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The accountant - Summer 2019


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  • 2 Aug 2019 12:00 | Deleted user
    The Accountant – Sustainability. Summer 2019 (MIA Publication)
    In my first address, as President of the MIA, to our members and our profession please allow me to express my happiness and gratitude for my election as President. This has constituted one of my dreams and ambitions for a number of years and I have worked hard for this to happen. Being elected President is an honour as it is a privilege to lead the Institute comprising the members of one of the most important professions in Malta. I will do my best to be a President of which our members and all professional accountants will be proud. I pledge my strong and total commitment to do everything I can to protect and elevate our profession.
    As a starting point, I would like to thank outgoing President William Spiteri Bailey for leading the Institute and the Accountancy profession through challenging times in the past two years. My congratulations and sincere gratitude to the outgoing President for the significant work he carried out. Everyone mentions William’s efforts to stay close to our members by visiting accounting and audit firms together with other places of employment where our members are employed, as one of his greatest achievements. 
    Going forward, throughout the next few terms we will focus on consolidating the MIA’s role, stature and relevance with a long-term view. We will continue building on the work carried out by subsequent MIA Presidents throughout the recent years. I have already declared a number of times that gone are the days when strategy and direction are modified every two years as soon as a new President is elected. Indeed, we want a programme spanning a number of years and a number of Presidents where the long-term strategy to be adopted is consistent and sustainable. 
    There are five core pillars underpinning the MIA’s strategy in the coming years and expect me to focus on these on a daily basis throughout my term:
    • Ensuring the MIA is home to all qualified professional accountants;
    • Elevating quality and raising standards within our profession; 
    • Working with all stakeholders to enhance the education and qualification process; 
    • Fostering collegiality and comradeship among accountants;
    • Striving to make the Institute’s voice heard, loud and clear, on issues which are important for the profession but also on national strategic issues. 
    The Institute belongs to all accountants and we definitely need broader representation of those qualified and operating as accountants in the Maltese jurisdiction. We want to continue conveying this message in a strong manner; the Institute is not a club solely for the largest firms. We want every single professional accountant, who behaves well on a professional level, to be a member of the Institute. But only fully qualified accountants should be considered as, and actually call themselves, professional accountants. The Institute will work relentlessly to achieve this latter objective.
    The MIA has a duty to keep raising the quality of accountancy profession. Our profession is constantly under the spotlight. We are being told by financial services regulators and by banks that we need to be stricter with client onboarding, monitoring of clients’ business and acting promptly and decisively when it comes to inadequate client behaviour. Whilst we might feel this is unjust criticism, I am sure we can and we should do better. We need to safeguard the reputation of our jurisdiction by enhancing our procedures; our profession is considered one of the most important gateways to business in Malta and hence we must behave accordingly taking cognisance of the stature of our profession. As an Institute we will continue working with the profession’s regulator to push the bar higher up, as we need to strive to do the right thing professionally in all circumstances, even if this entails a cost. 
    The Institute will continue to strengthen its efforts in the areas of education and qualification processes. The quality and quantity of accountants in the marketplace is a fundamental aspect for the profession. We need to seek ways of making it easier for expatriate professional accountants to relocate to Malta. But, fundamentally, we have to enhance the quality of accountants qualifying in Malta by giving our input on the level and rigour of technical material covered in the different qualification routes. The attractiveness of the profession needs continuous reinforcement as we need to attract the best students and youngsters. Our profession is a successful profession; we should not be struggling to attract the best crop for our profession. 
    The MIA will dedicate more time and effort to reinforcing a sense of collegiality and comradeship among accountants. In this area we need to function better as one profession, sometimes going beyond self-interest. The Institute has taken a number of initiatives which clearly demonstrate how well we can work as one profession. But expect more in this space as we will be taking a number of actions to address some key issues we are facing. The profession has a big role to play nationally, and we are committed to continue investing to give the Institute an influential voice on issues of strategic importance. The Institute deserves to have a voice on all relevant national issues, not simply on taxation matters. We have taken a number of initiatives in this area in the past few years; but the Institute is expected to pursue and indeed enhance its input and interaction with the relevant stakeholders. Our voice must be strong, technical, apolitical and effective– a voice which stakeholders look forward to hearing. We are in the process of taking a few decisions which might not be very popular or perhaps might not be understood. We work relentlessly to promote the Institute and to safeguard its viability. We would really require your trust and support throughout the coming months; but please do come forward with suggestions to help the Institute improve and grow further.
  • 2 Aug 2019 12:00 | Deleted user
    The Accountant – Sustainability. Summer 2019 (MIA Publication)
    President’s Visits
    William Spiteri Bailey in his capacity as former President of the Malta Institute of Accountants visited various firms to discuss the aspirations of the professionals within the company between the month of May and June 2019. The President stressed the importance of ethical practice and upholding integrity as a core value as well as gave thanks to all for their contribution to the profession.
    The visits are initiatives taken by the Institute to strengthen its role and increase stakeholder engagement in various levels of its operation and representation.

    Accountants donate €8,000 to Beating Hearts Malta
    The Malta Institute of Accountants raised €8,000 for Beating Hearts Malta at its annual Member social event in June. The Institute drove a successful donations campaign in the month leading to the social evening and organised raffles and an exhibition during the event itself to collect funds for the non-profit organisation. MIA President William Spiteri Bailey presented BHM President Prof. Victor Grech with the generous donation of €8,000. Members raised €5,266 during the fundraising campaign which the Institute then topped up by a further €2,734. The start-of-summer event by the Institute of Accountants is an annual occasion for members in the profession to meet in an informal environment. Some 700 accountants were treated to an enjoyable evening hosted by MIA. Every year, the Institute of Accountants takes the opportunity to raise members’ awareness about a noble cause and encourage them to contribute towards it – this year BHM was selected Beating Hearts Malta is the association for adults and children born with Congenital Heart Defects, the most common malformation present at birth. The donation by MIA supports a project to co-fund a dedicated cardiac magnetic resonance imaging (MRI) machine at Mater Dei hospital.
    The Malta Chamber of Commerce and the Malta Institute of Accountants commit to collaborate in the future.

    On the 9th July, a Cooperation Agreement was signed between the Malta Chamber of Commerce, Enterprise and Industry and the Malta Institute of Accountants which will see both organisations cooperate on matters of national economic policy of common interest to the business community and accounting profession. This was William Spiteri Bailey’s last achievement in his capacity as President of the Institute.
    The Malta Chamber of Commerce, Enterprise and Industry and The Malta Institute of Accountants have signed a memorandum of understanding, intended to provide a structure for collaboration between the two bodies in the future. By virtue of the agreement, which was signed by the Malta Chamber of Commerce President Perit David Xuereb and the Malta Institute of Accountants President Mr William Spiteri Bailey, the two organisations agreed to cooperate actively in the interest of the Maltese economy, and the upholding of business ethics and the promotion of best practice amongst members of both organisations. Speaking at the signing, President Perit Xuereb said that the Malta Chamber of Commerce was constantly seeking to strike agreements with reputable professional bodies in the interest of the Maltese economy where pooling of resources provides new synergies such as in the case of teaming up in the accounting profession. This agreement is one such way of securing a direct line of communication with one of the economy’s most important professions.
    Mr William Spiteri Bailey, the former President of the Malta Institute of Accountants said that the cooperation agreement would actively see both organisations cooperate on matters of national economic policy of common interest to the business community and accounting profession. The two organisations would in turn engage in a meaningful dialogue and seek to support each other’s stands on key common issues. The memorandum of understanding provides a platform for cooperation in matters in which either party has expertise. The two organisations also commit to cooperate towards facilitating the dissemination of information, opportunities in education, and life-long-learning for their membership bases. On a reciprocal basis, the organisations promise to collaborate in joint projects that are aimed at supporting the business of members on both sides to grow and internationalise. The agreement was also signed by the Malta Chamber of Commerce Deputy President Ms Marisa Xuereb and Malta Institute of Accountants Vice President Mr Fabio Axisa.
    New President for the Malta Institute of Accountants

    The Council of the Malta Institute of Accountants appointed Fabio Axisa as its new President for the term July 2019 - June 2020. The election was held during the Institute’s 55th Annual General Meeting on July 11, 2019
    The new President, Mr Axisa, thanked outgoing President William Spiteri Bailey for leading the accountancy profession through challenging times in the past two terms. “First of all, congratulations and sincere gratitude to the outgoing President for the significant work carried out. William was instrumental in many areas considering the pressures and challenges faced by the profession.” The new President said that he will focus on consolidating the MIA’s role, stature and relevance with a long-term view. “We will continue building on the work carried out by subsequent MIA Presidents throughout the recent years. Gone are the days when strategy and direction are modified every two years as soon as a new President is elected.” explained Mr Axisa, who served as Vice President in the last two terms.
    The new President highlighted five core pillars underpinning the MIA’s strategy in the coming years: 1. Ensuring the MIA is home to all qualified accountants. 2. Elevating quality within the profession. 3. Working with all stakeholders to enhance the education and qualification process. 4. Fostering collegiality and comradeship among accountants. 5. Striving to make the Institute’s voice heard, loud and clear, on issues which are important for the profession but also on national strategic issues. Mr Axisa said that the Institute belongs to all accountants and called for broader representation of those qualified and operating as accountants in the Maltese jurisdiction. “We want to continue conveying this message in a strong manner; the Institute is not a club solely for the largest firms. But only fully qualified accountants should be considered as and actually call themselves accountants.” The MIA has a duty to keep raising the quality of accountancy and the President warned that the profession is constantly “under the spotlight”. “As an Institute we will continue working with the regulator to push the bar higher, as we need to strive to do the right thing professionally in all circumstances, even if this entails a cost.” The Institute will continue to strengthen its efforts in the areas of education and qualification processes.
    The President acknowledges that the quality and quantity of accountants in the marketplace is a fundamental aspect for the profession. At the same time, the MIA will dedicate more time and effort to reinforcing a sense of collegiality and comradeship among accountants. “In this area we need to function better as one profession,” commented Fabio Axisa. The profession has a big role to play nationally, and the new President said he is committed to continue investing to give the Institute an influential voice on issues of strategic importance. “We have taken a number of initiatives in this area in the past few years; but the Institute is expected to pursue in and indeed enhance its input and interaction with the relevant stakeholders.”
    Outgoing President William Spiteri Bailey presented the Council Report for the year 2018-2019. He outlined the main work carried out by the Institute, particularly in the areas of technical and educational support to members as well as collaboration with local and international partners. Spiteri Bailey described how the MIA took concrete steps not only to be closer to its members, but to reach out to a wider and more varied audience too. Among the main activities and events in the last year were the Biennial Conference, the Accountancy Profession Strategic Forum for international stakeholders, a Protocol of Cooperation signed with the MIA’s counterpart in Cyprus, and the presentation of findings of the study in Gender Pay Gap within the accounting profession.
    The Institute welcomed its new Council members, elected on a two-year term: Christian Gravina, Etienne Borg Cardona, Franz R. Wirth, Lucienne Pace Ross, Mark Bugeja, Noel Mizzi and William Spiteri Bailey. These joined Annabel Zammit Pace, Christopher Balzan, David Delicata, Fabio Axisa, Ivan Grixti, Jonathan Dingli, and Shawn Falzon who are serving their term on the Council, ending in mid-2020. Following the Annual General Meeting, the Council also appointed David Delicata as Vice President, Noel Mizzi as Secretary, and Franz R. Wirth as Treasurer for the term ending mid-2020.

    I Choose: Nagħżel il-Karriera Tiegħi - Post-Secondary Education Fair 19th & 20th July 2019
    The Ministry for Education and Employment embarked on the ‘I Choose’ initiative for another year, targeting all 4th & 5th formers giving students the opportunity to explore further career options as they leave compulsory education. The overall aim of this event is to help students to overcome difficulties and doubts related to their future career paths. As well as seek one-to-one advice from the career guidance practitioners. Students and parents alike could opt to attend different talks delivered by professionals in various related fields. MIA was present as the official voice and guardian of the accountancy and finance profession. Apart from exhibiting to network and inform students on the alternative study routes, committee members discussed the diverse career opportunities, personal development and job security the profession offers during an interactive and informative panel discussion. Jean Paul Debono, Chairman of the Young Group, the SMP Advisory Group and Direct Tax Committee moderated the talk. The contributors included Zak Cachia who sits on the Young members Group, SMP Advisory Group & Indirect Taxation Committee, Steve Mamo a member of the Young Group, Noel Camilleri, member of the PAIB Advisory Group & AML Committee as well as Daniel Brincat, who sits on the Young Group.

  • 2 Aug 2019 12:00 | Deleted user
    The Accountant – Sustainability. Summer 2019 (MIA Publication)
    A Booming Industry with Serious Climate Goals
    The advent of low-cost airlines has made travel more affordable, allowing avid travellers to see more of the world and leading the aviation industry to experience a boom over the past years. Further growth is on the horizon, with international air traffic set to double within the next 15 to 20 years while aviation is forecast to directly contribute $1.5 trillion to world GDP by 2036. Moreover, a recent report issued by Airports Council International revealed that a 10% increase in direct connectivity translates into an additional increase of 0.5% in GDP per capita. 
    The economic benefits of this thriving industry are self-evident, but with them comes a big responsibility to ensure that this growth is sustainable and keeps in focus wider climate action. The aviation industry, which is responsible for around 2% of global CO2 emissions, has been championing climate action through the establishment of a series of ambitious goals such as a commitment to improved fuel efficiency and a reduction in its emissions. A decade ago, the industry declared its intention to slash its net CO2 emissions by half of what they were in 2005 by 2050. More recently the airport sector, led by Airports Council International Europe, took this pledge a step further with a landmark resolution stipulating a commitment to net zero carbon emissions by 2050.     
    Leading aviation authorities, including the International Civil Aviation Organisation (ICAO), the International Air Transport Association (IATA) and Airports Council International (ACI), have endorsed or established initiatives such as the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) and the Airport Carbon Accreditation (ACA) Programme. Helping both airlines and airports understand factors such as direct and indirect emissions as well as share best green practices, these programmes put aviation stakeholders in a better position to aspire to carbon-neutral growth and contribute to the realisation of the industry’s climate goals.
    Malta International Airport’s  Commitment to Reducing its  Carbon Footprint

    Set up by ACI a decade ago, the Airport Carbon Accreditation programme now boasts 266 participants, with Malta Airport having been a member since 2016 as part of its environmental commitments. All member airports are striving to be greener, cleaner, and more environmentally sustainable, with guidance and recommendations from industry experts enabling them to move from one of the four levels of the programme up to the next. Malta Airport is at the mapping stage of this programme and has been making noteworthy progress with regard to its carbon footprint. Like many other airports worldwide, measuring, reporting, and setting year-on-year targets for greenhouse gas (GHG) emissions have become central to Malta Airport’s environmental responsibility efforts. 
    The company’s fourth sustainability report adhering to the Global Reporting Initiative (GRI) standard revealed that, in 2018, passenger traffic through Malta International Airport increased by more than 13%, while the airport’s GHG emission intensity registered a drop of 12% to stand at a new low of 0.92kg of CO2 per boarded passenger. Put simply, this means that while energy-intensive operations have been on the increase to cater for more passengers, GHG emissions are on the decline mainly as a result of the company’s gradual implementation of various eco-friendly measures and complemented by Malta’s cleaner energy mix, which also comes into play for the purpose of this metric. 
    Malta International Airport’s investment in photovoltaic panels for the period stretching from 2016 to 2019 amounts to more than €1.2 million and, in 2018, the airport PV system generated more than 602,000 kWh of clean energy. To put this into better perspective, during the same year, SkyParks Business Centre, a BREEAM-certified building on the airport campus which houses around 1,000 employees, consumed just over 831,000 kWh of electrical energy. To be able to make the most of the 300 days of sunshine that grace the Maltese islands almost every year and aim for further GHG emission reductions, the airport is currently installing a 1,000 kWp system on the airfield. Another photovoltaic system of the same capacity is envisaged for the rooftop of Malta International Airport’s new multi-storey car park, making it a net zero energy building.
    A Three-Pillared Approach to  Sustainability
    Malta Airport’s efforts to safeguard the environment are always made in tandem with equally important commitments to the organisation’s economic and social responsibilities, with the ultimate aim to achieve a healthy triple bottom line. In fact, the GRI guidelines, which are voluntarily followed by the company in compiling its independently audited sustainability report every year, are based on three sustainability pillars: economic, social, and environmental.
    Malta Airport understands the importance of its role to the local economy and aims to achieve sustainable economic growth which benefits the company and the country as a whole. A key player in the tourism industry, the airport works closely with other important sector stakeholders to develop passenger traffic in a sustainable manner, notably by promoting Malta as an ideal year-round destination so as to address seasonality. The company’s most recent sustainability report revealed that 2018 was the fifth year during which the winter and shoulder months outpaced the peak summer months in terms of growth.
    Moreover, in line with its diversification strategy, the company also invests significantly in its non-aviation segment, which encompasses amongst others its VIP product, SkyParks Business Centre, car parking, and F&B outlets. In 2018, both the company’s aviation and non-aviation segments performed exceptionally well, enabling the company to improve the economic value it distributed in the form of operating costs, employee wages and benefits, payments to providers of capital, payments to government, and community investments by 5.7%. In turn, both community investments and good employee wages and benefits are central to the company’s efforts to be socially responsible and leave a positive impact on its people and wider local communities.
    The Malta Airport Foundation to Enhance Malta’s Tourism Product
    With the local tourism industry being the company’s home ground, a significant effort goes into enhancing Malta’s tourism product through investment in a number of projects. Established in 2014 to help the airport reach this goal, the independently administered Malta Airport Foundation has so far invested more than half a million euro to safeguard and increase awareness about the island’s heritage, making Malta a more appealing tourist destination and a better place for locals.
    Just days ago, the Foundation officially opened a newly restored coastal watch tower: Torri Xutu in Wied iż-Żurrieq. This inauguration marks the successful completion of the first large-scale project by Foundation. Recognising the importance of the sea and underwater world to the quality of the island’s offering, the Foundation has also produced two documentaries promoting marine conservation, sponsored the procurement of two sea bins which will contribute to cleaner seas in the southern part of the island, and is lending its support to the ongoing excavation of a Phoenician shipwreck.
    The Marketing and Communications Department at Malta Airport is responsible for documenting the company’s sustainability efforts in an annual sustainability report.
    For more information about Malta International Airport’s economic, social and environmental sustainability efforts visit www.maltairport.com.
  • 2 Aug 2019 12:00 | Deleted user
    The Accountant – Sustainability. Summer 2019 (MIA Publication)
    Malta has a vibrant economy, fuelled by a steady stream of start-ups attracted by a good investment climate. Doing business in Malta is duly regulated by clear legislation implemented by agencies that strive to improve the general business climate and continuously working to facilitate processes.

    Information released by the National Statistics Office on 9th May 2019 reveals that business demographics in Malta enjoy a healthy birth rate:

    A start up needs to follow a set of procedures and observe applicable legislation in order to be registered. While most business activities do not require a trading licence, there are a few specified activities that do require licensing, such as those related to: 
    • Street and Market Hawkers
    • Auctioneers
    • Car Boot Sales
    • Door to Door sales
    • Marketing agents
    • Commercial fairs and exhibitions.
    In addition, some specific activities may require an operating licence from the relevant regulatory authorities. For example, catering and hospitality establishments, tourist guides and travel operators require permits from the Malta Tourism Authority. Similarly, setting up an employment agency requires a licence by DIER (Department for Industrial and Employment Relations). 
    Permits are also required to set up a recreational diving centre, a private school, childcare centre and operating a motoring school. If your start up handles food, imports or sells food items or performs health-related activities, such as in the case of beauticians, clearances are required from the Environmental Health Directorate located in Santa Venera or at Business 1st.  The local regulating authorities should also be consulted for other specialised activities operating in the gaming, pharmaceutical, finance and transport sectors. 
    A new business may be established under various forms but the two most common types in Malta are self-employed ‘Sole Trader’ or registered as a ‘Limited Liability Company’ under the provisions of the Companies Act and the subsidiary legislation. Other options include Partnerships or Cooperatives but usually these forms fit rather specific circumstances. 
    The eventual choice of the form of business entity is mainly based on the nature of the business characteristics. The ‘Self Employed’ Sole Trader is typically the form of choice for start-ups that entail a low capital outlay, a minimal reliance on creditors and generally deemed as a low risk operation. This business is not incorporated under the Companies Act. Unincorporated businesses can be owned by one individual or more, if they agree to trade under a partnership agreement. The partnership should be governed by an agreement between the partners and the agreements should be formalised through a Notary Public. 
    The sole trader will need to register for VAT and is assigned a unique VAT number (unless activity is specifically exonerated under the VAT Act). The business owner will be personally responsible for the risks of the business while also carrying tax and legal responsibilities. Self-employed entrepreneurs can seek the assistance of Business 1st:a One-Stop-Shop agency, based in Mrieħel operating under the model of the ‘servizz. gov’ setup.  Business 1st assists start-ups with their registration process which is done online using an e-form accessed from the agency’s website. Sole Traders can apply for and register their new business by submitting a single form. Apart from obtaining a VAT number, the entrepreneur will be assigned a registration number with Jobsplus and notify the National Statistics office of the start-up. The e-form also links the start-up to the Income Tax regime and to be assigned a PE number. The single e-form will, therefore, notify the relevant authorities and all registration numbers and VAT number will be assigned via e-mail.
    At the registration stage, the entrepreneur will be required to provide an estimate of the forecasted turnover to determine the VAT classification of the business and the frequency of the VAT returns. 
    Sole traders can facilitate the entire process using their national electronic identification registration. The e-ID, or electronic identity, is a trusted authentication mechanism for citizens and businesses to identify themselves in order to electronically access services from across government.
    All self-employed sole traders are required to submit an annual tax return and the profits from the business activities will be subject to the tax rates applicable to individuals. The tax position should be reviewed with a warranted professional.
    The Companies Act provides three models of commercial entities but the most common among them remains the Limited Liability Company. This company can be registered as a public or a private company depending mainly on the number of shareholders or whether the company intends to issue a public offer for shares or bonds. In any case, if the shareholders exceed 50, the company needs to be registered as a public limited liability company (PLC). 
    In specific cases, the promoters may opt to register the enterprise as a commercial partnership which can take two forms: the Partnership en nom Collectif or Partnership en Commandite. The element of liability varies under both models and therefore professional advice should be sought when considering any of these two options. 
    The registration process of all companies is handled by the Registrar of Companies under the newly formed Agency which, as from the 27th June 2019, became officially known as the Malta Business Registry using the online portal address https:// registry.mbr.mt/ROC/. 
    A limited liability company is registered online on the portal of the Malta Business Registryand a registered Service Provider should be engaged to assist in this process. There are some basic steps that need to be followed before proceeding with the online submission:
    • Assign a corporate name which must not create any confusion with existing registered names nor be deemed as inappropriate
    • Determine the initial paid up share capital and structure and deposit the paid-up capital in a bank account
    • Establish the registered address of the entity
    • Assign a company secretary and the company directors
    • Set out a memorandum and articles governing the structure of the company and specify the objects of the company
    • Determine and declare the ultimate owners/beneficiaries of the entity. 
    It is always advisable to seek professional advice for guidance on tax implications, adapting the memorandum and articles of the company to the requirements of the new entity, and to determine whether you should form a commercial partnership or a limited liability company. 
    Furthermore, start-ups are encouraged to visit the Business 1st offices to find information about any applicable incentives. The MicroInvest incentive scheme, for example, awards tax credits to small enterprises that invest in capital expenditure, refurbishing or job creation. 
    'A new business may be established under various forms but the two most common types in Malta are self-employed ‘Sole Trader’ or registered as a ‘Limited Liability Company’ under the provisions of the Companies Act and the subsidiary legislation. Other options include Partnerships or Cooperatives but usually these forms fit rather specific circumstances. '
    Paul Baldacchino is the Chief Officer at Business 1st. Business 1st is a one-stop-shop for entrepreneurs in Malta and is based in Mrieħel. Visit our portal www.businessfirst.com.mt
  • 2 Aug 2019 12:00 | Deleted user
    The Accountant – Sustainability. Summer 2019 (MIA Publication) 
    Development in technology is one of the most commonly cited drivers of change in the accounting profession. The accountant is relieved from repetitive and error-prone tasks present in bookkeeping and regulation enforcement. Unburdened, the accountant can shift focus to proactive services such as addressing the development and direction of a business, tax planning and budget planning. In the era of the Cloud, the accountant has a wider data reach, exposing professionals to more complex business perspectives for decision making and interpretation. Besides this paradigm shift, however, the accountant is also exposed to new risks which must be addressed for the successful operation of a business. 

    With advance in technology, the spreadsheet remains one of the most commonly used tool in the accounts ecology, a phenomenon that can be explained thanks to the accessibility of the tool: the spreadsheet is flexible, easy to-use yet offering powerful reporting capabilities, it is supported and wellunderstood by a wide community and userbase, and has a low-priced entry point. The modern spreadsheet has evolved to support seamless integration with various data formats and data sources such as internal databases, enterprise systems and data from Application Programming Interfaces (APIs), for example, reading a Yahoo! ticker. As far as data management is concerned, the spreadsheet does not only offer a central and flexible location for data consolidation and customised reporting, but the spreadsheet user is also commonly equipped with the ability to commit and communicate manipulated data back to its data source.
    Despite the spreadsheet’s appealing qualities, it has been the source of numerous and extensive failures across several domains. In this article, we surmise the state of spreadsheets and the nature of risk with regards to modern spreadsheet accounting when interacting with various data sources.
    Spreadsheet risk has garnered enough interest that a group has been established with the aim of addressing risk by offering an extensive set of resources and information on the topic. This group is called the European Spreadsheet Risks Interest Group1 (EuSpRIG) and is motivated by an alarming number of corporate spreadsheet usage that led to serious consequences such as fines, damage to an entity’s reputation, and even incarceration. 
    Spreadsheet Praxis
    To understand the inherent problems of using a spreadsheet, one can look at the characteristics of a spreadsheet in an enterprise. A spreadsheet tends to be created and used informally – without adequate design of any requirements, specifications, structure or model, and without documentation. Yet, a spreadsheet model tends to have multiple users and a life spanning several years. As the simple and innocent spreadsheet grows to become more critical to the running of a business than first anticipated, it often fails to develop the necessary robustness in correctness and performance. Thus, one can understand why spreadsheets have become synonymous with risk and, for some, the object of contempt.
    Spreadsheets have increasingly come under fire with several people advocating against their usage. Ideally, software solutions are thoroughly designed for a business case, however, the implications of putting an abrupt end to spreadsheet usage need to be considered: (a) several unique tools have to be designed and tailored for each business case in place of using a standard, well-understood and capable tool; (b) accountants have to learn new technology rather than relying on their expertise; and (c) the business is forced to pause and restructure operations in light of a multitude of spreadsheets currently residing in an enterprise - an unrealistic imposition in a competitive climate. Instead, we are motivated in adopting spreadsheet design practices that minimize the risk of this necessary evil in the accounting practice.
    Spreadsheet Fraud
    The Sarbanes-Oxley Act was enacted in 2002 in the US in response to financial reporting fraud. This act requires corporations to assess the effectiveness of their financial reporting systems and one requirement that follows is the timely prevention or detection of misstatements. One can expect professional bodies and governments to have similar regulations on the matter, for example, The 8th EU Company Law Directive on Disclosure and Transparency. 
    A suggested way of detecting fraud and fault is through event auditing, a mechanism that can be found in restricted form in popular spreadsheet systems. As the careful development of spreadsheets becomes a legal obligation, organizations must use strong technical and operational controls to curb systems from falling short in their fight against fraud.
    Data Sharing Risks
    As the spreadsheet becomes a frontend to multiple data sources, it becomes a collection of multiple snapshots of corporate data. A simple scenario is that multiple spreadsheet users pull data from enterprise repositories. Once the spreadsheet user interprets this data, they can perform some manipulations and finally commit the work for approval, writing it back into the enterprise repository. 
    The risks present in this method are that different people in the enterprise can end up operating on different versions of the data and, by extension, multiple versions of a spreadsheet may end up in circulation within the enterprise. What guarantees exist that when a person commits their work, they are not contradicting someone else’s work? How can the company sign off the data as an accurate picture of the company’s results?  And in a competitive setting, having correct, fresh data is not the only factor to consider – obtaining it in adequate time is also important for the business to not lag behind. 

    One approach is to employ access control mechanisms. Rather than allowing everyone to manipulate data unhindered, operations can enforce a policy in which all data interactions go through the authority of one person that can be specified for each spreadsheet model. From a technical point of view, protecting a worksheet using conventional locking over data, is a common spreadsheet feature. A strategy where one user is solely responsible for data interactions at a time is a natural option to address potential conflict in data. Nonetheless, this approach is nontrivial and requires subtle programming skills in security and data sharing.
    Furthermore, this approach struggles when scaling to larger organizations. As all updates of the data go through one person, the amount of effort for several users to perform a task, in general, is increased as communication becomes unavoidable and people can be temporarily blocked from their operations creating a bottleneck  in the process. The adoption of strategies must, therefore, be carefully considered. 
    Another strategy is versioning by maintaining different versions of the data. This strategy generates a unique version number with each update operation and one can, for example, accept only spreadsheet manipulations with a specific version number while rejecting all stale or outdated spreadsheet data manipulation. When comparable versions are present, one must apply a conflict resolution strategy which can use fully automated procedures, or other automated procedures assisted by human intervention and judgement in the case of complex cases. While this technique protects users from working on stale data and allows for larger teams to operate quickly, users can still operate under various versions of data. 
    Adoption of a technique depends on the nature of the business process and the actual data. One must consider the blending of both techniques based on the business case, the number of people using the spreadsheet, how critical or sensitive the data is, and the amount of effort which one strategy imposes on operations. One must also consider the data usage pattern, the nature of the data source (one accounting package may offer seamless version control while another does not) and the granularity of the resource (can only certain spreadsheet cells be locked?). 

    Spreadsheet Engineering
    User-induced error has been the cause of many spreadsheet mishaps. Users may enter data instead of a formula or use formulas to refer to the wrong spreadsheet cell by mistake. How can one create a spreadsheet that can withstand the challenges of the real world?
    One aspect to consider is the structure of the spreadsheet, both in terms of its relationship with other spreadsheets and within the spreadsheet itself. In fact, spreadsheet relationships can be characterised by a network of dependencies. Such dependencies come at different levels: one cell can depend on another cell and one spreadsheet can depend on another spreadsheet. Dependencies can also be of different forms, for example formula dependencies or copy-paste dependencies. Thus, when looking at a spreadsheet, one needs to consider it in the broader context of its relationships.
    It has been established that through visualization [1] of the dependency network that governs a spreadsheet, the spreadsheet user can understand whether certain design decisions are problematic. Such visualizations can be enhanced through the automatic flagging of undesirable patterns which help the user navigate through larger networks (larger spreadsheets) and detect less obvious patterns.
    In this area, a number of software engineering patterns have been directly applied to spreadsheets. The term spreadsheet smells [1] has been coined, adapted from source code smells [2], where a smell is a pattern that suggests a problem at a deeper level. Ultimately, simplicity is the key goal of any design. Some patterns that can be considered are: 
    • The removal of duplicated dependency chains
    • The shortening and simplification of a dependency chain
    • Understanding what data source lies at the end of a dependency chain – one can attempt to refactor the dependency to keep the number of data sources to an absolute minimum
    • The rewriting of complex formulas in a more concise way, e.g. use of SUM(...) rather than addition (+).
    • If spreadsheet cells are excessively referred to by another spreadsheet, can they be relocated?
    • If spreadsheets have multiple back and forth references to each other, can the problem be expressed in such a way to avoid this pattern?
    • How can a cell whose changes in turn affect many other cells minimize its impact? 
    Despite best efforts at spreadsheet engineering, the spreadsheet can remain prone to errors and putting the spreadsheet under test is another important consideration. Testing does not need to be the final stage of the design process And may, instead, be done with every change. This phase is similar to software testing. 
    The investment in this technical control acts as a sanity check – a guarantee that certain functionality works as intended as the spreadsheet matures. One can look at the behaviour of the spreadsheet structure: does the input to the spreadsheet give the expected output data? Testing must not cover only the most common usage scenarios, but also the most abnormal ones – they can be considered normal by a (future) colleague. Due to the exhaustive nature of this activity, limiting testing to the most crucial of spreadsheets is a natural consideration.
    Concluding Remarks
    As the amount of data available to spreadsheet accountants grows, and as the demand for timely data becomes more relevant, exposure to risk increases, especially if spreadsheets are unprotected. Careful design of spreadsheets can no longer be an afterthought. The consequences are clear and ever-present. 
    By evaluating the nature of the data in terms of its sensitivity to the business, its source and its place in the spreadsheet structure, and by employing effective data governance strategies and business procedures, a great deal of risk can be minimized. Such controls can be approached both from a technical and operational standpoint. A significant input is an accountant’s own expertise in control and business process understanding.
    Many spreadsheet users have learnt to progress and structure their design while intuitively attenuating risks. Nonetheless, with data sharing and data consolidation requirements, these risks call for more sophisticated risk-aversion techniques. This article discussed such techniques and presents a way forward. Spreadsheets are killer applications, but do not let spreadsheets kill your business
    [1]  F. Hermans, M. Pinzger and A. van Deursen, “Detecting and visualizing inter-worksheet smells in spreadsheets”, 34th International Conference on Software Engineering (ICSE), 2012. [2]  M. Fowler, Refactoring: improving the design of existing code. Boston, MA, USA: Addison-Wesley Longman Publishing Co., Inc., 1999
    The insights in this article were gained through collaboration with Scope Solutions, a local expert in cloud-based software whose solutions are sought after by accountants. This article is part of DataDear, a project about empowering SMEs with tools to help them move to Cloud Computing. This project is financed by the Malta Council for Science and Technology through Fusion: The R&I Technology Development Programme 2017.
    Public Spreadsheet Blunders
    A number of spreadsheet errors have been publicly reported across various domains, including large corporations, elections, scientific analysis, and schools. Typically, they are the result of human error or fraud, and the outcome is in the form of regulatory, reputational, and commercial headaches. The following is a brief selection of such cases in the accounting world.
    Spreadsheet errors cost Clallam $494,157
    Rob Ollikainen, Peninsula Daily News, 2017
    • Spreadsheets were emailed back and forth in the Clallam County Office’s (Washington, U.S.) operations. Due to cut and paste, not all the formulas were pasted correctly. A deficit was reported to be much larger than previously calculated. This error led to a reduction of budgeting for personnel by 12%.
    • The commission was asked to reflect on the following two points: (a) could different budget decisions have been made had the true deficit been known? and (b) who is accountable for the mistakes?
    M&S results hit by spreadsheet mishap
    John Stokdyk, AccountingWEB, 2016
    • Marks & Spencer’s (UK) chief financial officer reports that a spreadsheet summing error, a double-counting error, while compiling the quarterly statement, forced the retailer to issue a correction to its trading statement.
    • A statement issued at 7AM reported sales to grow by 1.3%. But at 1:31PM, a correction was released showing that sales had in actuality fallen by 0.4%. Consumer confidence was reported to have suffered, and reporting procedures were put under review.
    Trustee’s Office mistake to cost taxpayers $12,500
    Mika Donila, Knox News, 2011
    • Auditors discovered a $6 million accounting error by the Knox County (Tennessee, U.S.) Trustee’s Office. It occurred when one account was not correctly linked with the spreadsheet.
    • Extra effort was incurred as a result of procedures at the Trustee’s Office to address the issue – about 75 hours at the cost of $12,500 out of the taxpayer’s pocket.
    Thomas Mercieca graduated with a BSc (Hons.) in IT from the University of Malta. He has later worked in the telecommunications industry and is currently working as a researcher at the University of Malta’s Faculty of ICT. His main research interests include database architecture and data modelling. He can be reached at thomas.mercieca@um.edu.mt.
    Dr Joseph G Vella lectures and researches in the areas of database technology at the University of Malta. His first degree was a BSc in Mathematics and Computing (UM) and a doctoral degree from the University of Sheffield Engineering Faculty. Dr Vella has participated in numerous projects at national and EU levels mainly dealing with data integration and consolidation for data warehousing and cloud services. Contact email is: joseph.g.vella@um.edu.mt.
    Dr Kevin Vella is the Head of the Department of Computer Science within the University of Malta’s Faculty of ICT. His teaching and research activities focus on the scientific and technical aspects of concurrent and distributed computing, computer operating systems and programming languages. He holds a PhD in Computer Science from the University of Kent, UK, and a BSc in Mathematics and Computing from the University of Malta. His contact email address is kevin.vella@um.edu.mt.
  • 2 Aug 2019 12:00 | Deleted user
    The Accountant – Sustainability. Summer 2019
    The sustainability of state pension systems has been at the centre of policy debates across the world since at least the 1980s. This followed the sharp slowdown of economic growth in the 1970s, combined with the realisation that life expectancies had been seriously underestimated. International institutions such as the World Bank argued that, to be sustainable, spending on public pensions should not rise exponentially while pressing for reforms that reduced generosity and led to more reliance on private saving. Furthermore, policymakers looked at ways of adjusting their system to reflect demographic changes, such as by raising the pension age.

    In contrast with systems across the EU, the Maltese pension system remained relatively unchanged through the 1990s and early 2000s. This lack of reform attracted the attention of international institutions; for instance, in 2003 the IMF “encouraged the authorities to move forward without further delays with a sufficiently ambitious pension reform that would ensure the financial viability of the system”. Although the delay has arguably made the task trickier, it also meant that reforms adopted a more holistic approach than that which was current before the mid-2000s. In fact, pension reforms in Malta have been inspired by the EU’s open method of coordination of social protection and inclusion policies. Under this framework the objective of reforms is “providing adequate and sustainable pensions”.
    Placing adequacy and sustainability on an equal footing may at first appear to weaken reforms, however, there is ample evidence to show that interpreting sustainability as lower future spending on pensions is self-defeating. Many European countries that had adopted radical World Bank inspired pension changes in the 1990s and early 2000s ended up reversing considerable parts of their reforms. A prime example of policy reversal is the UK, where the removal of wage indexation of the basic state pension in the 1980s was reversed in the 2010s, and contracting out of state pensions was recently replaced by auto-enrolment in workplace pensions. A holistic approach to assess pension sustainability could help limit this cycle of reforms and increase trust in pensions.
    Developing reforms with too strong a focus on long-term spending projections can be problematic, particularly in the context of a small and fast-evolving economy like Malta. The EU’s Ageing report issued in 2009 had projected that pension spending would rise consistently from 9.1% to 13.4% of GDP between 2015 and 2060. Projections issued a decade later, using the same methodology, show that in 2015 spending was 8% of GDP, and that it will fall to around 7% of GDP in  2030 before rising to 10.5% of GDP by 2060. This significant downward revision occurred despite there being no further increases in pension age, an increased generosity of pensions and further improvements in life expectancy. This apparent paradox disappears when one recalls Nicholas Barr’s statement on “the centrality of output to the macroeconomic viability of pensions”. While in 2009, Malta’s long term GDP growth was assumed to fall to 1% by 2060, the latest projections envisage it closer to 2%. A much higher level of GDP inevitably reduces the burden of pension spending.
    One of the key reasons underpinning the higher path of GDP growth is that we now expect the labour force to be considerably larger than was projected a decade ago. A significant factor behind this is the increased inflow of foreign workers. However, focusing just on this factor ignores the substantial contribution of the improvement in employment rates of Maltese citizens. Back in 2009, the participation rate was assumed to rise from 59% to 64.5% by 2060. In reality, the latter rate was already achieved by 2013, and by 2018 the employment rate had exceeded 74%. This reflects three developments; namely changes (like tax credits and free childcare) which have led the female participation rate to increase by half, measures that have extended working lives (such as increased benefits for those who forgo early exit) and reforms that have made work pay (including the tapering of benefits and the introduction of in-work benefits). This fully justifies the adoption in the latest pension reform of the principle that an adequate and sustainable pension system has to be sustained by a strong active employment policy.
    A frequent criticism made to Maltese policymakers is that the pension age in Malta remains too low compared to life  expectancy. Once again the reliance on a single indicator can be deceptive. The pension age in Germany in 2018 was 65 years and seven months, considerably higher than the 63 years in force in Malta. Yet, Eurostat estimates that on average men worked 40.9 years in Malta, as against 40.7 years in Germany. Having a high pension age is no guarantee that individuals will actually be working till that age. Only an active employment policy, together with broad cultural change in favour of active ageing, can help achieve that. The IMF estimates that the ongoing pension reform will reduce the burden of Malta’s national debt by 30% of GDP in the long run.
    The main lesson to draw from recent reforms is the need to have a gradual and well-studied approach that places the pension system within a wider context. In Malta, the system now undergoes a five-yearly strategic review which looks at both adequacy and sustainability. It is a process that has helped generate significant changes; including the introduction of tax incentives for voluntary personal and occupational pensions, rules on home equity release, the improvement of minimum and survivors pensions, the introduction of contribution credits for those who continue their studies or care for their children, and higher pensions for those with a full contribution history who work past the age of 61. 2020 will see yet another review which will continue to further strengthen the Maltese pension system.

    Dr Aaron Grech is the Central Bank of Malta’s Chief Economist and is a member of the Pensions Strategy Group.
  • 2 Aug 2019 12:00 | Deleted user
    The Accountant – Sustainability. Summer 2019 
    Next-generation internal audit
    As we approach the end of a decade of unsettling uncertainty, organisations face evolving strategic, reputational, operational, financial, regulatory, and cyber risks. Simultaneously, there is also a need to constantly innovate in order to compete. The world is entering the fourth industrial revolution where new technologies, digitalization, and artificial intelligence are dramatically changing the business landscape.
    Although internal audit’s service emphasis and delivery models must be updated, its central purpose remains much the same: to assure and advise. However, the most successful internal audit functions will also anticipate, and through proactive assurance, help organisations keep pace with and get ahead of emerging risks. These three – assure, advise, and anticipate – constitute the triad of value that internal audit stakeholders now want and need.
    Until recently, assurance was more focused on past events. But the rate of change means that the past is no longer a safe predictor of the future. In today’s environment, organisations are calling on internal auditors to be more forwardlooking. Boards want the comfort that, as they take their next steps, they can see the potential stumbling blocks and understand what they need to do to get around them.
    That is great news for internal auditors, but it is also a challenge! Traditional auditing is undoubtedly suitable for many projects; however, when auditors need to deal with the uncertainties inherent in planned business strategies, its approach is less relevant to the velocity of our current business environment. Internal auditors can build upon the steps they have taken to meet these new challenges by focusing more effort on innovation.

    Internal audit has a vital role to play in the success of its organisation. But to be up to the task, internal auditors need to refresh their commitment to innovation in internal audit. The internal audit profession needs to push further and Transforming Internal Audit into an Insightful Catalyst for Change harder in areas such as audit automation, data analytics, and rethinking audit processes and methodologies, as well as taking the first steps toward the use of robotics in audit work.
    This indeed represents a great challenge. Many internal auditors are already working their hardest to meet their stakeholders’ expectations with often constrained resource’s  – including tight budgets, limited staff, and everchanging competency demands. Even so, stakeholders seem to continually want internal audit to add more value. This is precisely why the innovation mindset is so relevant today. It means that internal audit should be a constant work in progress:
    • That processes are adaptable and open to rapid revision as circumstances change;
    • That audit finds more forward-looking ways of working to adapt to stakeholders’ changing needs;
    • That technology is a great enabler when fully embraced.

    Given the current pace and magnitude of change, it is impossible to anticipate (i) every change that will materialise in the near- and long-term; and (ii) how those shifts will affect auditing operations. For this reason, it is useful to develop an adaptable internal audit function: one that is routinely experimenting with new technologies and approaches and can, relatively easily, incorporate new technologies, risk management techniques, and other business processes as they emerge and as the broader organisation evolves as part of its own transformation efforts and in response to rapidly changing external forces.
    Continuous innovation should form part of the internal audit strategy to be approved by the Board through the Audit Committee. The strategy paper must be a live document which identifies the function’s most important and urgent innovation requirements on a periodic basis. Man-days should be specifically allocated in every Annual Audit Plan to cater for such innovation projects.
    Each audit function should at least ensure that one of the team is assigned with a part-time responsibility to help the innovation process. They should also make sure to tap into that wealth of often unexploited talent – new professionals. Newer internal audit professionals who are not tied to tried-and-true ways of working can bring a fresh perspective and an openness to technology as an enabler of innovation.
    Internal auditors must adapt, evolve and transform or risk becoming irrelevant. They need to ready themselves for changes and new thinking – now. Starting this journey is vital but, for many, it will not be easy because it must also be comprehensive. It requires an innovation mindset and culture within the internal audit group against the rapid pace of innovation to re-examine the foundational elements of their function’s capabilities, chart a transformational course, and then execute that plan while at the same time performing their daily jobs.
    It takes courage to innovate and overcome old attitudes resistant to change, to think and act differently, and to show leadership in the organisation. But by becoming a catalyst for innovation in internal audit, auditors can become a catalyst for change in the organisation at large.

    • Internal Audit: Golden Oldies or Latest Tunes? (Deloitte, 2017)
    • Internal Audit 3.0: The Future of Internal Audit is Now (Deloitte, 2018)
    • Next-Generation Internal Auditing: Addressing Risk in the Midst of Rapid Change (Protiviti, 2018)
    • The Innovative Internal Auditor (IIA, 2017)
    • The Next Generation of Internal Auditing – Are You Ready? Catch the Innovation Wave (Protiviti, 2018)
    • The Upside of Risk (IIA, 2019)
    • Unlocking the Strategic Value of Internal Audit – Three Steps to Transformation (EY, 2010)
    Giancarlo Millo FIA, CPA, CIA, CISA, CRISC, MBA (Fin)
    Giancarlo Millo is Group Chief Internal Auditor at Mizzi Organisation, having previously served as Deputy Group Head Internal Audit at FIMBank plc. Mr Millo has gained over 25 years’ experience in the financial services and banking industries, and has also volunteered as Secretary, Vice President and President of the ISACA Malta Chapter.
  • 2 Aug 2019 12:00 | Deleted user
    The Accountant – Sustainability. Summer 2019
    The Institute of Accountants just launched an engaging publication tracing its history back to 1965. The Accountant sat down with author George Cassola to discover what goes behind writing such a unique and fascinating work.
    Q: What drove you to write this unusual historical narrative?
     The Institute of Accountants first approached me with the idea in May 2015. That year was the fiftieth anniversary of the MIA, and the Institute wanted to commemorate the special occasion in a manner that suited its importance. It was decided that a publication telling its history would serve a longer purpose than holding some grand celebration. I had two good reasons for accepting to undertake this work. Firstly, I am a member of the Institute and I have myself lived through many of the events that shaped the development of the accountancy profession in Malta. Secondly, I have a strong interest in language and literature and have, over the years, written and published several pieces locally and overseas. The Institute’s invitation brought these two factors together and I could not resist.
    Q: How long did it take you to complete the project?
     I wanted the book to be published as close to the anniversary year as possible and planned to do the job within two years, which was the minimum such a big project would take.
    Q: Is it a book only for accountants?
     The part of our history that the book explores is enmeshed with other political and national events taking place during the last fifty years. In fact, it was necessary to insert a summary of local and international affairs that had an impact on the business of the Institute. The history of the MIA enlightens not only accountants, but anyone who wants to know more about our country’s history and the people who shaped it. Some sections in the book may interest accountants more, but the larger part of the book is of wider interest and can be enjoyed by readers who want to know about what went on behind the scenes, particularly in the sphere of local finance.
    Q: Why do you describe the 1965 merger ‘historic’ in the book?
     In the early Sixties the accountancy profession in Malta was still in its early development and the fact that accountants were divided in two separate associations did not help its consolidation. Although the two organisations were not rivalling, they did not cooperate, and each followed its own plans. The awkwardness of the situation became evident when the Commercial Partnerships Ordinance was enacted in 1962, in which accountants were treated without distinction. With the merger the two bodies of accountants now came together as one Institute which became the sole representative voice of the profession, giving it both consistency and strength. The merger is historic because it created a national body that could perform as one undivided force in its sphere of activity.
    Q: How would you describe the Institute at 50?
    Today, after 50 years of development and activity, the Institute is hardly identifiable with what it was at the beginning. It has grown steadily in size, stature and influence. Its membership has grown from 65 to over 3,300. It is recognised by law as representative of the profession – after having struggled for decades to achieve this status. It is permanently seated on the Accountancy Board and drives many of the decisions that are taken in that forum. It is a player in the major European and international accountancy federations, where standards are set and policies are determined. It has a robust code of ethics and a policy of continuing professional education that no other profession has matched. And it has a modern main office where members and guests can work productively. All this took years to be achieved and, today, the Institute can say that it is in a good state. 
    Q: We read that the profession is shaped by social and political events, but does accountancy also shape history?
    When we talk of history, we often understand mainly the development of political events. Business and finance do not usually form part of the core historical narrative, except when they themselves impact on political events. However, when this happens, it is very rarely considered newsworthy and we do not hear about them often: for example, the development of IASs and IFRSs, especially IAS39 and IFRS9, has affected the dealings in international finance and banking, but it was never in the news. Then, once in a while, an event occurs and it makes it to the world’s top headlines, normally because it is negative. Consider the crash of Enron in 2001 and Worldcom soon after, or the fall of Lehmann Brothers which sparked the international financial crisis in 2008. So, yes, although under-reported in mainstream media, accountancy does influence history.
    Q: If history is a lesson, what does half a century of the institute teach us?
     There are several lessons we can learn from the Institute’s history. The merger, for one, teaches us that there is strength in unity. The question of recognition teaches us to persevere in our goals. Other instances show us the wisdom of choosing dialogue over confrontation, of adopting a strong disciplinary stance, and above all of upholding fairness and integrity. Throughout the Institute’s history, there have been many cases where individual opinions did not always respect those precepts, but in the end the collective decisions remained true to the Institute’s principles.
    Q: Is the MIA’s role in landmark national legislation under-recognised?
     For many years the Institute preferred to keep a low profile even if it was very active in many areas. While it made major contributions towards legal provisions and administrative practice in tax, finance, banking and other areas – besides, of course, accounting and auditing – its efforts were not widely publicised and have therefore not been sufficiently recognised. In particular, the Institute’s role in the continuing education of its professionals is much larger than is generally appreciated.
    Q: What was the most surprising thing that you discovered in your research?
    The commitment of members to the Institute. Initially the Institute was led by a Council of twelve members and a few committees mostly made up of the same twelve members. Eventually the number of committees started to grow, with members recruited from among the Institute’s members. That means that there have been hundreds of professionals contributing towards the work of the Institute on a voluntary basis. Considering the pressures that accountants are known to have at their workplace, it is amazing that so many offer to give their time freely.
    Q: The Institute went through its own rough patches (such as the dispute over MDPs in 1998 or the SMPAC turmoil in 2002) – what is it that keeps the MIA strong and relevant?
    Yes, there were numerous instances where the Institute had to struggle to push its views to the authorities. Besides the ones you mention there were the tax issues of the 1970s, the question of government audit tenders, the EU membership decision and others. What kept the Institute strong throughout the years was its sense of unity. Imagine if there were still two institutes as before the merger: authorities would have found a divided profession unable to promote common interests. The Institute remains relevant particularly because it keeps There are several lessons we can learn from the Institute’s history. The merger, for one, teaches us that there is strength in unity. abreast with local and international developments and discusses issues beyond its internal structures.
    Q: What do you consider the top achievements of the MIA?
    The book lists a number of milestones which I regard the Institute’s top achievements. Among those, perhaps the major ones were becoming a founder member of IFAC and joining FEE; the joint examination scheme with MIA; and the launch of GAPSE. International membership has given the MIA a recognition beyond our shores which it took several years to achieve within them. The joint scheme opened a new opportunity for those choosing the profession as their career, and GAPSE has facilitated the development of small business in Malta. But the greatest achievement must be keeping the profession united and representing its members with equity and integrity. With its growth into unprecented numbers, the Institute must find that task ever more daunting.
    The Malta Institute of Accountants 1965-2015 can be purchased exclusively from the Institute where special rates are available for members, as well as purchases of 5 books and more. Email us at bookings@miamalta.org or call 2258 1900 for enquires.
    George Cassola started his career as a civil servant, working in taxation and later in IT. After graduating as an accountant, he spent some years working in computer audit with a major audit firm. He then moved to the Employment & Training Corporation where he was Senior Manager Finance & IT and later joined APS Bank as Head Finance. For many years he was a visiting lecturer in Computer Audit at the University of Malta. Since his retirement, he has freelanced as a translator of business text and has published his dictionary or accounting terms in Maltese titled “Dizzjunarju tan-Negozju u l-Kontabilita".

  • 2 Aug 2019 12:00 | Deleted user
    The Accountant – Sustainability. Summer 2019 (MIA Publication)
    The term sustainable development evokes thoughts of environmental protection: saving, somehow, the natural world. For many years this idea of sustainable development meant that only those working in the field of environment were responsible. The focus started shifting a little bit at the end of the last century towards economies and societies and how they contributed to (their) sustainability and how they could, in doing so, grow whilst limiting the impact on the one earth which we inhabit.
    But still, many struggle to understand the basic principles of sustainability. What is it? Why is it important? And why is it necessary? We start with definitions. The most popular definition of sustainable development comes from the 1987 Brundtland Commission and the subsequent book entitled Our Common Future. The definition specifies how:
    “Sustainable Development is the kind of development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”
    The focus on needs comes primarily from the fact that sustainability is about the principle of equity. The needs of the current generation must be fulfilled equally for all (hence reducing poverty and ensuring fair access to resources), but what we enjoy today should also be available to those of the future. A simple example of this relates to some basic resources which we all use and enjoy, like air and water.

    Air is a common good and a resource which we all share. However, due to unsustainable practices access to good air is not equal for all. Some are forced to live where the levels of air quality are low and their exposure to pollution related diseases are higher. Access to clean water is another example, with many in the developing world suffering because of unsustainable water management practices. Malta is a semi-arid country and as projections for a warmer earth increase, we could see the island moving towards arid and desert conditions. What provisions are being taken to meet today’s water needs and ensure a sustainable source of clean water for future island dwellers?
    These examples are not only environmental challenges because of their “association” with the environment. They involve individuals’ behaviours, industry stakeholders’ behaviour and subsequently our economy, environment and society. It is, therefore, wrong to ignore the situation as if it were someone else’s problem. We need to think about the fact that we drive our cars without asking ourselves whether we need to take the trip or whether we can walk to our destination, or use precious water resources without any care for its protection or reuse. Companies have a responsibility to ensure their burden on such matters are lessened. Effective energy and water management within buildings, the reduction in waste generation and its efficient treatment, the efforts to reduce their burden on air and noise pollution through effective transport management of their business and staff: these are just a few of the goals which we all should share within our society.
    Sustainability is not just rhetoric which is used by environmentalists and sometimes by politicians to look “green”. It is a principle which should drive all our decisions within our everyday lives, in our homes, at work, and in our businesses. It is a very simple principle of not wasting, reducing, managing effectively anything which has an impact. It might be difficult and complex to appreciate the impact of every single action that people and businesses have. We know that because Malta has been struggling with efforts of waste recycling, for example. Although simple in principle which, it has been difficult to implement in practice. Asking people to reduce their consumption is also not easy. Voluntary measures unfortunately hardly ever work because many times people do not fully understand the principle of sustainability and how far-reaching it is in our daily lives. Unfortunately, consumerism has made it too cheap and easy to use objects a single time and dispose of them afterwards. But at what cost? 
    The world’s population is nearing 8 billion. This translates into 8 billion pieces of single use items every day, thrown out. The need to manage that is critical. The use of the private car for personal mobility is a similar case. Fortunately, or unfortunately, depending on one’s perspective, not everyone has the same level of access to motorized transport in the world. Those who have a higher level of access, pollute the most. And remember that Malta is one of those states!
    All these impacts come at a cost. A cost to the economy that needs to manage waste, more expensive water provision through reverse osmosis (in our case), and the management of car traffic as demand increases among other things. Finally, the ultimate price is our health and well-being. Urban populations will be negatively affected by unsustainable practices, with those most disadvantaged carrying the heaviest burden since they cannot afford to buy the better products, have access to the best medical treatments, or move to cleaner living locations when pollution and waste become unbearable.
    Local studies have already estimated the costs of unsustainable practices in some sectors. External costs related to air pollution, climate change adaptation, accidents, noise and congestion coming from the use of commercial and private vehicles were estimated at €274 million in 2012 . These were estimated to increase to €317 million by 2020 – a conservative estimate considering that the booming economy in the last few years has changed the patterns of consumption, which means that the costs are probably much higher than originally predicted. Other studies in health have estimated that 576 people die prematurely each year in Malta from pollution-related diseases . This environmental impact has further repercussions on the economy and on our society.
    The UN Sustainable Development Goals (SDGs) are an excellent guiding framework to assess the way in which our society and economy are growing. We need to shift our mindset and think of well-being as a fairer and more equitable indicator of “growth” rather than a simple increase in the Gross Domestic Product (GDP). If we use well-being as our yardstick, and we apply the SDGs to our everyday life decisions at home and at work, then each one can consider themselves as active contributors to sustainable development. Just like individual households, industry has a responsibility towards sustainability. This can range from simple individual measures to Corporate Social Responsibility obligations, but in the end all serve the same purpose: ensuring a more equitable and fair world for us and others, and those that will come after us.

    Professor Maria Attard is the Director of the Institute for Climate Change and Sustainable Development at the University of Malta. She specialises in urban transport, planning and policy
  • 2 Aug 2019 12:00 | Deleted user
    The Accountant – Sustainability. Summer 2019 (MIA Publication)
    It soon became clear that the country had to step up its efforts to make the most out of the positive economic scenario and the business community rose quickly to this unexpected opportunity. Everyone shifted to top gear in a race against time to fill the gaps and meet the economic demands. 
    While other European states were battling problems of unemployment and lack of investment, Malta was booming and became the country with the highest level of economic growth.
    As demand grew, businesses, too, needed to immediately increase both their headcount and their operating space. The public administration developed in parallel.
    This situation created a significant ripple effect across the country. Foreign workers and their families relocated to Malta increasing an already densely populated island by over 60,000. Space now developed into an issue and the public started to question the relevance of positive economic growth on their own well-being.

    A 2018 study conducted by GRTU Malta Chamber of SMEs couldn’t express this concern better. Business owners were surveyed to understand exactly who was doing well in the economy and at which rate, but there were mixed feelings about the sustainability of an economy reliant on tens of thousands of foreign workers. While aware of the need to address the lack of human resources and increased demands, survey participants started to feel that this little island was getting even smaller.
    Although we should do everything to continue generating wealth for all, the time has come to think of alternatives that will answer concerns related to sustainability. The change in mindset brought about economic development, but it also shifted our focus. We turned into a high-speed train speeding ahead at the expense of what it was leaving behind and what stood in its way. With everyone concerned with doing more, no one was left to think of challenges ahead. Now, more efforts are necessary for the balance to be restored. 
    Social partners have been calling on the government to issue a sustainability plan for the next few years. Economic progress led to more wealth, however, NGOs and interest groups argued that it registered, in fact, regress. Not because the economy itself is showing any signs of regress, but because important aspects of social well-being have fallen back as a result.
    A series of corrective measures have started being implemented, among them the Rent reform addressing surging rental prices. While rents will continue to be allowed to increase, they cannot increase by more than what has been established as fair. Increases in rents was putting pressure on a number of families and also wages in general.
    Another positive step was the initiative to create a more conscious constructions development culture.
    Regression, however, was felt in other areas where solutions are not always as straight forward, many times presenting a double-edged sword. NGOs and interest groups voiced concerns about the environment, traffic, waste, infrastructure, and other matters. 
    More work is needed to raise our standard of living and make sure that, once the economy slows down, we will live in a country of high quality and standards that can sustain itself better.
    We also need to be careful of the changes we make and their consequences. Investments need to be assessed for their future impact balancing present needs with long term sustainability.
    Unless directed, businesses will make the most of what is available to them, so government intervention is necessary to put safeguards in place and guide investment in the most sustainable manner. 
    The government acts as watchdog for social well-being and economic progress must coexist with the country’s wellbeing. Everyone is asking what will happen when the economy goes through its natural cycle and slows down. We certainly will not be unable to turn back the clock and reverse the situation. It is time to plan for the future of Malta and Gozo and work towards that vision.
    Malta was a high-quality destination for holidaymakers, expats or even retired people. This perception is changing, however, and reputation takes time to rebuild.
    These questions are no longer at the back of our minds and should be addressed with an active plan for sustainability.

    Abigail Mamo is CEO of GRTU with expertise in business and economic affairs, advocacy and representation.
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