Indusrial Training Report. (accounting)

INDUSTRIAL TRAINING REPORT CPL & CO

ABST RA CT

Industrial training is one of the requirements to be fulfilled in order to obtain a diploma. Each student in this field needs to do industrial training in audit firm that is a recognized member of Malaysian Institute of Accountants. The students are compulsory to undergo an industrial training for duration of three months which consist of 13 weeks before completing their courses. The objective of this industrial training is to expose students to the actual working environment. Besides, to cultivate teamwork, spirit and familiarize with colleagues. By undergo the industrial training, students will create a trust worthy and responsible person. Besides that objective of industrial training is to build self-confidence among students and let students know the technical knowledge and professionalism. I was placed in auditing and taxation department during my industrial training. This industrial training really examines the understanding and responsibility in completing the assignment given by the firm. Specifically it measures the creativity in conducting the task to fulfill the firm and clients wants and needs. This training gives me good experience from the view of implementing my knowledge in accounting aspects. Last but not least, I had learnt more about auditing and taxation.

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INDUSTRIAL TRAINING REPORT CPL & CO

ACK NOWLED GEME NT

Sometimes words fall short to show gratitude, the same happened with me during this project. The immense help and support received from Cpl & Co overwhelmed me during the project. It was a great opportunity for me to work with Cpl & Co, pioneer in the field of accounting and taxation. I am extremely grateful to the entire team of Cpl & Co, who have shared their expertise and knowledge with me and without whom the completion of this project would have been virtually impossible. My sincere gratitude to Ms.Sara Chin (Secretary of the company) for providing me with an opportunity to work with them as a company project guide who has provided me with the necessary information and her valuable suggestion and comments on bringing out this report in the best possible way. I am highly indebted to Ms.Sharon (working colleagues) who has provided me the necessary information and her valuable suggestion and a good support in understanding the basics of accounting and taxation easily. I feel great pleasure to cordial thanks Ms.Lee (Auditor) . I also very thankful to my friends who help me in completion of the project . I am thankful to the power that always inspires me to take right step in the journey of success my life.

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INDUSTRIAL TRAINING REPORT CPL & CO

INTR ODU CT IO N A BO UT THE FIR M

1.0

1.1

SUMMARY Below is a brief explanation of the capabilities and relevant experiences of

the firm, CPL & CO offers the following unique benefits: •

to utilize its resources and technical expertise to deliver professional services on a timely basis;

•

to provide personalized service of partners at all times;

•

to provide professional business consulting services in local business challenges.

•

to offer value-added services with competitive professional fees.

•

to provide secretarial services.

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INDUSTRIAL TRAINING REPORT CPL & CO

1. 2 FI RM PR OFILE Over the past years, CPL & CO (an affiliated member Malaysian Institute of Accountants ) has built up its affiliate "partner" with L.C.SIM to cater local business needs of its clients. Other than the traditional services such as audit and taxation, CPL & CO also specializes in financial advisory, insolvency and consulting practices. Through its local affiliations, CPL & CO is in the position to promptly meet its clients' local business needs, irrespective of where the business operation is conducted. The size of CPL & CO offices enables it to provide a depth of technical experience across a full range of services thus having the added advantage of establishing close professional relationships with its clients. The combination of technical resources and personal commitment among the players has contributed to CPL & CO’s position of prominence and popularity in this line of business. Furthermore, CPL &CO works closely together with the relevant professional bodies to ensure that its clients' interests, growth and needs are fulfilled at all times.

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INDUSTRIAL TRAINING REPORT CPL & CO

1. 3 VAL UE FOR MO NEY APPR OACH CPL & CO's approach to its service assignment is based on the "Team Concept." In the course of carrying out its responsibility, the scope of the service and review work is allocated to the appropriate staff levels, wherever possible, at a lower charge out rate. Such allocation of work and duties ensures that the fees are kept to the minimum and correct level. Furthermore, this arrangement allows our clients to gain access to a wider range of expertise with the work being completed by the appropriate qualified staff members which also ensures timely and efficient completion of service assignment. CPL & CO maintains a strong partner involvement and any work performed is invoiced in accordance with the time taken to complete the task assigned. Naturally, "confidentiality" is held to be of utmost importance and as a client of CPL & CO, confidentiality is assured at all times.

Mission statement: To be recognized as a strategic financial business partner in fulfilling and to value-add the needs of our clients by way of a Multiple Disciplinary Partnership.

Vision statement: To continuously scale new heights and to embrace the vision of “The Business Mind”, with the focus to meet global challenges of tomorrow.

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INDUSTRIAL TRAINING REPORT CPL & CO

1. 4 OUR SER VI CES The primary role of CPL & CO is to perform assurance and compliance service in accordance with the guidelines set out by the legislation of the country. CPL & CO also has the technical expertise and experience to conduct financial due

diligence

reviews

and

internal

audit

where

appropriate.

CPL & CO tailors its professional business approach to the specific needs and requirements of its clients to ensure that the work is conducted in the most efficient and cost-effective manner. In this respect, an integrated approach to our professional business services is adopted to fulfill the requirements and objectives of the three main areas, namely:

1. 4.1

OPE RATI NG BUS INESS

The services required for the operating business embody the following: a) Tax compliance (Forms C & R) and CP 204 for Self-Assessment regulations. Due to the complexity and intricacy of the self-assessment system, CPL & CO has designed a system of producing relevant information necessary to meet the stringent requirements under the new taxation system. Prior to the year-end, Form C is completed for submission, the necessary CP 204 is filed on a periodic basis as and when there are changes to the tax estimates. CP 204 A relating to revised assessment

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INDUSTRIAL TRAINING REPORT CPL & CO is lodged should there be a change in the tax estimate. Form R is submitted at the end of the fiscal year giving information on the tax credit availability of the company under Section 108. This system allows CPL & CO to reduce the time required to collate and analyze the tax information collected, which saves clients unnecessary costs as well as allowing the company the opportunity to provide timely and proactive taxation advice. b) Tax consulting services Local Taxes The Malaysian Taxation System has recently revamped its system in line with globalization which has created a time of constant change and challenges. CPL & CO's taxation division has undergone rigorous tax training exercise in order to gear itself to provide proactive tax advice and to ensure that its clients are kept abreast of the latest tax changes and to comply with the taxation

responsibilities.

CPL & CO provides advice and information of the ever-changing taxation system to its clients to ensure that clients are fully aware of the taxation installment obligations under the self-assessment system which includes the lodgment of the relevant taxation returns.

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INDUSTRIAL TRAINING REPORT CPL & CO c) Service & Sales Tax/ Goods and Services Tax CPL & CO has considerable experience to assist clients with the transition to Service and Sales Tax and would assist clients to apply for registration when such need is required.

d) Benefits in kind (BIK) To ensure that the year-end tax return forms are completed fully, CPL & CO has devised a system to collate the relevant information and data collection for the purposes of preparing the fringe benefits tax annual returns. This system minimizes time required which enables CPL & CO to adopt a more efficient and proactive approach in advising its clients.

Salary packaging may best be described as the structuring of an employee's total remuneration to take advantage of any inherent savings by substituting cash salary with a range of other benefits known as "Benefits in kind" (BIK). Such inherent savings are derived from the confessional valuation provisions contained within the Income Tax Ruling ITR 1997/2 for the valuation of BIK. Salary packaging allows employers to reward certain key employees by providing such employees with all the additional benefits over and above normal cash salary. Such scheme ensures that the employers

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INDUSTRIAL TRAINING REPORT CPL & CO have an edge over their competitors when it comes to matching remuneration, motivation and retaining employees' loyalty.

e) Business consulting CPL & CO offers a range of business consulting services starting with strategic and business planning down to assisting with organizational change and restructuring, process re-engineering, market strategy, cost management reviews as well as e-commerce and internet strategy development. The services are provided to assist clients of CPL & CO in dealing with the challenges faced in a rapidly changing and complex global environment where a single firm or organization is no longer in isolation but forms part of the global economy. Such environment presents itself numerous opportunities but also many potential pitfalls.

f) Secretarial services It is a must for all companies to have their statutory files maintained by qualified Company Secretary as well as to prepare and submit relevant documents on time to the Company Commission of Malaysia (CCM). His service is providing to maintain and update statutory records of companies. Such service includes company formation, filing of statutory forms, attending meetings and preparation of minutes, advising clients regarding company secretarial matters.

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INDUSTRIAL TRAINING REPORT CPL & CO g) Audit services CPL & CO is in the position to assist its clients who require an internal audit review or due diligence review to be carried out for a particular business reason such as to satisfy the company financiers. The nature of the audits may vary from a limited scope audit to a full scope audit to satisfy assurance and compliance requirements.

2. 0 DE TAIL DES CR IPT IO NS OF TR AI NI NG

During my three months practical training in the audit firm, I engaged in main two areas, which are auditing and taxation. For auditing, I had handled few companies by my own and helped out my seniors for few big companies which are our priority given to them. Besides that, they also trained me to prepare working papers which also known as lead schedule, finalized audit report, and prepare a letter that has to be sent to clients, banks, debtors and creditors. I managed to implement my knowledge and learned many things from there. I had learnt how to compute tax for companies. It’s really interesting. I also had given chance to review the tax computation done by other staffs. I had prepared Form C and Form R for the companies. In addition, I also prepared many letter regarding tax which requested by the clients to Inland Revenue Board (IRB). Detailed descriptions of my task have been discussed in detail in this report.

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INDUSTRIAL TRAINING REPORT CPL & CO

3. 0 DE TAILS ABO UT C LIE NTS

CLIENTS 1) Guan Seng Hardware Sdn Bhd

NATURE OF BUSINESS  Principal activity is

operating a



hardware shop. Principal activity



traditional Chinese medicine. Principal activity is operating a

4) Honey Happy Home



Korean restaurant. Principal activity is operating old

5) Han’s Cake & Cafe



folks home. Principal activity is as bakers and

2) Kedai Ubat Xinxianghe Sdn Bhd 3) Seacrest Sensation Sdn Bhd

is

operating

manufacturers of an dealers in bread,



flour, biscuits and operating cafes Principal activity is as agriculture



chemical manufacture. Principal activity is

8) CNY Biotech Sdn Bhd



company on aquaculture products. Principal activity is as agriculture

9) CNY Bioscience Sdn Bhd



product manufacture. Principal activity is as agriculture



product manufacture. Principal activity is constructing and



contracting buidings. Principal activity is as car accessory



shop Principal activity is

6) CNY Chemical Engineering Sdn Bhd 7) CNY Aquaculture Sdn Bhd

10) Uptrend Engineering Sdn Bhd 11) Mawisa Enterprise 12) U.E.Confectionery Sdn Bhd

restaurant.

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operating

operating a

INDUSTRIAL TRAINING REPORT CPL & CO 13) U.E.Teahouse Sdn Bhd



Principal activity is

14) Top Master Home Sdn Bhd



restaurant. Interior design company

4. 0 NOM IN AL

LED GER

AN D

operating a

TR IA L

BALA NC E

A company must keep records and books of accounts including a cash book, a sales ledger, a purchases ledger and a general ledger. Supporting documents such as invoices, bank statements, pay-in slips, cheque butts, receipts for payments, payroll

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INDUSTRIAL TRAINING REPORT CPL & CO records and copies of receipts issued should be retained. Receipts issued must be serially numbered. A valuation of the stock in trade should be made at the end of the accounting period and the appropriate records maintained. Records in manual or electronic form should be sufficient to explain each transaction and to enable a true and fair profit & loss account and balance sheet to be prepared. If computers are used to record the transactions, original source documents such as invoices and receipts should be retained. Where the original documents are in electronic form, the documents can be retained in such form. The system documentation including the accounting manual, chart and code of accounts should be maintained. All bank statements or savings books, into which account money for the business has been credited or withdrawn, should be retained. At the end of the accounting period, a physical stock-take should be made to ascertain the quantity and the cost of the stock in hand or the cost of work in progress. The first step in performing audit is to check opening balances of balance sheet items. This can be done by check whether the amount reflected in previous audit report same as the opening amount in client’s account. If there is any difference, note of that amount and make adjustment of the amount.

The next step is to check journals whether have been posted to correct nominal ledger account or not. Scrutinize nominal ledger journals made during the period for evidence of any unusual journal entries. For such items, obtain satisfactory explanations from the client. Then obtain a closing trial balance for the current period. Check that the trial balance is mathematically accurate and trace numbers to the draft financial

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INDUSTRIAL TRAINING REPORT CPL & CO statements and lead schedules. For agreed post trial balance audit adjustments, check that the client has processed agreed journals into the nominal ledger and financial statements properly. After that perform an audit according to schedule, start off by balance sheet’s items.

THE A UD IT PROCESS

Getting Elected as Auditor

Preparation of Draft Financial Statements 14

INDUSTRIAL TRAINING REPORT CPL & CO

Audit Process on Working Paper

Data Entry

Print

Supervisor checks the Draft accounts

Final check and Casting

Audit Report

Diagram 1.0 The Audit Process

SC HED ULE A - PROPER TY, PLA NT AN D EQ UIP MENT

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INDUSTRIAL TRAINING REPORT CPL & CO There are few procedures to be followed during the audit work for this section. Firstly, obtain a summary schedule of each significant class of property, plant and equipment to satisfy disclosure requirements, showing opening balances, additions, disposals, revaluations and closing balances. Ensure that the property, plant and equipment exist and are genuine assets of the business and are beneficially owned by the business and any restrictions, pledges or liens on the property, plant and equipment are identified and adequately disclosed in the financial statements. At the same time, we have to prepare fixed assets schedule as to attachment for this section. Test the mathematical accuracy, agree opening balances to prior period working papers and agree closing balances to the nominal ledger and investment ledger where maintained. Vouch against invoices, contract notes, and agreements for any additions or disposals. Confirmation of documents needed from the client. Ensure that all property, plant and equipment are included in the balance sheet, income from investments is complete and gains or losses on realization of property, plant and equipment are correctly stated. In additions, ensure the property, plant and equipment are properly disclosed and capitalized. Ensure that property, plant and equipment are accurately stated at cost or revalued amounts and provided against where necessary. In this audit firm we normally do not conduct physical verification of the assets to ensure its existence. It is only applicable to a very large amount of assets. Then, check calculation of the rates of depreciation to ensure that the rates used are reasonable and consistent with previous years. If the assets are charged, ensure that the particular charge is contained in the register of charges and relevant forms are filed. Where possible, obtain a copy of the relevant forms.

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INDUSTRIAL TRAINING REPORT CPL & CO

SC HED ULE C - INVE NT ORIES A ND WOR K I N PROGR ESS

For this section, first of all obtain stock list and vouch as follows: a) Test additions and extensions.

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INDUSTRIAL TRAINING REPORT CPL & CO b) Check pricing with latest purchase invoices and compare with previous year. c) Check to the company's stock records. The next step is to ensure the valuations of stocks shown are at the lower of cost or net realisable value or other accepted Accounting Standard. After that, obtain stock certificates signed by the directors confirming the total stock and the location of the stock. Ensure that closing stocks do not include stock owned by third parties held by the company on their behalf. Besides that, check for stock located or held by third parties which belongs to the company is taken up properly. If stocktake was carried out at yearend, ensure that stocks shown in the balance sheet reconcile to the inventory records taken at the stocktake.

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INDUSTRIAL TRAINING REPORT CPL & CO

SC HED ULE D - TR AD E RE CEI VABLES

For this section, balances must be traced to schedule of debtors, cast schedule to agree with control account, balance sheet and debtors’ ledger. Scrutinise schedule of directors' accounts, subsidiary or associates or related companies accounts and non-trade items which should be shown separately. 1. Test check selected accounts as follows: a) Check casting. b) Enquire into large credit balances. c) Scrutinise for unusual entries. Then, review long outstanding accounts with management as to its collectibility and the necessity to provide for bad and doubtful debts. Check subsequent receipts. Scrutinise all accounts not supported by subsequent receipts and note or list debts outstanding for over one year. Seek explanation from the client as to the delay in payments. Besides that, obtain direct confirmation of balances especially large balances where possible.

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INDUSTRIAL TRAINING REPORT CPL & CO

SC HED ULE E - SU ND RY R ECE IV AB LES AND PRE PAYMENTS

The first procedure for this section is to obtain a summary of other debtors, prepayments and accrued income analysed by category and between amounts due within one year and those due after one year. Ensure other debtors exist and are genuine assets of the business. Test the mathematical accuracy and agree or reconcile balances to the nominal ledger. Then, compare an analysis of other debtors, prepayments and accrued income with prior periods.

Explanation needed for any significant or unexpected

changes. In addition, review related income and expense accounts for evidence of omission of significant prepayments. Obtain confirmation of significant advances, for an example, staff loans and inquire into the reason for such advances. Other than that, here we can obtain direct confirmation from all entities, this is applicable only for large amounts, with which the entity has loans or notes receivable at the balance sheet date. This can be done by preparing a confirmation requests from the respective parties. Ensure loan and notes receivable balances reflect a proper cut off of receipts and disbursements. Obtain an analysis of any loans and notes receivable written off by determine that significant write-offs have been properly authorized, for an example, in Board minutes. Review the propriety of recoveries if there is any. Other than that, check translation of any foreign currency loans and notes receivable balances and cash movements and treatment of exchange differences. Besides

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INDUSTRIAL TRAINING REPORT CPL & CO that, review document and then test the process used by management to determine any allowance or provision for irrecoverable loans and notes payable. Review subsequent events or transactions for any indications of required adjustments to the allowance/provision for irrecoverable loans and notes payable for the old and unusual outstanding balances with the client. Review subsequent cash receipts for evidence of significant collection problems and assess percentage of period end debts collected by the date of audit fieldwork. For significant other debtors, perform vouching to supporting documentation and consider recoverability and if there is a need for a provision for non-collection. Besides that, test the calculation of material prepayments and vouch to supporting invoices and other documentation. Meanwhile, for material accrued income, examine supporting sales contracts and customer agreements, test that sales invoices have been raised subsequent to the balance sheet date and for particularly material balances, consider confirmation of details with customer.

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INDUSTRIAL TRAINING REPORT CPL & CO

SC HED ULE F - C AS H AND CA SH EQ UI VALENTS

Procedures that to be followed for this section is, firstly obtain a schedule of all cash and bank accounts open at the balance sheet date or existing during the period showing the account number and balance per the nominal ledger. Check the casts and agree balances to the nominal ledger. Compare the list of cash and bank balances with prior periods and budgets. Ensure cash balances as presented in the balance sheet, properly reflect all cash and cash items on hand, in transit or on deposit with third parties. Compare total petty cash payments with prior periods and on a monthly basis. In addition, obtain an analysis of interest received and paid in respect of bank deposits and bank overdrafts. Obtain direct confirmation of period end balances from all banks with whom the entity conducted business during the year by the use of bank confirmation letter. Besides that, enquire of management whether new bank accounts have been opened in the period and review confirmation letters, board minutes and cash books for new accounts. Inspect or confirm certificates of deposit and other time deposits at balance sheet date. Ensure cash balances reflect a proper cut-off of receipts and payments. This can be done by reviewing review receipts and payments in the cash book for 5 items either side of the balance sheet date and check the validity and timing of material items and trace transfers between bank accounts, including related parties for a selected period either side of the balance sheet date and determine that transfers are properly recorded in

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INDUSTRIAL TRAINING REPORT CPL & CO the correct period. If control over cash is weak: obtain returned cheques in respect of any unusual payments identified and examine details of payees and amounts recorded in the cash payments book and check propriety and review or prepare a proof of cash reconciliation and corroborate the totals of receipts and payments recorded in the selected period. The next step is to obtain a copy of the bank reconciliation for each account at the balance sheet date and ensure it agrees the bank balance figure to the bank statement and bank confirmation letter. Then trace deposits in transit and uncleared cheques to after date bank statements and reconcile the balance with the nominal ledger. Examine documents supporting significant uncleared deposits and outstanding cheque payments which are not cleared at the audit date for cut-off. Scan the cash and bank nominal ledger accounts for evidence of unusual or reconciling entries. Explanations needed for such items from the client.

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INDUSTRIAL TRAINING REPORT CPL & CO

SC HED ULE G - GROUP A ND INTER CO MPAN Y IN DE BTED NESS

Disclosure of inter-company balances and transactions is required in respect of the Company and related corporations, for an example, between the Company and other companies within the same group as well as companies or firms in which the directors have interest. Inter-company balances include those arising in the ordinary course of business or from loans and advances or payments made on behalf of each other. For this section, obtain an analysis of amounts due to and due from group, joint venture and associated undertakings, analyzed by type between amounts due within one year and those due after one year, including movements in the year where necessary. Check the casts and agree balances to the nominal ledger. Then compare balances due from group, joint venture and associated undertakings with prior periods and explain significant change as well as taking group payment policies into account. Check the year end translation of balances denominated in foreign currencies. Obtain a confirmation letter from the related party of the balance due and any repayment and interest terms. Discuss with management regarding the basis of and reason for transactions and intra group trading policies if high value or unusual transactions in the year.

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INDUSTRIAL TRAINING REPORT CPL & CO Consider the recoverability of debtor balances by reviewing subsequent cash receipts and the latest audited financial statements. Obtain an analysis of interest payable and receivable on intra group, joint venture and associated undertakings balances. Here we have to review basis of interest calculation. Besides, check that amounts due to and due from group, joint venture and associated undertakings are only netted off in respect of balances relating to the same party and where a right of offset exists. Determine if any balances due from group, joint venture and associated undertakings are charged or restricted.

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INDUSTRIAL TRAINING REPORT CPL & CO

SC HED ULE H - TR AD E PAYAB LES

For this section, trace balances to schedule of creditors, cast schedule to agree with control account, balance sheet and creditors’ ledger. Scrutinise schedule of directors' accounts, subsidiary, associates or related companies accounts and non-trade items which should be shown separately. Verify balances with creditors' statements. Where no statements are available, select material balances for circularization, vouch with purchase invoices and check for subsequent payments after year-end. Besides, verify large balances, especially on the nature of such balances and on how they arise. Conduct a search for unrecorded liabilities after year-end and ensure that such liabilities pertaining to the year under review are taken up in the accounts as accruals. Obtain direct confirmation of balances, especially large balances where possible. Liabilities need to be segregated into short-term and long-term, where amount due within 12 months fall under short-term liability meanwhile amount due after 12 months fall under long-term liability.

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INDUSTRIAL TRAINING REPORT CPL & CO

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INDUSTRIAL TRAINING REPORT CPL & CO

SC HED ULE I - SUN DRY PAYABLES A ND ACCRUALS

Obtain a lead schedule supporting required disclosures for other creditors and accruals and deferred income. Test the mathematical accuracy, agree comparatives to prior period working papers and agree or reconcile closing balances to nominal ledger. Compare an analysis of other creditors, accruals and deferred income with prior periods. Compare related income and expense accounts with prior periods. Explanation needed for any significant or unexpected changes and consider any evidence of omitted accruals or deferred income. Besides, obtain a list of bills of exchange outstanding at the year end. Test the mathematical accuracy and agree to the lead schedule. Agree details of bills to the clients bills register and check that bills were subsequently met on the due date. Review the summary of other creditors. Test the calculation of significant other creditors and vouch to relevant supporting documentation. Besides, review the pension contributions control account in the nominal ledger and ascertain if payments to the pension scheme were properly made on a timely basis in respect of employees and employers contributions. Review an analysis of accruals including interest separately and deferred income. Test the calculation of material accruals and vouch to relevant supporting documentation.

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INDUSTRIAL TRAINING REPORT CPL & CO For test pension costs accruals, enquire into pension scheme position and ascertain how and when accrual will be eliminated. In addition, review the effect of changes to benefits in the year. Sometimes we need to discuss with management the method for establishing the completeness of accruals and estimating the accrual needed. Develop an independent expectation of accruals and consider reasonableness in comparison with amount recorded. For accrued payroll costs, ensure that it agrees the calculation and subsequent payment of accrued salaries and wages and check the calculations of holiday pay and ensure that the accrual is adequate. For deferred income, obtain an analysis of all items included in the period end balance and of movements in the period. Check the validity of deferred income and vouch to relevant supporting documentation. Besides, check that the amount of deferred income released to the profit and loss account is properly calculated based on a consistent basis with prior periods and the related asset.

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INDUSTRIAL TRAINING REPORT CPL & CO

SC HED ULE J - D IRECT ORS ’ A CCO UN TS

For this section, we have only to look at the movement in directors’ account during the financial year. Lead schedule have to prepare based on the movement to check the balance due to or from the directors. Any expenses paid by any of the directors of the company need to take into the account as well as income received by the directors in preparing this lead schedule. The balance confirmation letter needs to be prepared for each director in order to clarify the balance in the directors’ account.

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INDUSTRIAL TRAINING REPORT CPL & CO

SC HED ULE K - HI RE PU RCH ASE O R LE ASI NG A CCO UN TS There are few procedures to be followed in preparing Schedule K. First of all, obtain an analysis of loans and finance lease obligations due within one year and due after more than one year including the issue date, maturity date, face value, interest rate or terms, opening amounts, increases in loans and finance lease obligations, repayments, unamortized and amortized discounts and closing balances. Test the mathematical accuracy and agree or reconcile balances to the nominal ledger. In addition, obtain an analysis of interest payable on finance lease obligations, bank loans and overdrafts and other loans. Ensure the balances agree to the nominal ledger. Compare debt balances such as loans and finance leases with prior periods and budgets. Consider the interest amortization of debt issued at a discount or redeemable at a premium. Calculate interest expense as a percentage of average debt for evidence of unrecorded liabilities.

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INDUSTRIAL TRAINING REPORT CPL & CO Other than that, ensure that all relevant terms and details of loans are known including name of lender, original issue date, proceeds received means the net of eligible issue costs, security, interest rates applying and repayment terms. Update permanent file with relevant information for material new loans and finance lease agreements which includes finance costs profile as necessary. Request confirmation of balances payable from lenders with whom there was a significant loan outstanding at the balance sheet date or at any time during the period. Include in confirmation request, details of accrued interest, security and repayment terms. For repayments of loans, vouch that repayments are in accordance with loan agreements and vouch to approve documentation. Meanwhile, for loan drawdown in the period, have to check authorization to minutes or other documentation and vouch to cash received records and bank statements as well. Ensure it agrees details to loan agreements. Vouch issue costs to invoices and other supporting documentation. For the debt was issued with net proceeds less than the repayable amount, check that the interest amortization of the discount or premium is on an acceptable basis and has been accurately calculated and the balance sheet/net asset statement liability correspondingly increased. Ascertain from management or trustees details of any covenants included in bank loans or other debt agreements need to test compliance with debt covenants by agreeing covenant details to loan agreements or permanent file. Discuss with management what remedial action has been taken to deal with any non compliance and if necessary ask the client to obtain a waiver from the lender in respect of any non compliance which could accelerate debt repayment. To perform test on interest payable on loans by vouching interest payable to supporting documentation and recalculating interest accrued.

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INDUSTRIAL TRAINING REPORT CPL & CO For lease agreements, inspect for new finance leases incepting in the period, check suitable authorization and confirm finance lease classification. Check that a proper allocation of interest deferred to future periods has been made that the amount capitalized is correct. For repayments of finance lease obligations, check that rental payments are in accordance with the lease agreements and that payments have been properly split between repayments of capital and interest.

SC HED ULE N - SHA RE HO LDE RS’ FU NDS

This schedule will be prepared during performing statutory audit. First, verify authorized share capital with the Memorandum of Association. Then, verify any change in authorized share capital with minutes, relevant forms and special resolution. Besides, verify issued share capital with previous balance sheet and latest annual return. Other than that, verify the return of allotments with minutes, relevant forms and resolution for additional allotments made during the period or year.

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INDUSTRIAL TRAINING REPORT CPL & CO

SC HED ULE

P

-

PROF IT

AND

LOSS

ACCO UN T

For this section, there are few items that compulsory to perform an audit. This is due to the tax computation. By doing this, detailed information on taxable items easily can be obtained from this schedule. This schedule actually represents an operating costs which incurred by the business. Generally, for all expenses, obtain an analysis of operating costs showing accounts included in the cost headings disclosed in the financial statements. Test the mathematical accuracy and agree balances to the nominal ledger. Obtain an analysis of employee costs analyzed by payroll cost, tax and pension contributions. Test the mathematical accuracy and agree balances to the nominal ledger. Obtain or prepare a monthly schedule of cost of sales and gross profit percentage analyzed by department, location, segment or product. Compare with prior periods. Explain significant or unexpected changes and trends. Be vigilant in particular for evidence of unrecorded purchases or overstated stock or sales. For cost of sales in total or by products or locations, estimation done by reference to the quantities of goods sold and the average production cost. Compare analyses of distribution costs and administrative expenses with prior periods. Prepare a predictive estimate or proof in total of payroll costs of gross pay by obtaining prior period payroll costs, the numbers of employees in the period year including starters and leavers from Personnel Department and considering the effect of

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INDUSTRIAL TRAINING REPORT CPL & CO pay rises and changes in the staff mix in the period. For a sample of employees included on the payroll, check that the gross pay agrees to a contract of employment or subsequent authorized amendments to pay rates. Compare with recorded payroll costs. Ensure description of employee as either full time or part time is accurate. Compare purchases by month with prior period. Explanation needed from the client the reason for significant or unexpected changes and trends. For discounts allowed, calculate as a percentage of sales and compare with prior periods, company policy and credit control trends. For all operation categories, scan the nominal ledger accounts, journals or transaction files and list major transactions which normally those in excess of adjusted materiality limit and unusual transactions which those that indicate an accounting or disclosure matter. Examine documentary evidence underlying identified major and unusual transactions to ascertain that underlying evidence supports the recorded amount and description of the transaction. Ensure that revenue transactions are recorded in the proper period, properly classified and recorded in accordance with accepted accounting principles and the client's revenue recognition policy and cost of sales transactions are recorded in the proper period and properly classified as well. Besides, ensure other transactions are recorded in the proper period and in a manner that properly matches revenue and expenses. Test a sample of purchases recorded in the nominal ledger in the period and inspect authorized invoice by checking the accounts classification and ensure that agree to other evidence of work done.

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INDUSTRIAL TRAINING REPORT CPL & CO

SA LES

Firstly, obtain an analysis of sales by location and product. Check the casts and ensure it agrees to the nominal ledger. Besides, obtain a schedule of monthly, quarterly or annual sales, value and quantities if available, analyzed by geographical area, market and major product or major contracts and compare with prior periods. Review the schedule taking into account business and consumer trends, product mix, technology, new products, discontinued products, expansion etc. Meanwhile, compare miscellaneous and cash sales by product and location with prior periods.

Calculate an estimate for sales based on total quantities of goods

dispatched in the period and known or average selling prices. Compare the calculation with recorded sales and investigate any significant differences. Calculate the percentage credit notes by value and quantity with sales and compare with prior periods. Scan sales accounts in nominal ledger for evidence of unusual entries. Examine supporting documentation in respect of unusual items detected. For a selected month, check that the total number of sales invoices and dispatch notes issued have been, or can be, properly reconciled. Test that a sample of dispatch notes have been properly invoiced by checking to invoice details such as customer, quantity and price and customer order. To check the validity of credit notes issued in the period can be by vouching credit notes recorded in sales to the credit note or examining valid supporting documentation or inspecting evidence of authorization.

SC HED ULE S – STATUT OR Y AUD IT 36

INDUSTRIAL TRAINING REPORT CPL & CO

For this section, any important changes need to be noted. If the is any acquisition of assets during the financial year, resolution regarding that matter need to be photocopied. For an example change of bank signatories to current bank account, transfer of securities, director’s remuneration, all the resolution regarding this matter need to be photocopied. Besides, form of annual return as well as all the related form such as Form 49 also have to be photocopied for reference. Three books that need to be referred are minute book, secretarial book and register book. Firstly, go through the minute book. While extract the information, browse through the minute content. Secondly, obtain all the latest dated forms from secretarial book. Finally, reference made on register book to fill statutory programme.

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INDUSTRIAL TRAINING REPORT CPL & CO

SC HED ULE T - T AX ATIO N

Inspect tax file to ensure that all notices of assessment issued have been taken into account. Ensure CP 204 and CP 204A if any, has been lodged as appropriate. Take note of tax correspondence indicating where there is any tax dispute, tax investigation or other abnormal events. Analyze outstanding tax balance and enquire why tax liability has not been paid or where tax is overpaid. If this is the first year accounts, enquire from client the date of commencement of business. What is it based on whether invoices issued or received? Ensure that CP 204 been compiled with and submitted as appropriate. If the company first accounts do not cover a full period of 12 months, ascertain the basis periods and the tax implications. Impact of Deferred Tax on the Financial Statements - Quantify the amount and action taken. Identify are there any payments made that are subject to withholding tax. If yes, make sure withholding tax was reported accordingly to the tax authorities. Check RPGT implication if there is any disposal of Tangible Fixed Assets. For inter company transaction with related parties such as sales, payment and loan transactions, specify whether transaction is within Malaysia or outside Malaysia.

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INDUSTRIAL TRAINING REPORT CPL & CO

SC HED ULE V – CO NCL US IO N

The purpose of this schedule is to make a final review of the draft financial statements to ensure their completeness, consistency and presentation. We have to state whether the financial statements show a “true and fair” view or not and state that clean report may be issued. If not, state the fact and reasons as to why the financial statements should be qualified. Besides, we can state any reasons that we wish to highlight to the reviewing manager for his attention. Finally make reference to the appropriate schedules in the working papers where applicable.

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INDUSTRIAL TRAINING REPORT CPL & CO

DOR MA NT CO MPAN Y

For dormant company, most of the schedules are not applicable. The procedures for this type of company is confirm that the company has indeed been dormant. Then ensure that unresolved items brought forward from previous year have been cleared. Besides, obtain photocopies or extract of minutes of AGM, directors’ meetings and EGMs if any. Ensure the trial balance agree to general ledger. Ensure the opening balances of general ledger agree to previous year’s financial statements. In addition, for share capital and statutory records, ensure that authorized share capital agree to Memorandum of Association. Vouch movements in issued capital, if any and obtain copy of returns on allotment. Finally sight statutory records, complete the statutory registers checklist.

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INDUSTRIAL TRAINING REPORT CPL & CO

AUD IT REP OR T

The final stage in the auditing process is preparing the audit report, which is the communication of the auditor’s findings to users. Audit journal entries have to be prepared if the is any adjustments in accounts. We will prepare trial balance as for our reference. After all this documents have been prepared, the audit file will be given to the manager for review. The review notes given by the manager after he reviewed have to be cleared. After cleared all his review notes, the documentation can be prepared. The documentation that needed to be prepared are: 

Note of fees



Draft audited accounts



Two copies of audit journal entries



Twelve copies of the Director’s Report, Directors’ Statement and Statutory Declaration



Register – Form 7



Letter of representative



Stock certificate



Cash in hand certificate



Certificate of directors’ remuneration and shareholdings



Bank confirmation



Confirmation of balance

41

INDUSTRIAL TRAINING REPORT CPL & CO 

Cover sheets, Tax cover letter, Form C and Form R

5. 0 TAX CO MPUT ATI ON

I was also placed in tax department and assigned for tax computation job. I had done tax computation for companies. Tax computation means the working sheets, statements, schedules, calculations and other supporting documents forming the basis upon which a return is made and which are required to be submitted together with the return or maintained. A)

The starting point of a computation is the profit before taxation shown in the accounts. To this are added the following items which are disallowable or disregarded for tax purposes: •

Depreciation or amortization.

•

Capital losses, such as sale of fixed assets or other non-trading losses or expenses.

•

Professional fees relating to capital matters.

•

Expenditure of a capital nature. For an example additions, alterations and improvements, included under repairs and maintenance.

•

Entertainment expenses other than entertainment provided for employees.

•

Expenses relating to provision of leave passages.

•

Donations to charities and other organizations.

•

Premiums of leases charged to profits.

42

INDUSTRIAL TRAINING REPORT CPL & CO •

General provisions for bad debts, retirement benefits, leave passages, exchange losses, future expenditure.

•

Interest on overdue taxes.

•

Interest relevant to unproductive loans and advances to officers and associates of the company.

•

Interest on non-income producing investments.

•

Incorporation expenses in respect of authorized share capital in excess of RM250,000.

•

Pre-trading expenses. For an example expenses incurred from date of incorporation to date of commencement of business.

•

Receipts of a revenue nature credited to reserves.

•

Expenses relating to increase in authorized or issued capital.

•

Installation of equipment or assets.

•

Generally all expenses incurred not wholly and exclusively in the production of income, such as remuneration including EPF contributions and other benefits to partners and proprietors and basic expenses such as annual reports for distribution to shareholders for annual general meetings and extraordinary general meetings.

B)

From the total of the above are deducted the following: •

Income or gains which are of a capital nature. For an example profit on sale of fixed assets.

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INDUSTRIAL TRAINING REPORT CPL & CO

C)

•

Capital allowances

•

Unabsorbed business losses.

•

Donations to approved institutions.

Certain expenses are deductible although for various accounting and commercial reasons they may not have been charged to profit and loss account: •

Renewals and replacements of items which do not qualify for capital allowances, such as carpets, fire extinguishers.

•

Deferred expenditure. This would cover expenses incurred after the company has commenced trading but because they have not yet contributed to generating income they are not charged to profit and loss account instead they are carried in the balance sheet as deferred expenditure or pre-operational expenditure.

•

D)

Repairs and other allowable expenses charged directly to reserves.

There are also certain categories of payments, receipts and other points in a company’s operations which need special treatment. These are: •

Remittances from overseas. Income earned from sources outside Malaysia and remitted is tax exempt.

•

Dividends received from exempt profits. For an example from a pioneer company’s exempt income fund.

•

Allocation of expenses by a parent company to its subsidiaries.

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INDUSTRIAL TRAINING REPORT CPL & CO

E) Once the chargeable income and the tax thereon have been computed, the next step will be: •

Tax deducted at source from Malaysian dividends or Malaysian source interest. These deductions at source are at the rate of 28% and the set-off merely cancels out the tax charged on the gross dividends or interest in the upper limb of a computation.

•

Double tax relief. The double taxation agreements which Malaysia has contracted with other countries provide the extent of credit that may set off in this section of the computation.

5.1Computation of capital allowances. 5.1.1 •

Conditions for capital allowances. To qualify for initial allowance in respect of plant and machinery for a year of assessment, a person has to satisfy all the following conditions: 

He was carrying on a business during the basis period.



He has incurred qualifying plant expenditure in respect of that asset during the basis period.



That asset was used for the purpose of the business.



At the end of the basis period or if the asset was disposed of, at the time of disposal, he was the owner of the asset.

45

INDUSTRIAL TRAINING REPORT CPL & CO •

To qualify for annual allowance in respect of plant or machinery for a year of assessment, a person has to satisfy all the following conditions: 

He was carrying on a business during the basis period.



He had incurred qualifying plant expenditure in respect of that asset.



That asset was used for the purpose of the business.



At the end of the basis period, he was the owner of the asset and the asset was in use.

•

Qualifying plant expenditure means capital expenditure incurred on the provision, construction or purchase of plant or machinery used for the purpose of a business.

5.1.2 A) •

Claims for initial and annual allowances. Claims to be made in the return and in writing. Claims for Initial Allowance and Annual Allowance must be made in writing in the return for the Year of Assessment. The details of the claim should be shown in a certified statement in the tax computation.

B) •

Conditions to be satisfied. To qualify for Initial Allowance and or Annual Allowance for a Year of Assessment in respect of an asset, the person making the claim must satisfy all the following conditions:

46

INDUSTRIAL TRAINING REPORT CPL & CO 

He was carrying on a business during the basis period.



In respect of that asset, he has incurred Qualifying Expenditure in that basis period to qualify for Initial Allowance or has incurred Qualifying Expenditure in that basis period and or a previous basis period to qualify for Annual Allowance.



That asset was in use for the purpose of the business.



At the end of the basis period, he was the owner of the asset and the asset was in use.

5.1.3

The general rates for capital allowances are as follows: Asset

Heavy machinery, motor vehicles Plant and machinery Others

Initial Allowance Rate 20% 20% 20%

Annual Allowance Rate 20% 14% 10%

Particulars relating to tax adjustments a) In respect of each tax adjustment the basis for such adjustment should be shown supported by analysis, copies of subsidiary accounts, receipts etc. as appropriate. b) In respect of incentives claimed copies of approval letter, pioneer certificate, and exempt account should be attached. c) In respect of bad debts written off which exceeding RM5,000 for companies and RM1,000 for others, particulars of the debtor, nature of the debt and reasons for writing off should be given.

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INDUSTRIAL TRAINING REPORT CPL & CO d) In respect of capital allowances schedules to show additions, hire purchases, disposals or write-off should be attached.

Schedules that need to be prepared as supporting to a tax computation and accounts are: •

Fixed assets schedule which shows additions and disposals and a reconciliation of opening and closing figures.

•

Profit reconciliation.

•

Sundry creditors and liabilities.

•

Provisions and reserves where shows additions and appropriations.

•

A reconciliation of the taxation account.

•

Repairs and maintenance where large numbers are involved a broad analysis of expenses should be provided.

•

Legal expenses. Indicate the nature of each disbursement.

•

Subscriptions and donations. For donations, receipts supporting claims made should be attached.

•

Travelling and transportation. Indicate the place visited and the purpose of that visit. Identify whether that traveling and transportation relates to the business purpose.

•

Investment income showing source, gross income and tax deducted at source.

•

Property income showing income and non-income producing properties. For an example rental income.

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INDUSTRIAL TRAINING REPORT CPL & CO

Tax tr ea tment on in come and expenses 5.2

Income

A)

Commission income Commission by whatever name called which is calculated based on brokerage charged on securities transacted through the remisier is to be treated as business income and will be taxed under Section 4(a) of the Income tax Act 1967.

B)

Interest income on security deposit Interest received by a remisier on his security deposit in the form of cash places with the stockbroking company to make good against debts or liabilities will be treated as business income and assessable under Section 4(a) of the Act as the deposit forms an essential part of the remisier’s normal business.

5.2

Expenses In general, all outgoing and expenses wholly and exclusively incurred in the production of income are allowable as a deduction in arriving at the adjusted income.

In respect of expenses claimed the following particulars have to be furnished:

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INDUSTRIAL TRAINING REPORT CPL & CO 5.2.1

Contract or subcontract payments, commissions and rental and other contractual payments to residents, excluding management fees. •

Name, address, I/C No. and amount in respect of each recipient.

•

Type or nature of contract or commission and location or nature of asset rented.

5.2.2

Contract payments to non-residents. •

Receipts by non-resident contractor.

•

Location, nature and duration of project.

•

Name, address, tax reference no., I/C no. of non-resident contractor or the payer.

•

Total contract sum and the service portion thereof.

•

Contract sum and the service portion thereof payable / receivable for the relevant basis period.

•

5.2.3

Particulars of withholding tax showing: i)

Date of paying or crediting of contract sum due.

ii)

Date of payment and amount of withholding tax.

iii)

Receipt numbers.

Management fees to residents. •

Name, address, I/C no. and amount in respect of each recipient.

•

Indicate relationship with recipient, if any.

•

Basis for payment of fees supported by copy of management agreement, if any.

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INDUSTRIAL TRAINING REPORT CPL & CO

5.2.4

5.2.5

5.2.6

5.2.7

Professional or technical or management fees and rents. •

Name, address and amount in respect of the recipient.

•

Nature of services rendered.

Overseas trips (not required for public companies). •

Names and designations of persons involved.

•

Dates, destination and purpose of the trip.

Salaries or Commission •

Name, I/C No. and address or recipient.

•

Amount paid and claimed.

•

Services performed by the recipient.

•

Details of expenditure, indicating non-business element.

Non-trade debtors and creditors. •

There should be separate records for non-trade debtors and creditors. For an example, persons owing money to the individual or to whom the individual owes money which is not related to the business.

5.2.8

Small expenses without receipts. •

For small expenses for which no receipts are obtained. For an example, taxi fares and parking fees, a record should be made as to the date incurred, the amount paid, and the purpose for which the expense is incurred.

51

INDUSTRIAL TRAINING REPORT CPL & CO 5.2.9

Specific claims for deductions, allowances, reliefs and rebates refer to claims which are required to be supported by documents such as prescribed forms, certificates and receipts.

Other than preparing tax computation, I was assigned to prepare letters to IRB. Types of letters that I had prepared were appeal letters, request for refund of tax overpaid, CP 204 and some other matter regarding tax. Client can appeal if they are not satisfied with the manner in which their income have been assessed, personal reliefs have not been appropriately given, forget to claim certain expenses or reliefs or there is an error in the assessment issued by the IRB office.

Assessmen t of tax for empl oyer s

In general, employer means the party that pays remuneration to the employees, where there is an “employer – employee” relationship. Due to this, that is the reason why we have to attach the supporting documents for commissions paid, salaries paid and etc. This is to ensure whether the amount received for the services rendered by the, for an example, contractor reflect in his income computation. Examples of employer are manager, agent or person responsible for the payment of salary or wages to an employee, any body of persons whether or not statutory incorporated, for an example, an association and Statutory Boards, Federal and State Governments.

52

INDUSTRIAL TRAINING REPORT CPL & CO

Respons ibi li tie s of an emp lo yer 

Furnish within 30 days a Return (Form E).



Notify the Director General in writing of a new employee.



Notify the Director General in writing of an employee who is about to cease employment except if the employee has tax deducted under the Schedular Tax Deduction scheme and is not retiring from employment.



Notify the Director-General in writing of an employee who is about to leave Malaysia for a period exceeding 3 months. Withhold money payable to the employee who is about to cease employment or is

about to leave Malaysia for a period of more than 3 months. Deduct tax from the remuneration as directed by the Collection Branch. With effect from 1 January 1995, monthly tax deduction under the Schedular Tax Deduction Scheme. Offences and Penalties imposed on employer if they failed to fulfill the requirements. Failure to notify the Inland Revenue Board of the cessation of employment and or the departure of an employee from Malaysia, the Director-General of Inland Revenue is empowered to recover from the employer any tax due from the employee. Failure to comply with any of the requirements will render an employer liable to prosecution and on conviction, liable to a fine of not less than RM 200.00 and not more than RM 2,000.00 or to imprisonment for a term not exceeding six months or to both. Failure to deduct and / or remit monthly tax deduction of employees' by the 10th. of the following month is an offence and upon conviction, an employer can be fined up to RM1,000 or jailed up to 6 months or both.

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INDUSTRIAL TRAINING REPORT CPL & CO

Paym ent of tax

Under formal assessment, tax shall be paid within 30 days from the date of the Notice of Assessment notwithstanding any appeal or disagreement with the tax assessed. Under self assessment system, tax shall be paid on or before the stipulated due date. In certain circumstances an extension of time may be allowed, for example, where the taxpayer is away from the country. There are cases where payment is required to be made within 7 days from date of the notice of assessment. For example, where a person has a non-resident employer and is likely to leave Malaysia at short notice.

In stal lm ent sc he me for company

Under the Self Assessment System, every company is required to furnish an estimate of its tax payable for a year of assessment. This has to be done not later than 30 days before the beginning of the basis period. In respect of a company that has just commenced operation, the estimate of tax payable for the current year may be furnish within 3 months from the date of commencement of operation. The estimate of the tax payable for the current year of assessment should not be less than the estimate of tax to be paid for the immediate preceding year of assessment.

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INDUSTRIAL TRAINING REPORT CPL & CO

Paym ent by ins tal lmen t

The estimated tax payable has to be paid in equal monthly installments beginning from the second month of the basis period for a year of assessment. For an example: Number of months in basis period

= 12 months

Estimated tax payable

= RM 24,000

Monthly installment

= RM 2,000

Each installment is payable by the 10th of the month. Similarly, for new tax payers, installment payments must commence in the sixth month of the basis period for the year of assessment i.e. payable in the sixth month after the tax payer commence operation. All payments of tax to the IRBM must be made using the Remittance Slip (CP 207). Tax payer is required to indicate the Year of Assessment that the payment is made for on the remittance slip. Tax shall be paid within 30 days from the date of the Notice of Assessment notwithstanding any appeal or disagreement with the tax assessed. An increase of 10% tax will be imposed upon failure to pay the tax within 30 days from the date of Notice of Assessment issued. If tax is not paid for the next 60 days from the date of imposition of 10% increase in tax, a further increase of 5% will be imposed on the outstanding tax after the expiration of the 60 days.

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INDUSTRIAL TRAINING REPORT CPL & CO

Tax paymen t – payment thr ou gh bank

Payment by cash, cheque, debit account or telegraphic transfer may be made at any branch of Bumiputra-Commerce Bank Berhad (BCBB). This facility is available for companies and individual taxpayers. Type of tax that can be made at BCBB are Income Tax (Instalment Scheme and non-Instalment Scheme) and Real Property Gains Tax (RPGT). An Income Tax Payment Slip which available at the BCBB branch must be completed when making payment at the bank. A copy of the slip should be retained as proof of payment. The IRB will not issue official receipts for payments made at the bank. All cheques, bank draft, postal order, or money order must be crossed and paid to DIRECTOR GENERAL OF INLAND REVENUE, and if mailed, addressed to relevant Collection Branch. The relevant income tax reference number, identity card number, full name, current address and the relevant year of assessment must be written on reverse side of the cheque, bank draft, postal order or money order. The type of tax payable whether Income Tax or Real Property Gains Tax must be clearly indicated. Cash payment at payment counters must be accompanied by Remittance Form (CP 153). Official receipts will be issued for payments made at the payment counter or through the post.

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INDUSTRIAL TRAINING REPORT CPL & CO

Refund of tax o ver paid

An application for refund shall be in writing and the letter stating full name, income tax reference number and latest address must be sent to the relevant Collection Branch. For companies, the bank account number must be stated. A refund will only be made after the required verifications have been completed.

Sel f A ssessm ent System for Compan y

From the year 2001, the Self Assessment System introduced for companies. Under this system, companies are required to determine their own tax liability and make payment to the IRB. Companies have to maintain a good record keeping system. This will help in verifying any claims made should the IRB require them to be produced. Taxpayers have to determine their correct tax liability and make payments promptly. That does not mean that the IRB would not examine the return forms at all. A certain percentage of the return forms will be audited. It is very likely that IRB will audit those returns with a high probability of under declaration of taxable income or tax payable and those that are inherently of high risks to revenue. All companies are required to furnish to the DGIR an estimate of its tax payable for a year of assessment. This includes companies that expect no tax to be paid for that year of Assessment. Under the Self Assessment System, every company is required to furnish an estimate of its tax payable in a prescribed form (CP 204) to IRB. This

57

INDUSTRIAL TRAINING REPORT CPL & CO prescribed form has to be submitted to IRB not later than 30 days before the beginning of the basis period. However, in respect of a company that has just commenced operations, the estimate of tax payable for the current year may be furnishing within 3 months from the date of commencement of operations. The prescribed form for furnishing an estimate will be issued by IRB to companies. In the event that companies did not receive the form, these forms are also available at all IRB offices. Upon completion of CP 204, it should be sent back to Inland Revenue Board, Pusat Pemprosesan (Bahagian Operasi) Karung Berkunci 11055, 50990 Kuala Lumpur.

In general, the following information is required:



Name and address of the company.



Income tax file reference number.



Company registration number.



Indication of whether original or revised estimate.



Accounting period.



Date of commencement of operation for new companies.



The relevant year of assessment.



The estimated amount of tax payable for the year of assessment.

Generally, the estimate of the tax payable for a current year by the company should not be less than the estimate of tax to be paid for the immediate preceding year of assessment. Notwithstanding the above, it is specifically provided that for the Year of

58

INDUSTRIAL TRAINING REPORT CPL & CO Assessment 2007, the estimate of tax payable furnished to the Director General of Inland Revenue (DGIR) shall not be less than the amount of tax payable for the Year of Assessment 2006. Upon receiving the completed CP 204 furnished by the company, IRB will then issue Notice of Installment Payment (CP205). The company is allowed to revise its original estimate as furnishing, in the sixth month of the basis period for a year of assessment. Following from this, the remaining installments have to be revised accordingly. The application for revision can be done using the same prescribed form (CP204) but indicating that it is to provide a "revised estimate". A Notice of Revised Installment Payment (CP206) will be issued by IRB to confirm installment payments following the revised estimate. Penalty for Understatement of the Estimated Tax Payable will be imposed if the difference between the actual tax payable and the revised Estimated tax payable or the estimated tax payable (if not revised Estimate is furnished) is more than 30 % of the actual tax payable, a 10% increase in tax will be imposed on that difference in excess of the 30%.

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INDUSTRIAL TRAINING REPORT CPL & CO

For mu la for calcu la ting the penalt y

The formula for calculating the amount of tax to be increased is as follows: Amount of tax to be increased = {(AT-ET) – (30% x AT)} x 10% AT is actual tax payable ET is revised estimated tax payable or estimated tax payable and if no revised estimate is furnished. If a company fails to furnish an estimate by the required date, the DGIR will issue a direction to the company to make installment payment. The DGIR may also institute legal proceeding against the company for the failure to furnish an estimate.

Accounts Year Ending 31/01/2007 28/02/2007 31/03/2007 30/04/2007 31/05/2007 30/06/2007 31/07/2007 31/08/2007 30/09/2007 31/10/2007 30/11/2007 31/12/2007 Table 2.0

Estimate Furnished to Variation of IRB before: Estimate in Month of: 01/01/2006 July 2006 01/02/2006 August 2006 01/03/2006 September 2006 01/04/2006 October 2006 01/05/2006 November 2006 01/06/2006 December 2006 01/07/2006 January 2007 01/08/2006 February 2007 01/09/2006 March 2007 01/10/2006 April 2007 01/11/2006 May 2007 01/12/2006 June 2007 Installment Schedule

60

Commencement of Monthly Installments March 2006 April 2006 May 2006 June 2006 July 2006 August 2006 September 2006 October 2006 November 2006 December 2006 January 2007 February 2007

INDUSTRIAL TRAINING REPORT CPL & CO Under the self assessment system, companies are required to estimate their own tax payable for a year of assessment and make payment by installments. Companies are also required to furnish to the DGIR a return specifying the chargeable income and the tax payable on that chargeable income and also any other information as required. When a return is furnished, the DGIR is deemed to have made an assessment on the day the return is furnished. If the total amount of the installment payments is less than the actual tax payable, the difference has to be paid not later than the last of the sixth month from the date following the close of the accounting period.

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INDUSTRIAL TRAINING REPORT CPL & CO

When making payments to the IRB following items are indicated: 

Name and address of the company



Tax reference number



Year of assessment



Month for which installment is paid This is necessary to help us match the total installment payments that have been

made against the actual liability. A company is required to pay the estimate of tax by the tenth day every month in equal monthly installments, beginning from the second month in the basis period for a year of assessment. Similarly, for a new company, the payment shall be made by the tent day of every month in equal monthly installment beginning from sixth month of the basis period. If tax payable of the company exceeds the revised estimate or estimate, if no revised estimate is furnished by an amount of more than 30% of the tax payable, a 10% increase of tax will be imposed on the difference between that amount and 30% of the tax payable.

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INDUSTRIAL TRAINING REPORT CPL & CO

For m C

IRB will still send the return form based on records available. Return forms will be issued quarterly based on the companies' accounting period. Companies should receive the return form at least 3 months before the date of submission of Return Form. The submission of Return Form is due within 6 months after the close of the accounting period. Companies that did not receive any Return Form must contact the nearest tax office. A new Form C will be designed to facilitate all companies to complete and compute their tax . This form will be accompanied by explanatory notes on how to fill the form. The submission of a complete return should be made within 6 months after the close of the accounting period which constitute the basis period for the year of assessment. However, each company is encouraged to complete the Return Form C early does not mean that the company has to pay the last payment early. The last payment in respect of the balance of tax payable, if any is required to be made by the due date, for an example the last day of the sixth month from the date following the close of the accounting period. If a company fails to submit Return Form C, the company would have committed an offence. A fine of not less than RM200 and not more than RM2,000 or imprisonment not exceeding 6 months or to both will be imposed. When IRB receives the Return Form C, IRB will check if there are any obvious mistake, for example, arithmetical error or wrong transcription. If such errors are detected the company will be informed. However, if a Return Form is incomplete, IRB will reject

63

INDUSTRIAL TRAINING REPORT CPL & CO the Return Form and send it back for completion. Upon completion, the company will then furnish the complete return to IRB. IRB may select any case for audit. By this, queries will be raised on entries in the Return Form, Accounts or tax computation.

6. 0 DIS CUSS IO N, AN ALYSIS AN D FIN DI NG S WITH R EG AR D USEFUL NESS OF THE TR AI NI NG

My practical training at CPL & CO was very beneficial because it has exposed me to the many sectors of the accounting profession. The department that I was attached are auditing and accounting. They assigned me with many tasks which related to auditing and taxation. I had done a full set of accounts where at first I found many problems due to lack of information. But finally I managed to complete the account. Here I learned a lot on double entries. I did not use any software to do that accounts. I had done that by manually. I really had a hard time of doing that. The first day of my practical, I was given a task to start my audit job. Two boxes of documents were given to me. At that point of time, I am really blur because do not know where to start and how to start. All of my seniors are not around because they went to client’s office. That time there is only one senior who I appreciated till now helped me

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INDUSTRIAL TRAINING REPORT CPL & CO to perform audit schedule by schedule. She taught me in detail how to overcome the problems faced for each schedule. My manager always expects me to learn by myself. At first was really hard for me to learn by myself but day by day I tried to learn by myself. Not really depend on my seniors. Normally I will ask many questions to my seniors. This really helped me to learn more beyond what the procedures says. For taxation, my manager had taught me how to do taxation for companies. Actually in audit department itself we will do the tax computation for the company that we are auditing. Normally the tax department staffs will be preparing Form C and Form R and the letters that to be sent to IRB. Tax manager will review the tax computation and will ask to do amendment if any. After I shifted to tax department, I really can know all the scope in tax computation. Tax computation is really interesting compared to auditing. This training is really good for me to learn more than what I studied in the university. After went to training, now I really learnt what is accounting actually. Taxation is the most I hate when studying that subject. But after trained in tax department, now I really like taxation subject. What we studied in university is really helpful when we enter to working life. The thing is we really do not appreciate the information brought by the subject when we are studying. We tend to forget what we studied. When enter to working life, all those information become useful for us to implement.

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7. 0 LI MIT ATIO NS OF TR AI NI NG

This was basically my first real job as an accountant and frankly speaking I am traumatized by the way the bosses were acting with the employees at the firm. Basically in that firm only four staffs are working for a quite some time. Other employees are temporarily working there. I had investigated why new employee can’t work there even for a week. The reason I found out was the behavior of the employer towards employee. I was surprised how I could work even they pressured me to the maximum. This sort of environment was not exactly the best working environment. I decided not to give up that easily and at the same time I challenged to myself to complete my training in that firm.. They did not understand the fact that the whole reason, I was there to learn and they were also aware that I was fresh from university and had no prior job experience. In my point of view, the main limitation of the firm is lack of other races as their employees in that firm. They have to hire more employees of other races. By doing this, the understanding of different culture will be strengthened. During my first meeting with audit staffs, the meeting was handled in English for only in five minutes time. For the rest of meeting was conducted in Chinese. They don’t even bother that I am a new trainee over there who attended that meeting too. An ethical issue is very important nowadays. As a working staff, we should know how to behave with our employees. By having a good ethics, it will mirror a good perception of the firm to the public.

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INDUSTRIAL TRAINING REPORT CPL & CO Trainees or new employee who is fresh graduate should be guided before they perform an audit job. by giving guideline, they able to cope up very easily instead let them to learn by themselves. These are some of the important issues that I would like to raise here.

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8. 0 SC OPE FO R FUT URE TRA IN IN G IN THE FI RM TO D O 3 YE AR S PR ACTI CA L TR AI NI NG I N THE FI RM TO BE CO ME A MEM BE R OF M AL AYSI AN INSTIT UTE OF ACCO UN TANTS ( MI A) It is proposed that before an individual can assume the role of professional they should first qualify as a professional accountant, hold an undergraduate degree and have the additional knowledge, skills, practical experience, professional values, ethics and attitude. There are 3 categories of membership in MIA:•

Chartered Accountant

•

Licensed Accountant

•

Associate member

In Malaysia, the word "Accountant" is protected. This is provided for under provisions of the Accountants Act 1967 which state that no one can hold himself out or practice as an accountant unless he is registered as a member of MIA. So, to become one of the members, I have to obtain not less than 3 years relevant practical working experience in areas related to accounting. One of the best places to get such experience is in one of the audit firms. To be an accountant, we need critical and analytical skills plus the ability to work independently. We also need to be able to work in a team and communicate effectively. Accountants usually have their busy periods so we need to know how to manage my time properly to meet deadlines. Three years working experience is not a long period because the work that given by them, have to finished on time and I think in performing the job, also need a high

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INDUSTRIAL TRAINING REPORT CPL & CO efficiency and effectiveness in carrying the task especially doing accounts and audit clients accounts. The practical experience part of the qualifying process is intended to facilitate the development and direct application of professional knowledge, professional skills and professional values, ethics and attitudes. The three months practical training was only an introduction to see and have experience in conducting the task given by them. The really have the clear picture what is auditing, as an accountant we have to work in audit firm at least for three years so that we can equip ourselves with betterment of knowledge.

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9. 0 CON CL USI ON S

AN D

RE CO MME ND ATI ONS

I had gained so much of knowledge and experience during my industrial training. I had learnt how to handle and solve a difficult task that given to me. My knowledge in auditing and taxation is better now before I worked as a trainee. I applied whatever I studied theoretically into practically. Now I have the ability to prepare a full set of accounts for a company. After I had done accounts, I think it is very easy to conduct audit. Audit is basically the process of testing the accounts and who better to perform this than a person with the full knowledge of handling a full set of accounts. Think efficiently and effectively are the most important when I was in this area. Communications with the clients teach me to become more mature so that I will have the confidence when explaining something which relates to any matters. Besides, my public relations skills improved because during the three months I was give so many opportunities to correspond with clients and other stakeholders of the firm as well as stake holders of the clients. By the way, I had faced problems with my colleagues in the sense of miscommunication between us. They will not listen to what I’m trying to say. There are few situations that I came across when what I said was correct and what they said was wrong. I received the pressure to the maximum. At first, I can’t stand with my colleagues but that make me to take the first step to prove to them that I can work in such environment. I have also learned how handle job pressure, although I have to admit I did

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INDUSTRIAL TRAINING REPORT CPL & CO almost give up but I developed a self motivation skill within me which helped me push on. As my recommendation, it is good for the fresh graduates to gain knowledge and experience in any audit firm. Accounting is part of a professional job which has to be patience and have to gain more knowledge to be an efficient and effective accountant in the future undertaking. For the staff in the firm, I think that they should accept the trainee’s opinion. Not all the time, the trainees can make a mistake. Let them to learn from the mistakes that they have done. Do encourage them so that in future they will decide to work in the audit firm. Communication plays the important role in our daily routine. A more efficient vertical communication would definitely help in providing more effective guidance to the staff. On the other hand, the management in the firm must not overlook the needs to ensure each the employee is equipped with sufficient tools and supports to carry out their works efficiently.

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