8 November, 2010

World Congress of Accountants 2010


1.         I am delighted to deliver the keynote address today. It’s a pleasure to have the opportunity to talk to this impressive gathering of professionals, business leaders and accounting industry experts from around the world. The World Congress of Accountants (WCOA) is living up to expectations as a premier gathering for opinion leaders and standard-setters in the industry to provide thought leadership on the challenges of global accountancy.

2.         To the distinguished guests who have made a long journey to join us, I would like to extend a warm Selamat Datang – which means Welcome to Malaysia.

3.         It is truly a privilege for Malaysia to be selected as the location of the 18thWorld Congress of Accountants. I would like to take this opportunity to congratulate the Malaysian Institute of Accountants for winning the bid to host this prestigious event in Kuala Lumpur. This is the first time that we have hosted this event. I understand that the contenders included stiff competition, including the Netherlands, Mexico, Belgium, Spain and India.

4.         The choice of Malaysia as the host for the World Congress of Accountants 2010 by the International Federation of Accountants reflects the trust and confidence the global financial and business communities have in the professional standing of Malaysia’s accountancy profession.

5.         The World Congress of Accountants has been dubbed the ‘Olympics’ of the accountancy profession, since it has been held every four years since 2002, and every five years prior to that. It is considered the foremost international event for the accountancy profession. The congress represents a gathering of influential communities, including business leaders, who together explore the latest issues and innovative ideas on a platform of regional and international interests. This congress will address a wide area of topics and challenges in international financial markets, international communications techniques, as well as progress on the harmonization of international financial reporting standards.

6.         This year’s World Congress of Accountants has four plenary sessions and 35 concurrent sessions, which will begin tomorrow. One of the plenary sessions and two concurrent sessions will focus on Islamic Finance and will provide a great opportunity for you to consider this system’s approach and benefits. We are pleased about the prominence of this topic as it is in line with Malaysia’s position as the premier international hub for Islamic Finance.

7.         The theme of today’s congress, “Accountants: Sustaining Value Creation,” will allow participants to explore current issues affecting the accountancy profession now and in the future. It will provide opportunities to consider concrete solutions to address many of the industry’s challenges.

Ladies and Gentlemen,

8.         Accountants, in their fiduciary positions, play a major role in building and maintaining public confidence in the financial markets of their home countries. As we embark on a new decade, many of the world’s financial markets, particularly in emerging economies, are more liquid and efficient than at any other time before.

9.         However, as we saw in the recent global financial crisis, investors flee when markets are viewed as risky. This shows the importance of sound accountancy rules. It is, in fact, trust and understanding of the underlying financial reporting structure that promote confidence and stability in the market.

10.       While the disclosure of the required financial information is a corporation’s responsibility, accountants in their capacity as gatekeepers must do their best to ensure the statements and supporting documents provided are accurate and complete in portraying the current state of a corporation. Therefore, the ability of the accountancy profession to facilitate good governance among corporate players is essential to ensure a strong, vibrant and forward looking financial market.

11.       By monitoring the market, accountants and auditors help keep fraud at bay. This greatly enhances confidence among investors, who, understandably, tend to avoid companies affected by accounting scandals or with questionable corporate reputations.

12.       On the other hand, think about the circumstances surrounding the Enron failure and the recent collapse of established large financial institutions. You can see how the lack integrity and accountability in crucial monitoring responsibilities have negatively affected perceptions about the accounting world. These financial scandals were made worse by unprofessional accountants who were both dishonest and unethical.

13.       The boldness of the financial improprieties that came to light in certain cases have highlighted the consequences of accountants pursuing their own financial self-interest rather than promoting the values, integrity and best practices of their profession.

14.       As I am sure you all agree, in a time of highly interconnected financial markets, we cannot afford for a few bad seeds to spoil the long established reputation of a large majority of professionals who operate along the highest ethical standards.

15.       In fact, these failures have prompted greater scrutiny and oversight and resulted in the need to support the industry with clearer regulation that eliminates grey areas while allowing honest professionals to thrive in their business. Along these lines, Malaysia has strengthened its laws to enable the Securities Commission Malaysia to carry out an oversight function over external auditors of public interest entities. In this regard, the Securities Commission has established an “Audit Oversight Board” that will register, inspect and sanction external auditors of such entities.

16.       Also, the crucial role of accountants in detecting fraud is reflected in the number of whistleblowers that have provided information to the Securities Commission under the protection of the Capital Market and Services Act. This Act imposes a mandatory duty upon auditors and specific employees of listed corporations to report breaches of security laws and the rules of the stock exchange to the authority.

17.       Since the introduction of the whistle blowing provisions several years ago, the Securities Commission has received reports mainly from external auditors of Public Listed Companies. Some of these reports have led to enforcement action being taken against the perpetrators, often the directors and senior management of the company. With this, it is encouraging to note that a stronger culture of public accountability and integrity has been launched.

Ladies and Gentlemen,

18.       Every year globalization manifests itself at a faster rate. Economies are linked to each other faster and deeper and it essential that they are regulated by set of rules that are as homogenous as possible. When it comes to accountancy, the same principle holds. It is clearly against the public interest to have a multiplicity of accounting and auditing standards around the world that could potentially lead to confusion, encourage error and even, at times, facilitate fraud and arbitrage.

19.       It is crucial for us to learn from the lessons of the past. And one of these lessons has been that the broader adoption of a single set of high quality, global accounting standards is of great benefit to society and businesses. A single set of rules creates a level playing field for companies around the world, providing them with more and better opportunities in international markets.

20.       In this context, Malaysia is well prepared for the adoption of a single set of global accounting standards. This is fully in sync with our national goal to become a high-income and modern nation by 2020. The International Financial Reporting Standards, developed by the International Accounting Standards Board, are becoming the global standard for preparation of financial statements for public companies. This is a direction that Malaysia welcomes.

21.       In fact, I am pleased to note that the International Financial Reporting Standards convergence effort in Malaysia, which is predominantly driven by the country’s accountancy professionals, is right on track. Malaysia is set to achieve full convergence with the International Financial Reporting Standards (IFRS) by 1stJanuary 2012. This means that by this date, our accounting standards will be comparable to those in more than 100 other countries.

22.       Having a single set of global accounting standards is particularly important to Malaysia, as it will help us attract foreign direct investment. Such convergence will make it easier for foreign investors to understand and rely on the financial reports of Malaysian companies. It will also help Malaysian businesses operate in an increasingly globalised environment, since the accounting standards will put Malaysian businesses and capital markets on a level playing field with other nations’ companies and markets.

23.       The standards will be applicable to all entities, including private firms. They will ensure that financial reporting of Malaysian companies will be trusted in global markets and in the eyes of international investors. There are about 1,000 public-listed companies and 20,000 subsidiary and associate companies in Malaysia that will be affected by full IFRS compliance.

Ladies and Gentlemen,

24.       The benefits of full adoption of IFRS standards are clear through greater transparency and credibility in financial reporting. The accountancy profession itself will be a significant beneficiary of IFRS convergence, as accounting professionals will be able to market their talents across national borders. Thus, the Government of Malaysia remains committed to the IFRS convergence agenda, as it is one of many efforts to revitalise and strengthen Malaysia’s position as a premier capital market and boost investor confidence.

25.       Comments have been provided to the International Accounting Standards Board (IASB) by many jurisdictions that have adopted, or are in the process of adopting, IFRS. They have shared feedback on the practical complexities associated with its implementation and application. Some have requested that the International Accounting Standards Board consider developing IFRS implementation guidance as a possible solution.

26.       Since 2007, the Malaysian Institute of Accountants has had necessary mechanisms in place to address the complexities associated with the implementation and application of accounting standards in Malaysia through its Financial Reporting Standards Implementation Committee (FRSIC).

27.       As we move towards the convergence deadline, the Malaysian Institute of Accountants and the Financial Reporting Standards Implementation Committee (MIA-FRSIC) will continue to play a pivotal role to ensure Malaysia’s smooth transition to IFRS.

28.       Above all this, the successful development of a strong and credible accounting industry must also be premised on the ability of accountants to play an active role in exercising sound professional judgment in the application of global accounting standards; ensuring that accounting accurately reflects the substance of a transaction and not merely its legal form.

Ladies and Gentlemen,

29.       Clearly, these efforts cannot be short-term. The international accountancy profession and governments, regulators, standard setters, and the public must all make an ongoing and long-term commitment to establish and promote adherence to high-quality standards. This is, indeed, the best way to build and maintain confidence in the global profession.

30.       Nevertheless, it must be stressed that the goal of financial reporting must be to provide investors with material information to facilitate investment decisions. It must also remain relevant and informative to investors, and not impose unnecessary or costly burdens.

31.       I firmly believe that national standard-setters, accounting firms, and regulators from around the world should support and contribute to the work of the IASB. By bringing the brightest minds together, we can create convergence to a “best of breed” set of global standards that promote and sustain investor confidence.

Ladies and Gentlemen,

32.       I believe this congress is ideally positioned to address the issues and opportunities of the accountancy profession. It provides a strong platform for the exchange of ideas and knowledge-sharing among participants.

33.       In closing, I wish the Congress every success and hope that you will have a very pleasant stay in Kuala Lumpur.

Excellencies, Ladies and Gentlemen,

With these words, it gives me great pleasure to officially declare open the 18th World Congress of Accountants 2010, in Kuala Lumpur, Malaysia.

Thank you.

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