Malawi

In May 2016, the Companies Act, Act No. 15 of 2013 became effective and replaced the Companies Act of 1984. The Companies Act 2013 continues to establish the foundation for the financial reporting framework in Malawi and outlines the formation of the various types of entities, applicable governance arrangements, and the requirements for preparing financial statements. The Companies Act 2013 also provides extensive stipulations about company accounting systems, auditors’ reports, the appointment, remuneration, and removal of auditors, as well as the rights and obligations of auditors; however under the new law, there is no mandatory audit requirement for private companies, as explained below. The new Act now provides legal backing to the application of IFRS or IFRS for SMEs where relevant and requires mandatory application of ISA when conducting audits.

Accounting Framework

The Companies Act, Act No. 15 of 2013 stipulates that financial statements for all companies must be prepared in accordance with IFRS or IFRS for Small- and Medium-sized Entities (SMEs). Companies that are considered public interest entities (PIEs) must use full IFRS while all other companies may choose to use full IFRS or IFRS for SMEs. The Institute of Chartered Accountants in Malawi (ICAM), which was the de facto standard-setter until May 2016 and had adopted IFRS and IFRS for SMEs by reference, issued an official definition of PIEs in 2009. PIEs are companies that: are listed with the Malawi Stock Exchange or any other recognized stock exchange; have articles of incorporation providing for unrestricted transfer of shares or is a Public Company in terms of the Malawi Companies Act 2013; are permitted to offer shares to the public; hold assets in a fiduciary capacity for a broad group of outsiders, such as a bank, an insurance entity, securities dealer/broker, pension fund or mutual fund; are owned by the public through the Government; have a legal requirement to publish general purpose financial statements in any public media; and are material subsidiary of an entity with public accountability.

There are no separate requirements for the preparation of general purpose financial statements of regulated entities such as banks, credit institutions, and listed companies.

Auditing Framework

With the new Companies Act becoming effective, there is no longer a mandatory audit requirement for private companies, although such companies may resolve to appoint an auditor. Private companies are defined as companies with a minimum of one and a maximum of 50 shareholders; companies that are prohibited from offering its securities to the public; and companies with an annual turnover of 20 million Kwacha or less (approximately USD 27,000).

For all other companies, the Companies Act 2013 states that audits must be carried out in accordance with ISA. In accordance with the Public Accountant and Auditors Act (PAA) 2012, only Practicing Accountants of ICAM, registered with the Malawi Accountancy Board, are permitted to perform audit attest functions.

The accountancy profession in Malawi is regulated at the state level by the Malawi Accountant Board (MAB), and at the professional level by the Institute of Chartered Accountants of Malawi (ICAM).

There are three designations that individuals seeking to enter the profession in Malawi may obtain: Accounting Technician (Diplomate Accountant), Chartered Accountant (CA(M)), and Practicing Accountant. The CA(M) designation introduced by ICAM in December 2014 is protected under the Public Accountant and Auditors Act (PAA) 2012.

Individuals pursuing the Accounting Technician qualification must hold a bachelor’s degree in accounting or finance from the University of Malawi or another accredited university, complete examinations and practical training, and finally, register with the MAB after applying for membership of ICAM.

Candidates for the Chartered Accountant designation must hold a bachelor’s degree, pass ICAM’s introductory and final examinations, complete practical training requirements, and then register with the MAB after becoming a CA(M) member of ICAM. Individuals who receive foreign qualifications from ACCA, CIMA, or Institute of Chartered Accountants in England and Wales (ICAEW) may also qualify as a CA(M) after completing any additional requirements recommended by ICAM and approved by the MAB. Finally, Practicing Accountants must meet the same requirements as a CA(M) plus complete three years of work experience in audit and assurance in an audit firm. The PAA 2012 only allows Practicing Accountants of ICAM that are registered with the MAB to perform audit attest functions

All professional accountants in Malawi must be members of ICAM and be registered with the MAB. The MAB was established under the PAA of 1982 to regulate the practice and training of all professional accountants. In 2012, the PAA was amended to, among other things, extend the MAB’s mandate to include oversight of auditors of public interest entities (PIEs).

Additionally, the MAB’s responsibilities include to: (i) maintain a register of Chartered Accountants and Accounting Technicians (Diplomate Accountants); (ii) oversee and accredit professional accountancy bodies, including their training and professional qualification examinations; (iii) review PIEs’ statutory financial statements and financial reports; (iv) adjudicate/make determinations on appeals of disciplinary actions meted out by ICAM; (v) provide advice to the government and education providers on relevant matters; and (vi) conduct quality assurance (QA) reviews of auditors.

ICAM is the only professional accountancy organization in Malawi and regulates the profession through: (i) issuing practicing certificates for the profession; (ii) establishing initial professional development and continuing professional development requirements; (iii) setting ethical standards; and (iv) establishing an investigation and discipline system for professional accountants.

Auditors in Malawi are subject to the regulation and oversight of the Malawi Accountant Board (MAB) and the regulation of the Institute of Chartered Accountants in Malawi (ICAM). All auditors must be a Practicing Accountant member of ICAM and registered with the MAB in order to practice.

The Public Accountants Act (PAA) of 1982 established MAB to regulate the practice and training of all professional accountants. The PAA was amended in 2012 to extend the MAB’s mandate to include oversight of the preparation and audit of financial statements of public interest entities (PIEs). The MAB’s mandate as it relates to the oversight of auditors includes: (i) maintaining a register of Chartered Accountants and Accounting Technicians (Diplomate Accountants); (ii) overseeing and accrediting professional accountancy bodies, including their training and professional qualification examinations; (iii) reviewing statutory financial statements and financial reports of PIEs; (iv) adjudicating/making determinations on appeals of disciplinary actions meted out by ICAM; (v) conducting quality assurance reviews for auditors; and (vi) providing advice to the government and education providers on relevant matters. The MAB is not a member of the International Forum of Independent Audit Regulators.

In addition, auditors are subject to rules and regulations issued by the ICAM. In regards to auditors, ICAM is responsible for: (i) issuing practicing certificates for the profession; (ii) establishing initial professional development and continuing professional development requirements; (iii) setting ethical standards; and (iv) establishing an investigation and discipline system for its members.

The Institute of Chartered Accountants in Malawi (ICAM)

ICAM, the only professional accountancy organization in Malawi, was established in 2013 under the Public Accountant and Auditors Act (PAA) of 1982 as amended in 2012. It was created through a merger of the Public Accountants Examination Council of Malawi, which was established under the PAA 1982 to set syllabi and organize professional examinations for entry into the profession, and the Society of Chartered Accountants of Malawi. All accountants (Accounting Technicians/Diplomate Accountants and Chartered Accountants) and auditors (Practicing Accountants) must be members of ICAM.

ICAM’s responsibilities, which are outlined in its Article of Association and the PAA 2012, include: (i) issuing practicing certificates for the profession; (ii) establishing initial professional development and continuing professional development requirements; (iii) setting ethical standards; and (iv) establishing an investigation and discipline system for its members.

Lastly, in addition to being a Member of IFAC, ICAM is a member of the Pan African Federation of Accountants.

Under the Public Accountants and Auditors Act of 2012, the Malawi Accountants Board (MAB) is responsible for conducting quality assurance (QA) reviews of audits of financial statements. The QA review system is operational and applies to all mandatory audits.

The QA system is designed to be in line with the requirements of SMO 1, including requirements relating to review cycles, reporting, corrective actions, and linkage with the investigative and disciplinary system.

Current Status: Adopted

Under the Public Accountants and Auditors Act of 2012, the Institute of Chartered Accountants of Malawi (ICAM) is responsible for establishing initial professional development (IPD) and continuing professional development (CPD) requirements for professional accountants. The Malawi Accountants Board oversees ICAM’s activities in this area.

ICAM has established a national professional qualification (CA(M)) and maintains CPD requirements for its members. The institute reports ongoing curriculum reviews and updates to align its qualification framework with the International Education Standards (IES), including revisions to professional competencies and practical experience requirements. ICAM’s CPD policy applies an input-based approach consistent with IES 7.

While ICAM has incorporated elements of the IES into its qualification and CPD framework, full formal adoption and comprehensive alignment with all revised IES requirements in effect at the time of the assessment are not fully demonstrated.

Current Status: Partially Adopted

The Companies Act, Act No. 15 of 2013, requires that audits of financial statements be conducted in accordance with International Standards on Auditing (ISA). In accordance with the Public Accountants and Auditors Act of 2012, only Practicing Accountants of ICAM registered with the Malawi Accountants Board are permitted to perform audit attest functions.

ISA as issued by the International Auditing and Assurance Standards Board are applied in Malawi without modification and are effective for all mandatory audits.

Current Status: Adopted

Under the Public Accountants and Auditors Act of 2012, the Institute of Chartered Accountants in Malawi (ICAM) has the authority to establish and monitor compliance with ethical requirements for professional accountants.

ICAM has established an ongoing process to adopt the International Code of Ethics for Professional Accountants (including International Independence Standards) as issued by the International Ethics Standards Board for Accountants, without modification.

Accordingly, the most recent version of the International Code of Ethics in effect at the time of the assessment is adopted for all professional accountants in the jurisdiction.

Current Status: Adopted

The Public Finance Management Act (Act No. 7 of 2003) provides that government financial reporting shall be in accordance with international standards and best practices applicable to governments and statutory bodies. The Office of the Accountant General has indicated adoption of International Public Sector Accounting Standards (IPSAS) as the applicable public sector reporting framework.

The Government of Malawi currently applies cash-basis IPSAS in the preparation of its financial statements. Accrual-basis IPSAS have not been fully adopted across the public sector.

Current Status: Partially Adopted

The Public Accountants and Auditors Act of 2012 authorizes the Institute of Chartered Accountants in Malawi (ICAM) to establish and operate an investigative and disciplinary (I&D) system for its members, which comprise all professional accountants in the jurisdiction.

ICAM operates a two-tier system consisting of an Ethics and Investigations Committee responsible for receiving and investigating complaints and a separate Disciplinary Committee responsible for making disciplinary determinations. The Disciplinary Committee includes non-accountant representation to strengthen independence.

The Act provides for an independent appeals mechanism to the Malawi Accountants Board (MAB). The disciplinary framework includes a range of sanctions, including suspension and removal of practicing rights, and establishes linkage between quality assurance findings and disciplinary proceedings.

Accordingly, an I&D system incorporating the requirements of SMO 6 has been established and is operational in the jurisdiction.

Current Status: Adopted

The Companies Act, Act No. 15 of 2013, requires the application of International Financial Reporting Standards (IFRS) or IFRS for Small- and Medium-sized Entities (SMEs) in the preparation of financial statements. Public interest entities are required to apply full IFRS, while other entities may apply either full IFRS or IFRS for SMEs.

IFRS and IFRS for SMEs as issued by the International Accounting Standards Board are applied in Malawi without modification and with the same effective dates.

Current Status: Adopted

Relevant Organizations

Institute of Chartered Accountants of Malawi (ICAM)

Malawi Accountants Board (MAB)

Relevant Legislation

Companies Act of Malawi, 2013

Companies Regulations, 2017

Companies Act of Malawi, 1984

Banking Act of Malawi

Insurance Act of Malawi

Securities Act of Malawi

Relevant Publications

ICAM, Council’s Report: 4th Annual General Meeting, September 16, 2016.

ICAM, SMO Action Plan, July 2017.

IFRS Foundation, “IFRS Application Around the World?Jurisdictional Profile: Malawi,” August 2016.

Muhome, Allan Hans, “Malawi Companies Act 2013 Exploring Key Changes,” April 2016. PowerPoint presentation.

PWC, IFRS Adoption by Country, 2014.

World Bank, Report on the Observance of Standards and Codes (ROSC)—Accounting and Auditing: Malawi, June 2007.