Company Auditing - Statutory and Regulatory Requirements

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Questions and Answers

What is the main requirement of Section 248(2) CA2016?

Every company incorporated under the Act shall have its financial statements duly audited before the accounts are presented at the AGM.

Who appoints the auditor of a company?

The shareholders of the company.

An auditor must be appointed by the directors of the company.

False

What is the purpose of an engagement letter?

To agree on the terms of the audit engagement with management. Signup and view all the answers

Who is responsible for appointing the auditor of a private company if there is no AGM?

All of the above Signup and view all the answers

What is the qualification required for an auditor?

Must be approved by the Minister of Finance, meet criteria relating to professional training, expertise, and experience, capable of performing duties of an auditor, and have good character. Signup and view all the answers

A person who is indebted to the company or its related company in an amount exceeding RM25,000 can act as an auditor.

False Signup and view all the answers

What are the duties of an auditor under the Common Law?

Duties to shareholders, duties to the company, duty of care and skill, duty to third parties, and duty of confidentiality. Signup and view all the answers

What are the reporting duties of an auditor?

To state whether the FS have been properly drawn up in accordance with the provisions of the Act and approved accounting standards, and to state whether the accounting and other records have been properly kept in accordance with the Act. Signup and view all the answers

What is the purpose of the auditor's right of access to the company's records?

To enable the auditor to perform their duties effectively. Signup and view all the answers

What is the purpose of the auditor's notification to the Registrar and the Stock Exchange in the event of retirement or termination?

To notify the Registrar and the Stock Exchange in the event the auditor ceases to hold office in the company. Signup and view all the answers

What are the financial statements that require auditing?

Financial statements including share capital and reserves, statutory records, property, plant and equipment, cash and bank balances, fixed deposits, loans, investments, trade receivables, payables and accruals, inventories and work-in-progress, and income statement. Signup and view all the answers

What is the governing framework in auditing?

The governing framework in auditing includes the Malaysian Standards on Auditing (MASA) and the International Standards on Auditing (ISA). Signup and view all the answers

What is the role of the Audit Oversight Board?

To oversee the audit profession and ensure compliance with auditing standards. Signup and view all the answers

Study Notes

Statutory and Regulatory Requirements

Under Section 248(2) CA2016, every company incorporated under the Act must have its financial statements audited before presenting them at the AGM.
Section 263 CA2016 specifies the power and duties of auditors.
The appointment of auditors is governed by Section 248(2) CA2016, which requires companies to appoint auditors at every AGM.
Auditors are appointed by shareholders of the company.
Only approved company auditors, as specified under Section 263, are permitted to act as auditors.

Appointment of Auditors

The AGM is not compulsory for private companies under CA2016.
The responsible person for appointing auditors is:
- Directors
- Members (if directors do not appoint)
- The Registrar of Companies (RoC) on a member's written application and failure to appoint by the private company

Qualifications of Auditors

Auditors must be approved by the Minister of Finance (MoF) and are valid for two years unless revoked earlier.
Other qualifications required for auditors include:
- Meeting criteria related to professional training, expertise, and experience
- Being capable of performing audit duties
- Having good character
- Being registered with the Malaysian Institute of Accountants (Accountants Act 1967)
- Being independent of the company
- Not owing more than RM25,000 from the company or related company

Disqualification of Auditors

A person is prohibited from acting or accepting an appointment as an auditor if they:
- Are indebted to the company or related company in an amount exceeding RM25,000
- Are an officer of the company
- Are a partner, employer, or employee of an officer of the company
- Are a partner, employee, or employer of an employee of an officer of the company
- Are a shareholder of a corporation whose employee is an officer of the company
- Are responsible for keeping the members' register of the debenture-holders of the company

Powers and Duties of Auditors

Under the Common Law, auditors have duties to:
- Shareholders
- The company
- Third parties
- Confidentiality
Under Section 266(2) CA2016, auditors have two main reporting duties:
- To state whether the financial statements have been properly drawn up in accordance with the Act and approved accounting standards
- To state whether the accounting and other records and registers required by the Act have been properly kept

Reporting Duties of Auditors

Auditors have the right of access to accounting and other records of the company and related companies at all reasonable times.
Auditors are entitled to obtain information and explanations from officers of the company and related companies for the purposes of the audit.

Retirement and Termination of Auditors

Under Section 276 CA2016, auditors must notify the Registrar and the Stock Exchange (in the case of a public listed company) in the event they cease to hold office.
Circumstances for notification include:
- Removal from office by resolution of the company at a general meeting
- Written representation to the company
- Intention to resign and giving written notice to the directors of the company

Accounts Required to be Audited

Financial statements, including:
- Share capital and reserves
- Statutory records
- Property, plant, and equipment
- Cash and bank balances
- Fixed deposits
- Loans
- Investments
- Trade receivables
- Payables and accruals
- Inventories and work-in-progress
- Income statement

Governing Framework in Auditing

Malaysian Standards on Auditing (MASA) are issued by the Malaysian Institute of Accountants (MIA).
There are two categories of MASA:
- Adapted or adopted from International Standards on Auditing (ISA)
- Issued by MIA to address local features
International Standards on Auditing (ISA) are issued by the International Auditing Practices Committee (IAPC) of the International Federation of Accountants (IFAC).

Governing Bodies in Auditing

Audit Oversight Board
Practice Review Committee
Ethics Standards Board
Auditing and Assurance Standards Board

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Description

Learn about the rights, duties, and powers of auditors, as well as the process of appointment and removal of auditors in a company. Understand the governing bodies and their roles in auditing.