COMPANY LAW

AUDITORS

INTRODUCTION
Accounts is defined in
S 4 (1):Profit and loss accounts and balance sheets
and notes or statements required by the Act (other
than auditors report or directors reports)
Section 169 (1): Every company must lay down the
accounts at its annual general meeting
Section 169(4): Profit and loss account and balance sheet
to be audited before they are laid down before the
company

INTRODUCTION
Case: Caparo Industries plc v Dickman & Ors (1990)
Purpose of annual accounts:
is to enable them to question the past management
of the company, to exercise their voting rights, if do
advised, and to influence future policy and
management

ANNUAL ACCOUNTS
1st profit and loss account and balance sheet
Must be laid down within 18 months of the incorporation
Then, laid down every calendar year
Not more than 15 months since the last annual general
meeting

ANNUAL ACCOUNTS
A profit and loss accounts
A balance sheet
A directors report
A directors statement
A statutory declaration by director
Auditors report
Give a true and fair view of the statutory matters
In accordance to the act so as to give a true and
fair view of the companys affairs
In accordance with relevant approved accounting
standard.

APPOINTMENT OF AUDITORS
Section 172 of Companies Act
Every Company must appoint an auditor to audit its
accounts and report to members of the company.
First auditor
Director may appoint at any time before the first annual
general meeting
If not, company may appoint in general meeting
Auditor will hold office until the conclusion of the first
annual general meeting S 172 (1).
Subsequent appointment
Made by each annual general meeting
Hold office until the conclusion of the next annual
general meeting S 172 (2)

QUALIFICATION OF AUDITORS
Approved person
Approved by the minister
Approval valid for two years after the date of issue
Requires auditor to be competent, approved by the
Minister of Finance (MOF) and must ordinarily be
registered as a public accountant with the MIA under
the Accountants Act 1967

DISQUALIFICATION OF AUDITORS
Section 9 (1): Not an approved company auditor;
Indebted to the company exceeding RM 2,500;
He is the officer of the company;
He is a partner, employer or employee of an officer of
the company;
Etc.

TERMINATION AND REMOVAL

TERMINATION
Death or resignation
REMOVAL
Ordinary resolution of the company at a general
meeting.
Auditor is unsuitable to continue.
Special notice must be given.
Section 172(6) provides that seven days after
receipt may request, make representations, prior
to meeting a copy of representations sent to
members, may also require representation be
read orally at the meeting.
Once remove, may appoint new one.

POWERS OF AUDITORS
Access to accounting and other records
S174(4)&(5) :Rights to access accounting
book/records, vouchers, and other records of the
company and its subsidiaries.
Entitlement to require from any officer of the
company and any auditor of a related company or
of any subsidiaries, such information and
explanation as he desires for the purpose of
carrying out his duties.
Attend general meeting
S174(7):The entitlement to attend any general
meeting of any company and to speak on any
part of the business of that meeting that concern
him in his capacity as auditor.
Rights to receive all notices of any other
communication relating to any general meeting in
which a member entitled to receive.

DUTIES OF AUDITORS
Duty to report to members
Auditor must safeguard the interests of the
members.
Auditor must circulate reports to all members.
Auditor must communicate findings and seek
explanations from the officers especially if fraud is
suspected or discovered.
To carry out audit
Auditor must devise procedures to assist in
detection of errors or fraud.
Auditor must give an opinion on whether the
companys accounts provide a true and fair view of
its position.
Duty to be independent
Auditor must ensure the shareholders receive
unbiasedopinion of the true and fair viewof the
companys position;

DUTIES OF AUDITORS
Duty to use reasonable care and skill
Standard of care and skill of an auditor is that of an
ordinary and reasonable auditor.
Failure to do so, auditor is liable to the company for
breach of contract or negligence suit.
In such an event, the auditor is liable for any loss
suffered by the company.
Statutory Duties
Section 174 of Companies Act
Duties to report to Registrar
Section 174 (8) of Companies Act
In writing, immediately
If there is breach or non compliance of the act ;
and his opinion; and,
Has not been adequately dealt with.

AUDITORS LIABILITIES
Auditors liability to the company
An auditor who commits a breach of his
common law duty to use a reasonable care and
skill may be sued by the company
Case: Leeds Estate Building and Investment
CO v Shepherd
Although the auditor reports on the companys
account to the members, the auditor owes a
contractual duty of care to the company itself
Case: Caparo Industries plc v. Dickman & Ors
(1990)
Auditors liability to third parties
Auditors do not owe any liability to a third party.
That is he does not owe any liability to the
members of the public
Case: Caparo Industries plc v. Dickman & Ors
(1990)