) to
Workshop
ensure they can differentiate personal
conducted by
document with business documents.
Accounting unit
- 49 -
ISSUES FACED & PROPOSED ACTION PLAN
RESPONSIBLE
Goal: To ensure student enable to communicate properly in writing and verbally. Issue: Communication is very important for student success in their career. They must successfully interact with the clients if they are an auditor because through communication auditor knows about business operations. In some instances, you may encounter clients who exhibit All lectures.
difficult behaviours. Actions: 1) Most of the course in accounting programme have a case study. Lecturers should prepare a case study assessment that makes students interact with an outsider. 2) Presentation and group discussion in class also will help student confident level talk in front of others.
- 50 -
ISSUES FACED & PROPOSED ACTION PLAN
RESPONSIBLE
Goal: To make sure students are particular about due date and punctualities. Issue: Sometimes, companies submitted their accounts beyond the dateline and the audit processes would only begin after the dateline of the submission of an audit report. When the final audit report has not been submitted punctually, a penalty will be charged by the Companies Commission of Malaysia. Actions: 1) Impose
penalties
if students
sending
assignment over a specified date. 2) Impose penalties if students come to class,
not on time.
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All lectures.
5
CONCLUSION
It was a wonderful learning experience at MNZWAJA. The twomonth working experience at MNZWAJA has significantly increased my efficiency level. The warmth welcome from all the staffs is truly appreciated in sharing their experiences. I was given exposure in almost all the units at MNZWAJA. I have valuable experience in auditing, accounting, and taxation. I also gain knowledge in many aspects such as safety, work culture, and integrity that contribute significantly to my routine work involving the teaching and learning process. My level of confidence in my job also improved. These new experiences could be translated into teaching strategies that surely will benefit the students. The work-based learning is important to provide an opportunity to lecturers to gain structured training and learning process at the actual work place.
- 52 -
“You can read books to gain knowledge…but you have to go through life to get experience…
”
ey(2019)
- 53 -
REFERENCES 1. Book Profile MNZWAJA (2017). Jabatan Pengajian Politeknik, KPM (2013), Garis Panduan Sangkutan Industri Pensyarah versi 2 Malaysia Institute of Accountants (2018), By Laws (on Professional Ethics, conduct and Practice) of the Malaysian Institute of Accountants. 2. Internet Creating
an
Effective
Action
Plan
[Online]
Retrieved
from
https://www.smartsheet.com/develop-plan-action-free-templates MASB Approved Accounting Standards for Private Entities [Online] Retrieved from http://www.masb.org.my/pages.php?id=89 Presentation of Financial Statement (MFRS 101) [Online] Retrieved from http://www.masb.org.my/pdf.php?pdf=BV2018_MFRS%20101.pdf &file_path=pdf_file International Standard on Auditing 700 Forming an Opinion and Reporting on Financial Statements [Online] Retrieved from http://www.ifac.org/system/files/downloads/a036-2010-iaasbhandbook-isa-700.pdf 3. Dictionary [online] Dewan Bahasa dan Pustaka (2018). Pusat Rujukan Persuratan Melayu, kamus [Online] Retrieved from http://prpm.dbp.gov.my/cari
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INDEX A Adjusted trial balances · - 55 Audit · i, iii, iv, - 10 -, - 11 -, - 12 -, - 20 -, - 22 -, - 24 -, - 26 -, - 27 -, - 28 -, - 29 -, - 30 -, - 31 -, - 32 -, 33 -, - 34 -, - 36 -, - 41 -, - 44 -, - 46 -, - 47 -, - 48 -
B Bank reconciliation statement · - 42 bookkeeping · - 51 -
C chargeable income · - 49 closing meeting · - 46 Closing Meeting · - 46 compliance testing · - 37 corporate governance · - 10 -, - 14 corporate reporting · - 10 Current audit files · - 44 -
D Debtors’ listing · - 47 disallowable expenses · - 49 double-entry · - 51 -
E end-products · - 57 -
F Fieldwork · - 36 Financial Accounting · - 10 fixed assets · - 42 -, - 49 Fixed deposits · - 47 -
- 55 -
H human capital · - 6 -, - 9 -
I initial allowances · - 49 in-service courses · - 6 internal audit · - 11 -, - 12 -, - 13 internal control · - 9 -, - 12 -, - 13 -, - 14 -, - 37 interpersonal skills · - 6 -
L Lecturer’s Industrial Attachment · i, - 5 -, - 6 -
M misstatement · - 37 -
N non-statutory audit assurance · - 10 Notes to financial statements · - 57 -
O Open Meeting · - 35 opening balance · - 20 -, - 21 -, - 22 -, - 23 Outsourcing · - 12 -
P pedagogical · - 6 practical skills · - 6 Prepayments · - 47 profitability · - 9 -
R Regulatory Compliance · - 10 Risk Management · - 13 -
- 56 -
S Share capital · - 47 stakeholders · - 9 -, - 10 -, - 11 statement in changes in equity · - 57 Statement of cash Flows · - 57 Statement of Comprehensive income · - 57 Statement of Financial Position · iv, - 46 -, - 47 statutory income · - 49 substantive testing · - 37 sustainability · - 10 -
T Taxation · i, iii, - 21 -, - 48 -, - 49 -, - 50 taxation computation · - 21 -, - 23 -
U Unadjusted Trial balance · - 54 -
V vouching · - 20 -, - 22 -, - 37 -, - 38 -, - 41 -
W working paper · - 43 -
- 57 -
