In Malaysia, in addition to the statutory audit requirements under the Companies Act 1965, auditors for housing developers are also required to prepare another auditors' report to the Controller of Housing in accordance with the format stipulated in the Housing Developers (Housing Development Account) Regulations, 1991 (HDA Regulations).
Under the HDA Act and HDA Regulations, a Housing Development Account (HDA) shall be opened and maintained by the housing developers for each phase of the housing development undertaken by them. The housing developers shall pay all monies received from the buyers into the HDA.
No monies shall be withdrawn by the housing developers except for the purposes listed in Regulation 7 of the HDA Regulations, accompanied with specific supporting certificates or documents stated in the said Regulation. With the approval of the Controller, a housing developer may withdraw all monies remaining in the HDA when the housing development project has been completed, and a solicitor has certified that the obligations of the housing developers in respect of transfer of title under all sale and purchase agreements in that housing development project have been fulfilled.
An Auditor's responsibilities under the HDA Act include, among others, the requirement to examine the HDA and report on any fraudulent act or misappropriation of money in the HDA maintained by the housing developers.
HDA Regulations (Amendments) 2002
On 18 November 2002, the HDA Regulations were amended by the Minister of Housing and Local Government. Three of the new Regulations amended by the Minister required more stringent examination and reporting to be performed by auditors of housing developers, as follows:
Section 12A: Auditor to make annual report
Every auditor of a licensed housing developer shall, within six months after the close of the financial year of such developer, make an annual report to the Controller as to the HDA and shall state in every such report whether or not in her opinion:
a. each and every deposit and withdrawal recorded in the HDA are in accoudance with these Regulations;
b. the accounting and the records examined by her are properly kept ; and
c. if the auditor has called for an explanation or information from the officers or agents of the developer, such explanation or information has been satisfactory.
Section 12B: Auditor to lodge a report to the Controller
An Auditor of a licensed housing developer shall immediately, of she has found any fraudelent act or misappropriation of money in the HDA, lodge a report to the controller together woth a full statement and relevant documents relating to the act. Additionally, the auditor is bound to supply any further information or document if requested by the Controller.
Section 12C: Penalty
Any person who contravenes any provision under these Regulations shall be guilty of an offence and shall, on conviction, be liable to a fine not exceeding RM5,000 or to imprisonment for a term not exceeding 3 years or to both.
Key Issue arising from section 12A
As we can see, the amended Regulation 12A requires an auditor to check 100% of the deposits and withdrawals recorded in the HDA !!
Clearly therefore, auditors need to urgently considered the impact of the additiona resources that will need to be allocated to perform the audit engagement. Additionally we need to liase with the affected clients to ensure that the additional work can be scheduled in such a way that it does not conflict with the clients' requirements nor other audit engagements!
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