AUDITOR

AUDITOR : SAMPLE FINAL EXAM QUESTION

SECTION A

1. Briefly explain appointment of an auditor for a public company. (3 marks)
[MAY2019]

SECTION B

1. In order to safeguard the interests of the shareholders and to check on the auditors, Companies Act 2016
provides compulsory appointment of an auditor in a company.
Based on the above statement:

a) Discuss on qualifications required to become an auditor in Malaysia (8 marks)
b) Elaborate three (3) duties of an auditor. Support your answer with the relevant authorities. (12 marks)

[SEPT2018], [SEPT2017]





AUDITORS Introduction Duty to carry out
Appointment audit
Qualification To the company
Vacation of office Duty to report

Rights Duty to be
Duties independant

Duty to use
reasonable care &

skill

1. INTRODUCTION

1.

SEC 245 CA 2016 - provides

3. company to keep all the 2.

The purpose of records/transaction. The An independent certified
carrying audit, is to public account, will examine
director shall prepare a the records & provides written
give high level of statement as to whether the
assurance and it is free financial stmt audited accounting records comply

from misstatement. first sent to the with the Act

members directors will

present it in AGM.

S. 267 – Private co. APPOINTMENT S. 271 – Public co.

1. For each financial year. 1. For each financial year.

2. By B.O.D or member 2. B.O.D appoint at any time
through ordinary before the 1st AGM or by
resolution.
members through ordinary
3. Period – depends on l.o.a resolution.

3. Hold office until the
conclusion of !st AGM.

4. Auditor cease to hold office
at the conclusion of AGM
unless he has been
reappointed.

REMUNERATION REMOVAL RESIGNATION

Sec 274 CA 2016 - Sec 276 CA 2016 – Sec 281 CA 2016 -
Will be decided by the 1. May resign before his
1. Members may remove
parties who appoint him at any time by terms end by giving
him in the company. ordinary resolution written notice.
and 28 days notice
given. 2. May resign after 21
days from the date he
2. The copies send to the send notice to the
auditor & Registrar in 14 company.

days 3. The company after
receives notice in 7
days must send it to
the Registrar

Approved by the Min Indebted with the Not an
of Finance as he company approved
>rm25000
competent enough to auditor
become auditor

21 years old Must be a 1. Officer of the co DISQUALIFICATION
member of 2. Partner/employer/e Sec 264 CA 2016
QUALIFICATION professional
Sec 263 CA 2016 mployee of the
bodies. officer

Undischarged 3. Partner/employee
bankrupt of an employee of
the an officer
Fit & proper Registered as a
person public accountant 4. Shareholder/spous
e of the officer
with MIA

DUTIES : sec 1. DUTY TO CARRY OUT AUDIT & PREPARE
266 CA 2016 REPORTS

This is the main statutory duty where the report shall be
presented at the AGM.

In the report auditor must consider whether the report follow
the accounting standard. The report must be transparent (true

& fair view)

Case : Pacific Acceptance Corp
The auditor had failed to detect errors/fraud. The court held

that an auditor had breached the duty to carry out audit.

2. DUTY TO INVESTIGATE & BE DUTIES : 3. DUTY TO USE REASONABLE CARE
INDEPENDENT IN HIS REPORT. sec 266 AND SKIL
CA 2016
1. That is why a persons who are 1. If fails to use reasonable care and skill, will be liable
connected with a company is for breach of contract & negligence.
disqualified to be a company auditor.
2. Case : Re Kingston Cotton Mill Co [1896]
2. This to make sure the shareholder
receives an unbiased report. The director had overstated the values of the stock, he
did this only to make it appear better in the account.
3. Can seek information from any Auditors failed to detect this.
officers, but when come to making his Court held : not liable
report, he must do so independently,
make inquiries, cannot rely on others. 3. BUT in 1968 in Re Thomas Gerard
The director make alteration on invoices, the auditor had
4. Breach of duty if totally rely on them. notice of it but failed to investigate.

Case : Dominion Freeholder Court held ; breached of duty.
Auditor argued that he received wrong
information from the company’s 4. Pasific Acceptance Corp Ltd v. Forsyth (1970)
accountant. The auditor had failed to detect errors/fraud. The court
held that an auditor had breached the duty to carry out
Court held as breached of duty. audit.

AUDITOR’S 1. Auditor may access the books and accounts at all reasonable times
POWER 2. May request for necessary explanation & information.

3. May attend AGM, may receives notice, may speak in the meeting in his
capacity as auditor.

Section 266(4) CA 2016

Auditor in public company may attend AGM and so that he can respond
according to his knowledge
Section 285 CA 2016

If he discovered any irregularities and fails to report then he is guilty
punishable with imprisonment (5 years) or fine <rm3 million.

Any officers who fails to give co-orperation to the auditors shall be guilty of
imprisonment (3 years) or fine rm50,000 or both.