CONTENTS

TITLE PAGES
INTRODUCTION 2
ANSWER QUESTION 1 3–4
ANSWER QUESTION 2 5
CONCLUSION 6

1
INTRODUCTION

An audit is a process whereby the financial statement of business entities,including limited

companies,charities,trusts and professional firms are subjected to scrutiny in such detail as will will
enable the auditors to form an opinion as to their truth and fairness.

Other than that , auditing can be described as a process of objectively collecting and evaluating
evidence related to an assertion so as to determine whether the assertion corresponds with the
established criteria.Auditing is an assurance service because it provides some level of assurance to
the interested party or parties.

2
QUESTION 1

Explain 4 reasons why the audit of financial statementsof limited companies is necessary ?

The natura of limited companies is such that auditing becomes necessary in order to protect the
shareholders ( owners ). A limited company is different from a partnership or a sole
proprietorship.Whereas a partnership and a sole proprietorship are under the direct control of the
owners,the limited companies are not.The necessity for the audit of limited liability companies may
be summarized as follows :

Separation between management and owners

The owners of limited liability companies are often separated from its management.The
shareholders are not accessible to the documents and records of the company.Even if these
documents and records are accessible , most of the shareholders are not competent to understand
them . As such it is not possible for the shareholders to ensure themselves of the quality of the
financial statements.This makes auditing necessary

Conflict of interest

There is often a conflict of interest between the management and owners . Management people are
often overzealous about the operation and results of the business in the sense that they tend to

3
show strengths and hide weakness.The owners and other parties interested in the business would
like an assurance about the picture of the business.This is not possible without auditing

Diverse users

-The financial statements of limited companies are used to make many type of decisions by diverse
users. the users of financial statements are reliable.Auditing can provide this assurance

Complexity

-Limited companies now are large,many with branches and subsidiaries scattered all over the
global.This makes thevpreparation of the financial statement become more and more
complex.Complexity can give rise to misstatement ,either intentional or otherwise.The need for
auditing is obvious .

4
QUESTION 2

Name 2 profesional accounting body in Malaysia and discuss their roles in accounting field ?

A. MALAYSIAN INSTITUTE OF ACCOUNTANTS ( MIA )

-MIA is a statutory body.A statutory body is a body established by statute, that is, an Act of
Parliament.MIA was established under Accountants Act 1967 with the objective of regulating
of controlling the accounting profession.
Every accountant in Malaysia is required to be a member of MIA . All accounting and
auditing activities of limited company in Malaysia fall under the jurisdiction of MIA.As
provided for under Companies Act 1965 , it is illegal for any persons who are not members of
MIA to carry out any accounting practice associated with limited company in Malaysia .

THE ROLE OF MALAYSIAN INSTITUTE OF ACCOUNTS ( MIA )

a) To promote and monitor professional standards and integrity

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 b) To provide education and training to meet the challenge of the ever-changing global
economy
c) To conduct and promote research and development for the enhancement of the
profession

B. MALAYSIAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS ( MICPA )

-MICPA was established in 1958 as Malayan Institute of Certified Public Accountants, a
company limited by guarantee with the objective of providing the necessary guidance to the
profession .

THE ROLE OF MALAYSIAN OF CERTIFIED PUBLIC ACCOUNTANTS ( MICPA )

a) To advance the theory and practice of accountancy in all its aspects.
b) To recruit, educate, train and assess by means of examination or otherwise a body of
members skilled in these areas.
c) To preserve at all times the professional independence of accountants in whatever
capacities they may be serving.
d) To maintain high standards of practice and professional conduct by all its members.
e) To do all such things as may advance the profession of accountancy in relation to
public practice, industry, commerce, education and the public service.
CONCLUSION
An audit is a process whereby the financial statement of business entities,including limited
companies,charities,trusts and professional firms are subjected to scrutiny in such detail as
will will enable the auditors to form an opinion as to their truth and fairness.

Besides that ,company auditors belong to the accounting profession. There are two
accounting professional bodies in Malaysia namely , Malaysian Institute of Accounts ( MIA )
and Malaysian Institute of Certified Public Accountants ( MICPA ).