Ministry of Housing and Local Government

To:All Members in Practice

July 25, 2003 TEC/005/07/2003

AUDITOR’S REPORT ON HOUSING DEVELOPMENT ACCOUNT

PURSUANT TO HOUSING DEVELOPERS (HOUSING DEVELOPMENT ACCOUNT) (AMENDMENT) REGULATIONS 2002

As members may be aware, the Housing Developers (Housing Development Account) (Amendment) Regulations 2002 came into operation on December 1, 2002.

The amendments include, inter-alia, the following:

The title of the principal Regulations, “Housing Developers (Housing Development Account) Regulations 1991” is changed to “Housing Development (Housing Development Account) Regulations 2002”.

New regulations 12A, 12B and 12C are implemented.

2.New Regulations 12A, 12B and 12C

2.1The above-mentioned new Regulations are reproduced below for members’ information:

“12AEvery 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 Housing Development Account and shall state in every such report whether or not in his opinion –

(a)each and every deposit and withdrawal recorded in the account are in accordance with these Regulations;

(b)the accounting and the records examined by him 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.

12BAn auditor of a licensed housing developer shall immediately, if he found any fraudulent act or misappropriation of money in the Housing Development Account, lodge a report to the Controller together with a full statement and relevant documents relating to the act and the auditor is bound to supply any information or document if requested by the Controller.

12CAny 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 five thousand ringgit or to imprisonment for a term not exceeding three years or to both.”

2.2The new Regulations 12A and 12B impose onerous responsibilities on the auditors of housing developers and Regulation 12C appears to render any person who has been found guilty of a failure to perform his duties under these Regulations, i.e. which may include an auditor, liable to a fine not exceeding five thousand Ringgit or to imprisonment for a term not exceeding three years or to both.

2.3The Institute has been informed that pursuant to a meeting between MIA and the Ministry of Housing and Local Government, the Ministry has advised that:

(a)The Ministry agrees to further study Regulations 12 and 12A of the Housing Development (Housing Development Account) Regulations 1991. After taking into consideration the problems encountered by the parties affected by the new Regulations, the Ministry has agreed, as an interim measure, to accept the auditors’ reports submitted to the Ministry, that comply with either Regulation 12 or Regulation 12A until such time when a decision/amendment is made on the said provision.

(b)In regard to Regulations 12, 12A and 12B, if the auditor encounters problems with the developer, the auditor may invoke the powers under section 9(4) of the Housing Development (Control and Licensing) Act 1966, similar to the powers given to the Housing Inspectors under section 10 of the said Act.

(c)In regard to Regulation 12C, the term “any person” means any party who has been charged with responsibility under these Regulations. In other words, the auditor or the housing developer who is charged with responsibility to carry out the Regulations set out under the Housing Development (Housing Development Account) Regulations 1991, may be liable to legal action if a breach has occurred, but such action will be taken only after due investigation has been carried out. The Ministry will not take legal action against any person indiscriminately.

2.4Regulation12 of the Housing Development (Housing Development Account) Regulations 1991 provides that every auditor of a licensed housing developer shall in his report to the Controller under section 9(3) of the Housing Development (Control and Licensing) Act 1966 as to the annual balance sheet and profit and loss account of the licensed housing developer for whom the auditor is appointed, state whether or not, in his opinion, the monies in the Housing Development Account have been withdrawn in accordance with these Regulations.

In this regard, the Institute in 1993 had issued two specimen auditor’s report on the Housing Development Account for the purpose of Regulation 12, which had been prepared in consultation with the Ministry of Housing and Local Government.

The specimen auditor’s reports, modified to comply with the current reporting format, are attached to this Circular for members’ guidance:

(a)Appendix I sets out the standard auditor’s report where no exceptions were noted.

(b)Appendix II sets out the auditor’s report where exceptions were noted.

TAN SHOOK KHENG (Ms)

Secretary

Tec1/2003.Cir004.Housing Development Regulations

APPENDIX I

AUDITORS’ REPORT PURSUANT TO REGULATION 12 OF THE HOUSING

DEVELOPMENT (HOUSING DEVELOPMENT ACCOUNT) REGULATIONS 1991

EXAMPLE 1 : Where No Exceptions Are Noted

Controller of Housing

Model Development Sdn Bhd

(Incorporated in Malaysia)

Financial Statements for the Year Ended December 31, 200Y

In the course of our audit as external auditors of Model Development Sdn Bhd for the year ended December 31, 200Y, we have audited the Housing Development Accounts required to be opened and maintained pursuant to the Housing Development (Housing Development Account) Regulations 1991.

The audit involves the examination of a total of (number) withdrawals from the Housing Development Accounts maintained. The accounts maintained are:

(a)Taman SUN Phase 3A

(b)Taman SUN Phase 2

(c)Taman Oh Phase 5

Based on our work done, nothing has come to our attention that causes us to believe that the monies in the Housing Development Accounts have not been withdrawn in accordance with the Regulations.

Audit & Co

Chartered Accountants

City, Malaysia

Date

APPENDIX II

AUDITORS’ REPORT PURSUANT TO REGULATION 12 OF THE HOUSING

DEVELOPMENT (HOUSING DEVELOPMENT ACCOUNT) REGULATIONS 1991

EXAMPLE 2 : Where Exceptions Are Noted

Controller of Housing

Model Development Sdn Bhd

(Incorporated in Malaysia)

Financial Statements for the Year Ended December 31, 200Y

The audit involves the examination of a total of (number) withdrawals from the Housing Development Accounts maintained. The accounts maintained are:

(d)Taman SUN Phase 3A

(e)Taman SUN Phase 2

(f)Taman Oh Phase 5

Based on our work done, except for the withdrawals set out below, nothing has come to our attention that causes us to believe that the monies in the Housing Development Accounts have not been withdrawn in accordance with the Regulations.

Details of Withdrawals

Account

Amount Drawn

Details

of Cheque

Comments

Taman SUN Phase 3A / RM5,000 / BBB No. 007 / Advances made to a related company
Taman SUN Phase 2 / RM10,000 / BBB No. 006 / Withdrawals made to purchase
quoted investments

Audit & Co

Chartered Accountants

City, Malaysia

Date