Topic 2 latest(1).pptx

2 Statutory and Regulatory Requirement  Learning Outcomes: 1 2 3 Discuss the „„Explain the Identify the rights, duties process of governing and powers of appointment bodies in auditors. and removal or auditing an...

2 Statutory and Regulatory Requirement  Learning Outcomes: 1 2 3 Discuss the „„Explain the Identify the rights, duties process of governing and powers of appointment bodies in auditors. and removal or auditing and resignation of their roles. auditors. 3  Section 248(2) CA2016: Every company incorporated under the Act shall have its financial statements Provisions duly audited before the accounts are presented at the AGM. for Audits under Section 263 CA2016: - Audit must be performed by an Companie approved company auditor. s Act 2016 Section 266 CA2016: - Specifies the power & duties of auditors. 4 Appointment of Auditors Section 248(2) CA2016 Requires a company to appoint a company auditor(s) at every AGM & the auditor appointed will hold office until the conclusion of the next AGM. Auditors are appointed by the shareholders of the company. Only approved company auditor(s) as specified under Section 263 is permitted to act as the auditor of the company. 5 Appointment of Auditors (cont’d) Section 320 (MIA By-Laws) ISA 210 - auditor’s responsibilities in agreeing the terms of the audit engagement with management (engagement letter). 6  What is an Engagement Letter?? 8  CA 2016 differentiates the appointment of auditor for a private company and public company since AGM is no longer compulsory for private companies. Appointme The following are the responsible nt of person for the appointment of the auditor (i.e., no AGM): Auditors i. Directors (cont’d) ii. The members (if directors do not appoint); or iii. The RoC (on member’s written application and failure to appoint by private company). 9  Must be approved by the Minister of Finance (MoF). Valid for two (2) years unless revoked earlier by the Minister [Sec. 263 (1)-(4)]. Other qualifications required for an auditor are as follows: Qualificatio Meet criteria relating to professional training, expertise and experience, capable n of Auditor of performing duties of an auditor and good character. Registered with the Malaysian Institute of Accountants (Accountants Act 1967). Must be independent of the company; Must not owe more than RM25,000 from the company or related company; 10 Disqualification of Auditors Section 264(1) CA2016: A person is prohibited from acting or accepting an appointment as the auditor of a company if he is: Indebted to the company or its related company in an amount exceeding RM25,000; an officer of the company; A partner, employer or employee of an officer of the company; A partner, employee of an employee of an officer of the company; a shareholder of a corporation whose employee is an officer of the company; or 11 Disqualificati Responsible for or if he is the on of partner, employer or employee for a person responsible for keeping the Auditors members' register of the debenture- holders of the company. (cont’d) 12 Powers and Duties of an a) b) Duty Duty to Shareholders to the Company Auditor c) Duty of Care and Skill d) Duty to Third Parties under the e) Duty of Confidentiality Common Law: 13  Section 266(2) CA2016 Two main requirements: i. The auditor must state, whether in his opinion, the FS have been properly Reporting drawn up in accordance with the provisions of the Act & approved duties of accounting standard, so as to give a true & fair view of the company's state of affairs & result of operations; and Auditors ii. Auditor must state, whether in his opinion, the accounting & other records & the registers required by the Act to be kept by the company, have been properly kept in accordance with the Act. 14  To enable auditor to perform their duties Reporting effectively, the Act empowers auditor to have the right of access at all duties of reasonable times, to the accounting & other records of the company & its related companies. Auditors Also entitled to obtain from officers of the company & related companies, (cont’d) information & explanations that he requires for the purposes of the audit. 15 Retirement & Termination of Auditors Section 276 CA2016 auditor of a company is to notify the Registrar and the Stock Exchange (in the case of a public listed company) in the event he ceases to hold office in such company under the following circumstances: where he is to be removed from office by resolution of the company at a general meeting pursuant to section 276(1) AND where the said auditor has made a representation in writing to the company under section 277; or 16 Retirement & Termination of Auditors (cont’d) where he intends to resign and gives a written notice to the directors of the company of his intention to resign pursuant to section 281(1). 17 18  Financial statements – share capital and reserves, statutory records. Property, plant and equipment Cash and bank balances, fixed deposits Accounts Loans required to Investments be audited Trade receivables Payables and Accruals Inventories and work-in-progress Income statement 19 Governing Framework in Auditing 20 Malaysian Standards on Auditing (MASA) Standards pertaining to actual auditing practice are issued by the MIA. 2 categories: i. Standards that are adapted or adopted from those issued by the IAPC known as ISA-International Standard on Auditing; ii. Issues by MIA to argument ISA called MASA – Malaysian Approved Standards on Auditing. Intended to cover topics NOT dealt with in the ISA where particular features of the Malaysian environment warrant a domestic standards written specifically to address local features. 21 International Standards on Auditing (ISA) Issued by the International Auditing Practices Committee (IAPC) of International Federation of Accountants (IFAC). ISAs are generally similar to Malaysian Approved Standards of Auditing (MASA). ISAs do not override a country’s regulations governing the audit of financial or other information. MIA and MICPA are members of IFAC. Auditing standards contain the basic principles and essential procedures which must be followed on each audit. 22 Internationa l Standards on Auditing (ISA) Conceptual Basis 23 International Standards on Auditing (ISA) Performance or Field Work Standards 24 Governing Bodies in Auditing 25 Audit Oversight Practice Review Board Committee -Fill in the details- -Fill in the details- Auditing and Ethics Standards Assurance Board Standards Board -Fill in the details- -Fill in the details- 26  Governing Framework vs. Governing Bodies This Photo by Unknown Author is licensed under CC BY-ND  Next Topic 3: Objectives and Scope of Financial Statement Audit