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Audit Tutorial 2
Question 1:
(a) Briefly explain FIVE (5) statutory rights granted by Companies Act 2016 to external
auditors to enable them to carry out their duties effectively.
• Statutory rights granted by Companies Act 2016 to external auditor is necessary to
enable them to carry out their duties effectively.
1) Access to records
• A right of access at all reasonable times to the accounting records and other records,
including registers of the company.
• Examples of accounting records: source documents (such as invoices, official
receipts), accounts and vouchers of the company.
2) Sufficient information and explanations
• A right to require from the company’s officers such information and explanations as
they think necessary for the performance of their duties as auditors.
3) Rights in relation to written resolutions
• A right to receive a copy of any written resolution proposed.
4) Attendance at/notices of general meetings
• A right to attend any general meetings of the company and to receive all notices of
and communications relating to such meetings which any member of the company is
entitled to receive.
5) Right to speak at general meeting
• A right to be heard at general meetings which they attend on any part of the business
that concerns them as auditors.
6) Right to require laying of accounts
• A right to give notice in writing requiring that a general meeting be held for the
purpose of laying the accounts and reports before the company (if elective resolution
dispensing with laying of accounts in force)
• The auditor’s report shall be attached to or endorsed on the financial statements or
consolidated financial statements and shall, if any member so requires, be read
before the company in general meeting and shall be open for inspection by any
member at any reasonable time.
Note:
➔ Section 266, Companies Act 2016: Powers and duties of auditors.
Additional Question:
What is the rational of granting statutory rights to external auditor?
Statutory rights are granted to external auditor to enable them to carry out their duties
effectively.
(b) Briefly explain FIVE (5) statutory duties of external auditors under Companies Act 2016.
1) To express/form audit opinion
• To express/form audit opinion on the F/S prepared and presented by BOD shows
true and fair view after reviewing all material respects, in accordance with laws and
an identified financial framework.
2) To report to shareholders
• To report to shareholders on whether the F/S prepared and presented by BOD
shows true and fair view after reviewing all material respects, in accordance with
laws and an identified financial framework.
3) To report on any violation of law
• To report on any violation (non-compliance) of law of the company’s constitution.
• Auditor is required to report in writing to the Registrar if in the course of the
performance of his duties as auditor of the company detected there has been a
breach of non-observance of any of the Provisions of the Act.
Note:
• S266(13) Companies Act 2016: Non-compliance: Imprisonment for a term not
exceeding 3 years or to a fine not exceeding RM3 million or to both.
4) Management report VS Audited Financial Statement ➔ consistent
• To consider whether the information in the management report is consistent with the
audited financial statement.
5) To give various details required by legislation.
• To ensure the directors disclose all the various details required by legislation.
• Example: Common details are directors’ transactions and emoluments.
6) To make a “Statement of circumstance”
• To make a “statement of circumstance” when they cease to hold office for any
reason.
• Consist of:
a) “Statement of circumstances”
➔ Some disagreement issues need to be highlighted to the attention of
shareholders.
➔ Example: fraud, severe disagreement over accounting practices.
b) “Statement of no circumstances”
➔ No issues need to be brought to the attention of the shareholders.
➔ Example: Disagreement over auditor fees.
Note:
Cessation of office:
20/5/2018 27/5/2018
➔ Served notice of resignation ➔ Statement of Circumstances
=>Section 284, Companies Act 2016
After 21 days from date of notice ➔ auditor’s term of an office to an end ➔ after 10/6/2018
➔ Section 281, Companies Act 2016
(c) Briefly explain FIVE (5) statutory duties of company director under Companies Act 2016.
1) Adequate internal control system
• Taking reasonable steps to safeguard the assets of the company and prevent and
detect fraud and errors.
• Directors are responsible for designing an effective internal control system to protect
the companies’ assets from any possibility of fraud and error.
2) Accounting system and accounting records.
• Directors are required to design the accounting system.
Within 7 days
