LAW485 - Auditor - uitm student account PDF

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AUDITOR – SELF ASSESSMENT QUESTIONS 1. What are the qualifications and disqualifications of an auditor? QUALIFICATION  S263(1) – A person who wants to be a company’s auditor must first obtain approval from the Minister charged with responsibility for finance. The approval is for a period of 2 years unless revoked earlier by the Minister  S263(2) – the Minister may approve if he satisfied that the applicant is: - Of good character - Competent to perform the duties of an auditor  An approved company auditor is one that has been approved by the Ministry of Finance to act as auditor and has the necessary qualification and satisfies the above requirements  The auditor must be registered as a public or chartered accountant with the MIA under Accountant Act 1967. This is further confirmed by S263(7)  S14(3) of Accountant Act 1967 – MIA will only consider an application for registration as a public or chartered accountant if: - The person at least 21 years age - A fit and proper person to be admitted - Must have passed the final exam at one of the institutions specified under S14(1)(a) Accountant Act 1967 - He must be a member of one of the specified professional bodies under S12(1)(a) Accountant Act 1967  S264(5) – a person may not be appointed as an auditor of the company unless he has given his written consent to the appointment DISQUALIFICATION  S264(1) – an approved company auditor may not accept the appointment or act as an auditor for a company if: 1) He is not an approved company auditor – S264(1)(c)(i) 2) He is indebted to the company or its related corporation for an amount exceeding RM25,000 – S264(1)(c)(ii) 3) He is an officer of the company – S264(1)(c)(iii)(A) or its related corporation – S264(2) 4) His spouse is an officer at the company – S264(1)(c)(iii)(A) or its related corporation – S264(2) 5) If he is a partner, employer or employee of an officer of the company - S.264(1)(c)(iii)(B) or its related corporation – Section 264(2) 6) He is a partner or employee of an employee of an officer of the company - S.264(1)(c)(iii) (C) or its related corporation – Section 264(2) 7) He is a shareholder of a corporation whose employee is an officer of the company – S.264(1)(c)(iii)(D) or its related corporation – Section 264(2) 8) His spouse is a shareholder of a corporation whose employee is an officer of the company – S.264(1)(c)(iii)(D) or its related corporation – Section 264(2) 9) He is responsible for the keeping of the register of members or register of debenture holders of the company – S.264(1)(c)(iv)

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10) He is undischarged bankrupt within or outside Malaysia except with leave of the court – S. 264(1)(c)(v); or 11) He has been convicted of any offence involving fraud or dishonesty punishable with imprisonment for three months or more – S.264(1)(c)(vi) Section 264(2) a person shall be deemed to be an officer of a corporation if he has been an officer or promoter of the corporation at any time within the past 12 months. The term officer has been defined under Section 2(1) to include a director, secretary or employee, a receiver and manager as well as a liquidator of the corporation In case a firm of auditor to be appointed as auditor, Section 264(4) requires all the partners in the firm are resident in Malaysia and are approved company auditors. Section 264(8) provides penalty to a fine not exceeding RM100,00 on any person or firm appointed in contravention of Section 264(1) and (4).

2. Please explain the differences between the appointment of an auditor at a private and public company? appointment of an auditor at a appointment of an auditor at a private company public company First auditor S267(3) provides that the board of S271(1) provides that the board of directors shall appoint the first director shall appoint the first auditor at least 30 days before the auditor at any time before the end of the period for the submission company’s first annual general of the first financial statements to meeting and he shall hold office until the ROC the conclusion of the first AGM. There is a statutory obligation for a Reference should be made to company under S258 to submit the S340(3) which requires that a public financial statements to the ROC company to hold its first AGM within within 30 days from the circulation 18 months after its incorporation. of the statements to the members The board of director must appoint If the board of director did not the first auditor not later than 6 appoint any auditor, then the months after the company’s financial member may do so by passing an ordinary resolution - S271(4). year end. The ROC may also appoint one or The ROC may also appoint one or more auditors upon receipt of an more auditors upon an application in application in writing from any writing from any member of the company – S272. member of the company – S268. Subsequent An auditor appointed to audit the S271(4(a) provides that the member auditor company’s subsequent years’ may appoint an auditor at the AGM, and the auditor shall hold office until financial statements. the conclusion of the next AGM. Based on S269(1), an auditor of a There is no provision for the private company ceases to hold automatic re-appointment of an office in accordance with the terms auditor. The appointment is on yearly basis. of his appointment provided that:

1) He does not take office until the previous auditor ceases to hold office, unless he is the first auditor; and 2) He ceases to hold office 30 days after the company’s audited financial statements are circulated to its members unless he is re-appointed. S269(2) further provides that an auditor may take office before the previous auditor ceases office if the previous auditor is not the sole auditor or if he is appointed as an additional auditor. Where the auditor’s office becomes vacant under S269(1)(b) and no auditor has been appointed by the members, then the auditor who hold office immediately before the vacancy shall automatically be reappointed

If the member did not appoint another auditor, then S271(4)(b) provides that members can appoint an auditor by passing an ordinary resolution possibly at a general meeting held later. The ROC may also appoint one or more auditors upon an application in writing from any member of the company – S272.

3. Briefly explain whose interest are protected by the company auditors and how it is done?

ISSUE 1. Whether Razif has breach his duties as an auditor by not giving a true and fair view of the company's account? 2. Whether the company and Mona can take any legal action on Razif? LAW i.definition of common law duties ii.duty of care iii.breach of duty iv.duties to an outsiders other than the company & its members 1. The loss or damage suffered by the plaintiff was foreseeable 2.There was an existing relationship of proximity between the auditor and the plaintiff 3. It is reasonable to impose on the auditor a duty of care towards the plaintiff APPLICATION By referring to the case of Daniels and Anderson, this case stated that even if auditor had disclosed the matter and the company could not have done anything to avoid losses.However, there is no causation between the auditor’s breach of duty and the losses suffered.Other than that, in the case of Segenhoe Ltd and Akins stated that the auditor to be liable for the full amount of capital paid by the company as the losses were caused by their negligence. CONCLUSION In conclusion, Mona and OK Sdn Bhd. can take legal action against Razif because he negligent his duty as auditor and believe Tuan Suhaimi statement without make further investigations....