Competency Framework

for Finance Function

in Public Interest Entities
J u n e 2 0 1 9
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 Table of Contents

Definitions 2

1.0 Introduction 3

2.0 Objective 5

3.0 Supporting the Leader of Finance Function 7

4.0 A High Performing Finance Function 11

5.0 Assessment of Finance Function 13

i) Finance Assessment Framework 14

ii) Finance Target Operating Model 18

iii) Indicators / Red Flag Diagnostics 20

6.0 Key Considerations 21

7.0 Recommendations 23

Appendices

Appendix 1: Indicators and Red Flags Diagnostic Analysis

Appendix 2: Finance Function Assessment

Acknowledgements
COMPETENCY FRAMEWORK FOR FINANCE FUNCTION IN PUBLIC INTEREST ENTITIES

Definitions
1 > Chief Financial Officer (CFO) 3 > Public interest entities
The most senior person involved in the finance Public interest entities refer to those entities that
function of an organisation whose primary role are currently specified under Part 1 of Schedule 1
normally includes being overall responsible for of the Securities Commission Malaysia Act 1993
managing all financial aspects of the organisation (SCMA). They include–
including assessing financial risks and controls,
managing budgets, preparing financial statements A public listed company or corporation
(a)
and providing financial information. CFOs are listed on the stock exchange;
normally authorised by the Board of Directors to A bank licensed under the Financial
sign the statutory declaration on the correctness of (b)
Services Act 2013;
the financial statements of an entity in accordance
with the Companies Act 2016 in Malaysia. An insurer licensed under the Financial
(c)
Services Act 2013;
A takaful operator licensed under the
2 > Finance Function (d)
Islamic Financial Services Act 2013;
Finance function includes planning, organising,
accounting for and managing an entity’s finances An Islamic bank licensed under the Islamic
(e)
Financial Services Act 2013;
and financial risks and controls, the preparation
of financial statements and external reporting A financial institution prescribed under
in compliance with accounting standards and section 212 of the Financial Services Act
(f)
relevant laws and regulations, and involvement in 2013 or section 223 of the Islamic Financial
strategy development and execution, performance Services Act 2013;
monitoring and communication with stakeholders. A development financial institution
(g) prescribed under the Development
Financial Institutions Act 2002;
A holder of a Capital Markets and
Services Licence for the carrying on
(h) of the regulated activities of dealing in
securities, dealing in derivatives or fund
management;
An exchange holding company approved
(i)
under the securities laws;
An exchange approved under the securities
(j)
laws;
A central depository approved under the
(k)
securities laws;
A clearing house approved under the
(l)
securities laws;
A self-regulatory organisation recognised
(m)
under the securities laws;
A private retirement scheme administrator
(n)
approved under the securities laws;
A trade repository approved under the
(o)
securities laws; and
The Capital Market Compensation Fund
(p) Corporation.

2
 1.0
Introduction
 COMPETENCY FRAMEWORK FOR FINANCE FUNCTION IN PUBLIC INTEREST ENTITIES

1.0 Introduction
The role of finance functions is rapidly evolving With these perspectives in mind, MIA posits that
and being redefined to meet the increasing one of the key factors in facilitating the growth
expectations of stakeholders and as such, CFOs of the economy is by strengthening the quality
are simultaneously challenged to drastically of financial reporting that remains as one of the
change their traditional finance processes and central basis of decision making in formulating
operational support models in an effort to deliver and driving strategy, shaping the financial profile
faster, more accurate and more insightful analysis as well as creating value for a company. To
and reporting whilst managing risk and reducing achieve this, a company needs to strengthen its
cost. finance function by equipping its human capital
with professionals that have the requisite skills
These new challenges demand a readiness and expertise not only at the technical and
from CFOs and their teams to take a leading, operational level but also at the strategic and
as opposed to an advisory role within strategic management level. A competency framework will
decision making. It sees the CFO playing a serve as a source of reference and impetus in
much more dynamic and facilitative role, moving sharpening competencies of staff and enhancing
from static and rigid processes and controls to organisational capabilities in meeting future
adaptive, agile and resilient models which require challenges.
orchestration rather than mere execution and
control. This entails a need for greater support
to the CFO to enable the execution of the CFO’s
responsibilities efficiently.

This Competency Framework focuses on the role

of the finance function in public interest entities
(PIEs). The principles put forth and matters
deliberated may also be applicable in varying
degrees to other entities including small and
medium enterprises. Application for such other
entities should be done with the understanding
that the discussion in this Competency
Framework is focused on the finance function of
PIEs.

In past discussions between MIA and fellow

regulators, one of the areas identified as a
concern is the weakness of the finance function
among some listed entities which resulted in
substandard quality of financial reporting. For
these entities, greater investment is needed in
the finance function and less reliance on auditors
to address presentation and disclosures in the
financial statements. For a high performing
finance function of a PIE, it is imperative to
look at the quality of the finance staff and their
accounting systems, regardless of size and
operations.

4
 2.0
Objective
 COMPETENCY FRAMEWORK FOR FINANCE FUNCTION IN PUBLIC INTEREST ENTITIES

2.0 Objective
The objective of this Competency Framework is
to assist CFOs and stakeholders in assessing
and developing the effectiveness, efficiency
and competencies of finance functions befitting
organisations for the achievement of their desired
goals.

6
 1.0 3.0
Introduction
Supporting the
Leader of the
Finance Function
 COMPETENCY FRAMEWORK FOR FINANCE FUNCTION IN PUBLIC INTEREST ENTITIES

3.0 Supporting the Leader of the Finance Function

As the leader of the finance function, the CFO, In July 2018, the MIA issued the Competency
apart from having a duty under contract with Framework for Chief Financial Officers (CFOs)
the organisation that employs the CFO, is also in Public Interest Entities to serve as a reference
subject to the requirements under the Companies guide for companies, Audit Committees and
Act 2016. In addition, a CFO of a public entity CFOs in clarifying and defining the scope of
is required to comply with the Bursa listing work that CFOs in PIEs could be doing and
requirements and Capital Market Services Act the competency that is expected to go with it.
2007. To describe the roles of a CFO, that document
referred to a diagram by EY which outlines six
roles that represent the breadth of a CFO’s remit
as depicted in the Diagram 11 below.

Diagram 1:
The CFO’s contribution

th e Trus
i o n t o l a ce ting
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progress on decisions are
strategic goals to grounded in

UT
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external sound financial

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eg

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DEVE
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6 1
Provid

Developing Providing
and defining insight and
the overall analysis
ing insight

strategy 5 The CFO’s 2 to support

for your CEO and
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contribution
organisation other senior
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4 3
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enabling and initiatives in
executing finance that
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EN
ABLEMENT

1
The DNA of the CFO – The Disruption of the CFO’s DNA, Ernst & Young, 2016.

8
 MALAYSIAN INSTITUTE OF ACCOUNTANTS

The weightage of a CFO’s involvement in each

of the six areas will depend on the maturity and
motivation of that individual, the sector and scale
of the finance function and economic stability
which are all critical to effective leadership. An
effective finance function should be able to
support the CFO in discharging the 6 roles.

One of IFAC’s 5 key principles relating to the role

of CFOs is that the CFO should bring professional
qualities to their role and encourage ethical
behaviour and decision making throughout an
organisation to ensure sustainable value creation.
Strong ethical leadership and good governance
are prerequisites for sustainable value creation.
The finance function should support the CFO in
displaying and inculcating professionalism and
ethical behaviour in the organisation.

As stated in the Competency Framework for

CFOs in PIEs, whilst the 6 roles of CFOs remain
relevant, an updated research by EY in 2016
regarding the roles of CFOs revealed four forces
that are changing the expectation placed on
CFOs: digital; data; risk and uncertainty; and
stakeholder scrutiny and regulation. The impact
of these disruptions and the implications for
CFOs are included in Appendix 3. The finance
function needs to be equipped with the necessary
knowledge and skill sets in order to support the
organisation in addressing these disruptions. In
particular, digital skills are increasingly becoming
important for personnel in the finance function in
order to harness technology for greater efficiency
and to be better business partners by generating
valuable and timely insights for decision making.

9
COMPETENCY FRAMEWORK FOR FINANCE FUNCTION IN PUBLIC INTEREST ENTITIES

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10
 4.0
A High Performing
Finance Function
 COMPETENCY FRAMEWORK FOR FINANCE FUNCTION IN PUBLIC INTEREST ENTITIES

4.0 A High Performing Finance Function

The finance function is responsible for a wide • Leveraging the latest information technology
range of activities from bookkeeping and developments to take advantage of evolving
applying technical accounting knowledge for market opportunities.
external reporting to management reporting
and data analysis, providing insights for • Ability to function as an effective check and
stakeholders’ decision-making. Each of these balance on operations and as a gatekeeper to
tasks requires a certain depth of knowledge and uphold good governance.
typically the tasks are assigned to responsible
persons in the core finance function. In the ensuing sections, we explore 3 ways
to measure the effectiveness and efficiency
As organisations expect their finance functions of a finance function and to identify areas for
to develop to do more than just report the enhancement and development:
numbers, meeting these needs is a key priority a) Finance Assessment Framework
on the CFO’s agenda. Finance functions in many
b) Finance Target Operating Model
entities are evolving to become more efficient,
effective and a better partner to the business. At c) Indicators / Red Flags Diagnostics
the same time, stakeholders’ expectations of a
modern finance organisation are increasing.

As with CFOs, the skill sets of those in the

finance function can enable them to expand
their roles beyond financial management.
However, the finance function should maintain
the stewardship role, particularly on financial
management and compliance with regulatory
requirements. A high performing finance function
should also be able to demonstrate that controls
are in place to prevent window dressing and
other forms of creative accounting.

A high performing finance function should be

poised to focus more on driving innovation and
able to demonstrate the following capabilities:

• Strengthening strategy alignment, business

planning, performance reporting and
analytical capabilities.

• Empowering the organisation to help the

business make better and more informed
decisions based on the right information
delivered at the right time.

• Working at transforming data into

intelligence that enables actionable
decisions based on insightful reports that
highlight key performance measures
collected by multiple functions (such as
finance, risk, operations, human
resource and marketing).

12
 5.0
Assesment of
Finance Function
 COMPETENCY FRAMEWORK FOR FINANCE FUNCTION IN PUBLIC INTEREST ENTITIES

5.0 Assessment of Finance Function

i) Finance Assessment Framework
In looking at the key roles of a finance function this Competency Framework refers to PwC’s finance
assessment framework that highlights 3 major dimensions which include business insight, efficiency and
compliance and control as depicted in Diagram 2 2 below.

Diagram 2: PwC’s standard of

Finance Assessment Framework finance success

Business insight
• Strategy & planning
• Budgeting & forecasting
Going beyond improving efficiency in your • Business analysis
finance function; these are the key areas of • Performance improvement projects
• Tax planning
focus to build a finance function that’s truly
integral to the success of your business. Transactional efficiency
• Accounts payable
• Travel & expenses
• Credit management
• Customer billing
How do you balance the
• Accounts recievable
competing demands of • General accounting
insight, efficiency and Business • Financial/external reporting
insight • Management reporting
control?
Effective ways of
working with the Compliance & control
business to provide: • Treasury
> Valued business • Internal audit
partners • Process controls & compliance
> Sustainable business • Tax accounting & compliance
growth
> Relevant and timely
performance management
information

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operating have at

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Do you anis

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sin
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t

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Org

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Te
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H o hn olog
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Compliance & control
le v w w e l l d o y o u Improving task
How to balance sustainable erag performance in a timely and
cost without constraining the e t e c h n olo g y cost effective manner by:
business: > Simplifying processes enabled
> Optimise risk management by technology
> Stay flexible for future > Outsourcing and using shared
changes in regulation services for non-core activities

2
Breaking Away: How Leading Finance Functions are Redefining Excellence, ©2015 PwC Private Limited.

14
 MALAYSIAN INSTITUTE OF ACCOUNTANTS

Productivity improvements in the finance function need to be demonstrated across all of these 3 key
dimensions as explained below:

A. Business Insight
This key role focuses on the finance function’s ability to guide the business. It is demonstrated by
assessing factors including the proportion of finance effort spent on business partnering, time spent on
analysis vs. data gathering, and an assessment of the quality and impact of processes such as
budgeting and forecasting.

Business Insight enables the organisation to answer the following questions:

Role of the finance function - what is the role of finance and how do we contribute to value creation
within the business?

Business partner - are we providing the right business information to support decision making
and control?

Management information - does finance provide the appropriate management information to the
business to support their strategic objectives?

Stakeholder management - do we have a consistent and reliable model for managing our internal and
external relationships?

Tax and capital strategy - what is the most effective tax structure for the group and how do
we optimise capital allocation?

B. Efficiency
This key dimension analyses transactional processes using a range of key determinants including cost,
speed, quality and process complexity.

Efficiency enables the organisation to answer the following questions:

Value for money - Are our processes efficient and are we applying an appropriate and cost effective
resourcing model?

Benchmarking - How do the standards of efficiency we apply to our finance function compare to best
in class?

Transformation – What are the processes and technology best suited for the desired finance function
and how can the best practices of other organisations be implemented?

Automation - Are we making effective use of the technology available and automating those processes
and tactical spreadsheet solutions that do not require human intervention?

15
 COMPETENCY FRAMEWORK FOR FINANCE FUNCTION IN PUBLIC INTEREST ENTITIES

C. Compliance and Control

This key role examines the effectiveness of the controls framework, and the cost and efficiency of controls.
It is normally attributed to the people and technology. Internal audit has a role to play to supplement
management’s effort in assessing independently the effectiveness of the finance function.

Compliance and control enables the organisation to answer the following questions:

End to end control - Do we have clear understanding of end to end processes, ownership,
accountability and definition of roles/responsibilities?

Transparency - Do we know what is going on in the business and to what extent we can rely on the
numbers?

Governance - Are our internal policies, controls and code of ethics effective and are they fully
embedded within business processes?

Consistency - Is there a single version of the truth? Are data sets common?

D. Organisation, People and Technology

A high performing finance function has these It is also important that the finance staff have
three enabling dimensions that are integral a high level of integrity in executing their tasks.
in supporting the whole finance assessment Finance staff should possess the core values of
framework shown in Diagram 2: integrity and accountability to foster trust in an
organisation and be champions of a value-based
Organisation alludes to having the right ethical culture that goes beyond mere compliance
operating model in partnering with the business. with rules and regulations.
An illustration of an excellent organisation is
where the organisational structure is aligned with Technology looks at how well it is being
enterprise strategy and redundant structures are leveraged to help the business. Efficient
eliminated. There is adoption of shared services leveraging of technology is where there is
and centres of excellence as well as appropriate electronic workflow which enables process
use of outsourcing. Finance staff are organised to integration and strategic linkages such as
provide the most effective service delivery to the web-enabled linkages and embedded linkages
business. controls. Technology can also be deployed to
provide better quality information for decision
People focuses on having the right mix of talent making and to address risks of fraud (including IT
and capabilities. This can be facilitated by having fraud) through the use of artificial intelligence, big
clear, well-defined roles and responsibilities that data analytics and other digital technologies.
properly align skill-sets to the roles. Performance
measures are directly tied to company strategies
where incentive compensation structures are
aligned with performance and the management
of risk. It is also essential to create a knowledge-
sharing and continuous-learning environment.

16
 MALAYSIAN INSTITUTE OF ACCOUNTANTS

E. Relationship between Finance Function and CFO’s Contribution

In order to demonstrate how the role of CFOs contributes to the finance function, this Competency
Framework attempts to link between Figure 1: The CFOs Contribution and Figure 2: Finance Assessment
Framework. This is summarised in a table below which combines the 6 roles of a CFO and that of the 3
key dimensions of a finance function:

High performance
of finance function The CFO’s Contribution (Diagram 1)
(Diagram 2)

Business Insight • Trusting the numbers: Ensuring business decisions are

grounded in sound financial criteria.
• Providing insight: Providing insight and analysis to support
CEO and other senior managers.
• Development of business strategy: Developing and defining
the overall strategy for your organization.
• Communication to the external marketplace: Representing
the organization’s process on strategic goals to external
stakeholders.

Efficiency • Getting your house in order: Leading key initiatives in finance

that support overall strategic goals.
• Funding organizational strategy: Funding, enabling and
executing strategy set by CEO.

Compliance and Control • Getting your house in order: Leading key initiatives in finance
that support overall strategic goals.
• Communication to the external marketplace: Representing
the organization’s process on strategic goals to external
stakeholders.

By having good business insight in the The efficiency of the finance function contributes
organisation, business decisions are made positively towards the CFO’s role in leading key
with strong financial criteria which can be initiatives in finance that support overall strategic
used by a CFO to support the CEO and other goals.
senior managers. This ultimately contributes in
developing and defining the overall strategy of an The finance function is expected to increase
organisation. its support for strategic and operational
decision making in addition to fulfilling
Effective compliance and control by a finance traditional stewardship responsibilities relating
function enables a CFO to lead key initiatives in to governance, compliance and control, and
finance that support overall strategic goals. It business ethics.
helps to facilitate funding, enabling and executing
strategy set by CEO while representing the Appendix 1 highlights some of the common
organization’s process on strategic goals to indicators that signal inadequacy in the finance
external stakeholders. function.

17
 COMPETENCY FRAMEWORK FOR FINANCE FUNCTION IN PUBLIC INTEREST ENTITIES

ii) Finance Target Operating Model

Secondly, the Diagram 33 below, acts as another useful tool that enables a finance department to plot
where they are today and where they want to be in their transformation journey in two to three years.
The Finance TOM looks at 6 specific areas ranging from alignment of finance services with the business
strategy, through organisational and cultural needs, to specific process and system requirements.

BU finance reporting
Autonomous finance
Organisation Finance function directly into
functions, e.g. objective
in silos local mgmt/dotted
setting at BU level
line to centre

Finance vision agreed

Entirely internally Multiple agendas,
Services and aligned
focused cost centre mentality
with the business

Some centralisation
All processes are
Decentralised for low value,
Location internal and
processing high volume
decentralised
transactions

Reactive ad
People Scorekeeper Diligent caretaking
hoc analysis

Incompatible Multiple data models,

Standard
Technology sustems and tools/applications
consildation layer
data models and G/Ls

Disaggregated Low degree of

Business processes and standardisation and
Processes
unit (BU) specific responsibilities, automation (divisions/
multiple G/Ls geographies)

Diagram 3: KPMG’s Finance Target Operating Model (TOM)

In applying the model, the first essential step to they want to move the finance function based on
transforming the finance function is by defining a an assessment of prioritised requirements and
clear finance vision and strategy to design a fit-for- expected benefits. In that respect, a full-fledged
purpose TOM that will deliver this vision. This step finance transformation program may not always
is essential to allow the finance management team be necessary.
to be able to determine the scale and scope of its
finance ambitions clearly at the very beginning.
A finance leader/CFO can decide how far and fast

3
Being the Best: Inside the Intelligent Finance Function, © 2013 KPMG International

18
 MALAYSIAN INSTITUTE OF ACCOUNTANTS

Strong
alignment Central guidance Integrated finance Integrated
with central finance for BU implementation community finance function
(hard dotted line)

Finance is a business
Focus on Key influencer
partner of management Value driver
value management of stakeholders
and the board

Sourcing
Majority of
(central or external)
finance processing All financial processes Strategic sourcing/
of finance
are sourced in optimum locations SSCs optimised
support tasks
(central or external)
(i.e. finance systems)

Business
Insightful analysis Business partner
acumen and financial Constructive challenge
and comment
knowledge

Standard systems,
Standard data model, Standard tools
interface layer Central data model/
tools/applications, and applications,
and recommended systems
on multiple currencies on single occurence
data models

Recommendation for
Standardised processes Standardised processes
common methods, Standardised and
for low value, for financial
processes and optimised
high volume transactions management
reference data

In essence, a well-defined Finance TOM is able

to identify where the finance function needs to
acquire or develop new capabilities, knowledge
and/or resources in each of the 6 operational
areas to become a high performing finance
function.

19
 COMPETENCY FRAMEWORK FOR FINANCE FUNCTION IN PUBLIC INTEREST ENTITIES

The table below is an example on what a “world-class” finance function could look like.

Services Organisation People

Single finance vision and Global finance function Global finance teams
strategy aligned to business
Clear roles, responsibilities Global finance teams
Finance as a business partner and accountabilities competencies
Focus on value drivers Transparency and objectivity Commercial challenge
Single version of the truth Global objectives setting Highly motivated and
enthusiastic staff
Strategic and operational Global training and mobility
decision support Global talent management
Global governance framework
Leads communication of Global succession planning
performance to stakeholders

Process Technology Location

Standardised policies, Single consolidation/ GL/ COA Sourcing aligned globally

precedures and controls
Common reports, data models Processes in optimum
Integrated processes and and reference data locations
common data models and
reference data Single ERP (one instance) Global sourcing governance
framework
Standardised and automated Global systems governance
processes framework Processes/ controls enable
sourcing
Integrated performance Single sourcing strategy [M&D]
management (including CP&M) People skills enable sourcing
Scaleable and flexible
Complex scenarios [PB&F] System(s) enable sourcing

Scaleable and flexible

iii) Indicators / Red Flags Diagnostics

Thirdly, the effectiveness and efficiency of a Refer to Appendix 1 for a list of indicators or red
finance function can be assessed by comparing flags that characterise a finance function that
its performance to a checklist of indicators or red needs improvement.
flags that can be used to diagnose any weakness
or potential problems affecting the finance
function.

20
 6.0
Key Considerations
for Board Members
and CFOs
 COMPETENCY FRAMEWORK FOR FINANCE FUNCTION IN PUBLIC INTEREST ENTITIES

6.0 Key Considerations for Board Members and CFOs

By utilising the 3 tools, the Board, CFO or relevant • To what extent is the organisation willing
personnel of any organisation can assess whether to invest in further improving the efficiency
its finance function is fit for purpose. These key and effectiveness of its finance operations,
considerations may include the following: and in the broader finance function
transformation?
• What are the strengths, weaknesses and
critical capabilities across the core finance • To what extent has the finance function
process areas and activities? been successful in addressing business
needs beyond basic transaction processing
• How is the finance function’s role evolving in and financial reporting and control activities
the development and execution of new in areas such as strategic and forward-looking
business strategies? business performance, decision support
and risk management activities?
• What changes to finance operating models,
controls and systems are expected in the
next two years? What are the drivers for these
changes, which of these changes will present
the biggest challenges, and how can the
finance function overcome them?

22
 7.0
Recommendations
 COMPETENCY FRAMEWORK FOR FINANCE FUNCTION IN PUBLIC INTEREST ENTITIES

7.0 Recommendations
In utilising the 3 ways to analyse a finance iii) Tool 3 - Indicators / Red Flags Diagnostics
function, a clear assessment can be made Lastly, an organisation should look at a set
of the strengths, weaknesses and areas for of indicators or potential red flags such as the
improvement, while providing a baseline or one shown in Appendix 1 to detect potential
benchmark from which to measure progress. This problems that may not be readily apparent
allows the finance function to assess whether from the reports and outputs generated by
they are operating optimally and are meeting the the finance function unless further probing
overall objectives of the business. is done to identify issues and find the root
cause of these issues. This can act as a useful
In summary, a CFO can assess the Competency monitoring mechanism for the finance function.
and effectiveness of its finance function by using
the following tools: The aforementioned tools can be operationalised
as illustrated in Appendix 2.
i) Tool 1 – Finance Assessment Framework.
By applying this framework, the finance One of the most important enabling factors for a
function can act as a proactive partner in the high performing finance function is the supply of
strategic planning and management of the talent. Therefore, it is critical to have a benchmark
enterprise to redefine itself as service- that outlines each competency required by
oriented, business-focused and a provider of individuals working in the finance function of a PIE
value-adding services. that would result in a competent finance function.

Accordingly, the finance function will also As a regulatory body, MIA is also responsible
be able to understand the requirements of for developing and enhancing the value of its
their stakeholder groups and align their members by promoting and facilitating continuous
operating model or attributes (processes, learning to equip them with relevant knowledge
organisation, people and technology) to meet and skills that meets the need of the industry.
those requirements. For example, to keep the finance function
apprised of the latest developments in technical
ii) Tool 2 – Finance Target Operating Model pronouncements and laws and regulations, there
(TOM). is a need for continuing education. Continuous
Applying the Finance Target Operating learning and development are also needed as
Model enables finance leaders to plot where the detailed knowledge and skills required by
they are today and where they want to be personnel in a finance function will change over
in their transformation journey in the next time due to the evolution of the markets and
few years. This exercise provides an industries in which they operate. In this respect,
indication of the requirements needed to MIA plays an important role in providing relevant
achieve those targets which are usually trainings that will enhance the talent within a
driven by what the finance function ultimately finance function and capture all levels of roles
produces such as financial reports and related that include the technicians, accountants, finance
financial management services. managers, controllers and CFOs.

The trainings can be matched against the

expected duties and responsibilities assumed by
each role within the finance function. However,
these individuals would first have to acquire a
certain level of technical qualification.

References:
i. The DNA of the CFO – The Disruption of the CFO’s DNA, EY, 2016.
ii. Breaking Away: How Leading Finance Functions are Redefining Excellence, ©2015 PwC Private Limited.
iii. Being the Best: Inside the Intelligent Finance Function, © 2013 KPMG International

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Appendices
 APPENDIX 1 > Page 1
COMPETENCY FRAMEWORK FOR FINANCE FUNCTION IN PUBLIC INTEREST ENTITIES

Indicators and Red Flags Diagnostic Analysis

A Financial Reporting:
1. Deviation greater than 10% between announced net profit in unaudited financial statements
and the net profit in the audited financial statements.
2. Timeliness of closing of financial statements.
Best practices recommended by the following organisations:
- KPMG: 3-5 days
- PwC: within 5 business days
- CIMA: within 5 working days of period end
- Crowe Horwath: 3-5 days
3. Insufficient time and resources dedicated to financial reporting.
4.
Numerous significant amendments between the first draft financial statements and the
audited set of financial statements.
(a) Significant late adjustments/reclassifications by the reporting entity
(b) Significant audit adjustments/reclassifications
(c) Significant unadjusted misstatements as a percentage of profit after tax/financial
statement line item.
5. First draft of the financial statements not being reviewed by the CFO before giving to
the auditors.
6. Incomplete disclosures in draft financial statements before audit.
7. Non-compliances with Bursa listing requirements and other regulations.
8. Adjustments are mostly done in Quarter 4. Significant write downs or losses being
recognised in Quarter 4 as compared to other quarters.
9. Policies and disclosures come under scrutiny by regulators.
10. Lack of insight shared with management arising from analysing operational results.
11. Tax investigation audit by the Inland Revenue Board of Malaysia.
12. Payment of tax penalty levied by the Inland Revenue Board.
13. Evidence of window dressing and other forms of creative accounting.

B. Compliance and control:

14. Reconciliations are not conducted frequently.
15. Numerous significant internal control weaknesses identified.
16. Recurring internal control weaknesses remain outstanding.
17. Late audit confirmation replies.
18. Existence of significant fraud.
19. Not developing staff competencies.
20. Not embracing technology for operational efficiencies.

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MALAYSIAN INSTITUTE OF ACCOUNTANTS

C. Behavioural:
Additional (beyond compliance)
21. High staff turnover in the finance function.
22. No succession planning

D. Managing stakeholders:
23. No profit warning before an incident happens.
24. Analytics are not used for effective assessment purposes.
25. Inability to assist Board and CEO to manage the numbers.

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COMPETENCY FRAMEWORK FOR FINANCE FUNCTION IN PUBLIC INTEREST ENTITIES

Finance Function Assessment

Tool 1 • Finance Assessment Framework
Direction: 1. To describe your present situation on the respective areas being asked and identify areas
of improvement.
2. To state the action points to be taken in addressing the areas of improvement

Present situation
Action points for
Questions and areas for
improvement
improvement

A. Business Insight: Indicates the finance function’s ability to guide the business

1. Role of the finance function - what is the role

of finance and how do you contribute to value
creation within the business?

2. Business partner - are you providing the right

business information to support decision
making and control?

3. Management information - does finance provide

the appropriate MI to the business to support
their strategic objectives?

4. Stakeholder management - do you have a

consistent and reliable model for managing your
internal and external relationships?

5. Tax and capital strategy - what is the most

effective tax structure for the group and how do
you optimise capital allocation?

B. Efficiency: Analyses transactional processes

6. Value for money - Are your processes efficient

and are you applying an appropriate and cost
effective resourcing model?

7. Benchmarking - How do the standards of

efficiency you apply to your finance function
compare to best in class?

8. Transformation - What can you learn from other

organisations?

9. Automation - Are you making effective use of

the technology available and automating those
processes and tactical spreadsheet solutions
that do not require human intervention?

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MALAYSIAN INSTITUTE OF ACCOUNTANTS

Present situation
Action points for
Questions and areas for
improvement
improvement

C. Control and Compliance: Examine the effectiveness of control framework

10. End to end control - Do you have clear

understanding of end to end processes,
ownership, accountability and definition of roles /
responsibilities?

11. Transparency - Do you know what’s going on in

the business and to what extent we can rely on
the numbers?

12. Governance - Are your internal policies and

controls effective and are they fully embedded
within business processes?

13. Consistency - Is there a single version of the

truth? Are data sets common?

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COMPETENCY FRAMEWORK FOR FINANCE FUNCTION IN PUBLIC INTEREST ENTITIES

Finance Function Assessment

Tool 2 • Finance Target Operating Model
Direction: 1. To plot your organisation’s current position between the continuums for each of the focus
areas listed.
2. To plot the future position desired by your organisation between the continuums for each of the
focus areas listed.
3. To plan future actions to achieve the future position desired.

Focus Area Minimum

BU finance
Autonomous finance
Finance reporting directly
functions, e.g.
Organisation function into local
objective
in silos mgmt/dotted line
setting at BU level
to center

1 Current/[date]

Future/[date]

Action Plan

Entirely Finance vision

Multiple agendas,
Services internally agreed and aligned
cost centre mentality
focused with the business

Current/[date]
2

Future/[date]

Action Plan

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MALAYSIAN INSTITUTE OF ACCOUNTANTS

Optimum

Strong alignment
Central guidance for BU Integrated finance Integrated finance
with central finance
implementation community function
(hard dotted line)

Focus Finance is a business

Key influencer of
on value partner of management Value driver
stakeholders
management and the board

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COMPETENCY FRAMEWORK FOR FINANCE FUNCTION IN PUBLIC INTEREST ENTITIES

Focus Area Minimum

All processes Some centralization

Decentralised
Location are internal and for low value,
processing
decentralized high volume transactions

3 Current/[date]

Future/[date]

Action Plan

Reactive ad
People Scorekeeper Diligent caretaking
hoc analysis

Current/[date]
4
Future/[date]

Action Plan

Incompatible Multiple data models, Standard

Technology systems and data tools/ applications consolidation
models and G/Ls layer

5 Current/[date]

Future/[date]

Action Plan

Disaggregated Low degree of

Business unit processes and standardization and
Processes
(BU) specific responsibilities, automation (divisions/
multiple G/Ls geographies)

6 Current/[date]

Future/[date]

Action Plan

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MALAYSIAN INSTITUTE OF ACCOUNTANTS

Optimum

Sourcing Majority of finance

(central or external) processing are All financial processes Strategic sourcing/
of finance support tasks sourced in optimum locations SSCs optimized
(i.e. finance systems) (central or external)

Business acumen Insightful analysis

Constructive challenge Business partner
and financial knowledge and comment

Standard systems,
Standard data models, Standard tools and
interface layer Central data
tools/ applications, applications,
and recommended model/systems
on multiple ocurrences on single ocurrence
data models

Recommendation for Standardized

Standardized
common methods, processes for low Standardized
processes for
processes and value, high volume and optimized
financial management
reference data transactions

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COMPETENCY FRAMEWORK FOR FINANCE FUNCTION IN PUBLIC INTEREST ENTITIES

Finance Function Assessment

Tool 3 • Gaps/Red Flags Diagnostics
Direction: 1. To assess and indicate current performance for each question.
2. To identify and list root cause and action plan.

A. FINANCIAL REPORTING:

1. Deviation between announced net profit in unaudited financial statements and the net profit in the audited
financial statements.

2. Timeliness of closing of financial statements.

3. In respect of financial reporting, is there adequate allocation of:

a) Time?
b) Resources?

4. Adjustments or proposed adjustments between the first draft financial statements and the audited set of
financial statements

a. Late adjustment/ reclassifications

Adjustment(s) impacting consolidated profit after tax

Corresponding impact to assets

Corresponding impact to liabilities

Corresponding impact to equity

Total adjustment(s)

% of total adjustment(s) to consolidated profit after tax: [%]

Reclassification(s) to consolidated statement of profit or loss

Reclassification(s) to consolidated statement of financial position

Reclassification(s) to consolidated statement of cash flows

Reclassification(s) to consolidated statement of changes to equity

Total reclassification(s)

% of total reclassification(s) to consolidated profit after tax: [%]

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MALAYSIAN INSTITUTE OF ACCOUNTANTS

Results Root cause and action plan

≤10% >10%

3-5 6-10 11-15 >15

working days working days working days working days

Debit Credit
Number
(RM ‘000) (RM ‘000)

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COMPETENCY FRAMEWORK FOR FINANCE FUNCTION IN PUBLIC INTEREST ENTITIES

4. Adjustments or proposed adjustments between the first draft financial statements and the audited set of
financial statements (cont’d)

b. Audit adjustments/reclassifications

Adjustment(s) impacting consolidated profit after tax

Corresponding impact to assets
Corresponding impact to liabilities
Corresponding impact to equity
Total adjustment(s)
% of total adjustment(s) to consolidated profit after tax: [%]
% of total adjustment(s) to consolidated revenue: [%]

Reclassification(s) to consolidated statement of profit or loss

Reclassification(s) to consolidated statement of financial position
Reclassification(s) to consolidated statement of cash flows
Reclassification(s) to consolidated statement of changes to equity
Total reclassification(s)
% of total reclassification(s) to consolidated profit after tax: [%]
% of total reclassification(s) to consolidated revenue: [%]

c. Uncorrected/unadjusted misstatements
Adjustment(s) impacting consolidated profit after tax
Corresponding impact to assets
Corresponding impact to liabilities
Corresponding impact to equity
Total adjustment(s)
% of total adjustment(s) to consolidated profit after tax: [%]
% of total adjustment(s) to consolidated revenue: [%]

Reclassification(s) to consolidated statement of profit or loss

Reclassification(s) to consolidated statement of financial position
Reclassification(s) to consolidated statement of cash flows
Reclassification(s) to consolidated statement of changes to equity
Total reclassification(s)
% of total reclassification(s) to consolidated profit after tax: [%]
% of total reclassification(s) to consolidated revenue: [%]

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MALAYSIAN INSTITUTE OF ACCOUNTANTS

Results Root cause and action plan

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 APPENDIX 2 > Page 11
COMPETENCY FRAMEWORK FOR FINANCE FUNCTION IN PUBLIC INTEREST ENTITIES

5. The timing when the CFO reviews the financial statements.

6. Disclosures in the draft financial statements completed before submission to the auditors.

7. Were there any instances of non-compliance with Bursa listing requirements?

8. Significant write downs or losses being recognised in Quarter 4 as compared to other quarters.

9. Policies and disclosures come under scrutiny by regulators.

10. Were there sharing of insights with management arising from analysing operational results?

11. Was there any recent tax investigation audit by the Inland Revenue Board of Malaysia.

12. Has there been any payment of tax penalty levied by the Inland Revenue Board?

13. Were there instances of window dressing and other forms of creative accounting?

B. COMPLIANCE AND CONTROL:

14. Reconciliations were not conducted on a timely basis.

15. Numerous significant internal controls weaknesses identified.

16. Recurring weaknesses in internal controls remain outstanding.

17. Timeliness of audit confirmation replies.

18. Existence of significant fraud.

19. Not developing staff competencies.

20. Not embracing technology for operational efficiencies.

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MALAYSIAN INSTITUTE OF ACCOUNTANTS

Results Root cause and action plan

a. Before passing the first draft to the auditors.

b. After audit adjustments have been finalised.
c. After obtaining clearance by auditors on the
financial statements.

Yes/No

Yes/No

No. of write downs or losses:

[Description of findings by regulators]

Yes/No

Yes/No

Yes/No

Yes/No

Yes/No

No:

No. of carried forward internal

control points that are not cleared:

No. of days from year end within (select one):

• 30 days
• 45 days
• 2 months
• >2 months

No. of occurrences:

No/Types of staff training for

finance personnel development

Describe the use of technology for operational efficiencies?

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COMPETENCY FRAMEWORK FOR FINANCE FUNCTION IN PUBLIC INTEREST ENTITIES

C. BEHAVIOURAL: ADDITIONAL (BEYOND COMPLIANCE)

21. High staff turnover in the finance function.

22. Is there succession planning in the organization?

D. MANAGING STAKEHOLDERS

23. Was there any profit warning before a significant incident?

24. Is analytics used for effective assessment purposes?

25. Is there any indication that the finance function is unable to assist
Board and CEO to manage the numbers at the end?

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MALAYSIAN INSTITUTE OF ACCOUNTANTS

Results Root cause and action plan

Annual staff turnover in finance function:

Yes/No

Yes/No

Yes/No

Yes/No

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 APPENDIX 3 > Page 1
COMPETENCY FRAMEWORK FOR FINANCE FUNCTION IN PUBLIC INTEREST ENTITIES

The Four Forces Disrupting the Roles of CFOs3

Disruptions Impact Considerations for CFOs

Digital Finance leaders need to understand • Re-evaluate underlying assumptions

digital and smart technologies to deliver regarding business models, pricing,
against their critical strategic priorities. revenue streams and the related
financial models.
• Build the organisation’s confidence
and capability to navigate the digital
economy.

Data Delivering the data and advanced • Make data integral to the business
analytics for business intelligence and strategy.
management information will be a
• Align analytics delivery and business
critical capability for tomorrow’s finance
requirements.
function.
• Instil the right leadership and culture.

Risk and Strategic, reputational, regulatory • Think beyond preventable risks.

uncertainty and cyber risks are growing parts of • Address risk directly.
the finance remit particularly in larger
organisations. • Make investments in key risk talent.

Stakeholder Demands of stakeholders are often in • Improve the skills in managing

scrutiny and conflict and CFOs increasingly have to relationship including with investors,
regulation juggle the requirements of regulators boards, the CEO and other members
with the demands of investors and other of the C-suite.
stakeholders. • Prioritise the stakeholder relationships
that are most important.
• Communicate proactively.
• Tell a consistent value story.

3
Being the Best: Inside the Intelligent Finance Function, © 2013 KPMG International

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 MALAYSIAN INSTITUTE OF ACCOUNTANTS

Acknowledgements
The Competency Framework for Finance Function by the PAIB committee and through contribution
in Public Interest Entities was prepared by the MIA from two focus group discussion and feedback
Technical team under the supervision and review from stakeholders.

Members of the Professional Accountants in Business Committee

1 Jeremy Nasrulhaq (Chairman)

2 Aznorashiq bin Mohamed Zin
3 Chari Thandalam Veeravalli Thirumala
4 Dato’ Dr. Lukman bin Ibrahim
5 Dato’ Merina Abu Tahir
6 Datuk Zaiton Mohd Hassan
7 Dr. Ng Boon Beng
8 Mazhairul Jamaludin
9 Radha K Vengadasalam
10 Shyamala Dhoraisingam Samuel
11 Teresa Chong
12 Yeo Tek Ling

Composition of Roundtable Discussions

1 Dato’ Mohammad Faiz Azmi (Chairman)

2 Chua Wai Hong

3 Datuk Zaiton Mohd Hassan
4 Dato’ Merina Abu Tahir
5 Datuk Mohd Nasir Ahmad
6 Dr. Nurmazilah Mahzan
7 Dr. Ng Boon Beng
8 Jeremy Nasrulhaq
9 Mazhairul Jamaludin
10 Tan Lay Khoon
11 Venkkat Ramanan

12 Wong Kay Yong

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COMPETENCY FRAMEWORK FOR FINANCE FUNCTION IN PUBLIC INTEREST ENTITIES

Composition of Two Focus Group Discussions held at the Malaysian Institute of Accountants

1 Chin Wui Choong

2 Chong Peng Khang

3 Dr. Mary Ann Harris

4 Irene Sin May Lin

5 Khalijah Ismail

6 Kong Chee Khoon

7 Low Kong Choon

8 Mohd Nizam Abdul Wahab

9 Nik Muhammad Hanafi

10 Nor Fadhilah Mohd Ali

11 Shahrulanuar Ishak

12 Shen Yan Chao

13 Shirley Chan

14 Tan Mon Swang

15 Wong Chui Fen

16 Zain Azrai bin Zainal Abidin

FEEDBACK FROM OTHERS

1. Association of Chartered Certified Accountants

2. Raja Nazim Raja Nazuddin

Staff of the MIA Professional Practices and Technical Division

1. Simon Tay Pit Eu
2. Sukhpal Singh Kaur Singh
3. Zulfa Abdul Rahman
4. Monika Patel

44
Malaysian Institute of Accountants
Dewan Akauntan
Unit 33-01, Level 33
Tower A, The Vertical
Avenue 3, Bangsar South City
No. 8, Jalan Kerinchi,
59200 Kuala Lumpur
Malaysia