Lecture 1

Introduction to Audit and

Assurance Services
Learning Outcomes
 Describe auditing
 Distinguish between auditing and accounting
 Explain why there is a need for auditing and
assurance services
 Describe different types of audit.
 Explain the framework of auditing
 Describe the requirements for becoming a
Chartered Accountant
 Auditing
• Auditing is a systematic process of
objectively obtaining and evaluating
evidence regarding assertions on
economic actions and events, to
ascertain the degree of
correspondence between those
assertions, and established criteria and
communicating the results to interested
users.
 Assurance Service
 Assurance Service is defined as an
independent professional service in which
a practitioner express a conclusion
designed to enhance the degree of
confidence of intended users other than
the responsibility party about the
outcome of the evaluation or
measurement of the subject matter
against criteria
 Distinguish Between
Auditing and Accounting
Accounting vs Auditing
 Accounting
- the recording, classifying and summarising of
economic events in a logical manner for the
purpose of providing financial info for decision
making.

classifying

recording summarising
Accounting vs Auditing
 Auditing

- focus on determining whether recorded information

properly reflects the economic events that
occurred during the accounting period.
- besides a thorough understanding of approved
accounting standards, auditor must
also possess expertise in the
Determining proper
accumulation & interpretation of audit procedures

audit evidence.
Deciding number & types
of items to test
Evaluating results
Types of Audits
Operational- to evaluate the effectiveness and efficiency of
the procedure

 Compliance Audit- to determine the compliance with specific

procedures and rules established by higher management within
entity and authority
 Financial Statement Audit-is the systematic process in which the
auditor objectively obtains and evaluate evidence regarding
management assertions about transaction and events to ascertain
whether the financial statements are prepared in accordance with
established standard

Forensic Audit- is often conducted to obtain or develop information as

evidence or for use by expert witness in the court of law
Operational Audit

Evaluate computerized payroll system

Example
for efficiency and effectiveness
Number of records processed, costs of
Information
the department, and number of errors
Established Company standards for efficiency and
Criteria effectiveness in payroll department
Available Error reports, payroll records, and
Evidence payroll processing costs
 Compliance Audit

Determine whether bank requirements

Example
for loan continuation have been met

Information Company records

Established
Loan agreement provisions
Criteria
Available Financial statements and
Evidence calculations by the auditor
Financial Statements Audit

Annual audit of Boeing’s financial

Example
statements

Information Boeing's financial statements

Established Generally accepted accounting

Criteria principles
Available Documents, records, and outside
Evidence sources of evidence
Types of Auditors
 External Auditors
 “independent auditor”- financial statement audit
 Approved company auditor” means a person approved
by the Minister of Finance under 2016 CA to perform
the duties of a company auditor. The person must be
Member of Malaysian Institute of Accountants (MIA) –
Chartered Accountant (MIA) and having his principal
place of residence in Malaysia
 Internal Auditors- compliance, operational , financial
statement audit
 Government Auditors- perform audit for the auditor
general( OAG) established under the Audit Act, 1957
Independent auditors
 Independent auditors, often referred to as
external auditors, are either individual
practitioners or members of public accounting
firms who render professional auditing services
to clients

 By virtue of their education, training and

experience, independent auditors are
qualified to perform the types of audits
previously described

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Auditor’s Independence
• Audit Independence is the cornerstone of auditing.
Independence is the essence that underlies the success
and credibility of the accounting profession and its
service to the public.
• Maintaining independence allows the auditing and
accounting profession to be self-regulated, a highly
prestigious character. This objectivity permits the
profession to perform its attestation and monitoring
functions effectively.
• Independence is also a key component of the agency
theory of auditing. In the management /shareholder
agency relationship it is important that the monitoring
function (audit) is and is seen to be separate from
management, for it to be a ‘value added’ service.
• Independence mean a state of mind that involves
objectivity in mind and in appearance and absence of
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any significant conflict of interest

Independence in mind

The state of mind that permits the

expression of a conclusion without
being affected by influences that
compromise professional judgment,
allowing an individual to act with
integrity and to exercise objectivity
and professional scepticism

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Independence in appearance
Independence in Appearance

The avoidance of facts and circumstances

that are so significant that a reasonable
and informed third party, having
knowledge of all relevant information,
including safeguards applied, would
reasonably conclude a firm’s or
professional accountant’s integrity,
objectivity or professional scepticism had
been impaired
MIA By-Law Fundamental principles
section 100
A professional accountant/auditors shall comply
with the following fundamental principles:
 (a) Integrity - to be straightforward and honest in
all professional and business relationships.

 (b) Objectivity - to not allow bias, conflict of

interest or undue influence of others to override
professional or business judgments.

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 MIA By-Law Fundamental principles
(c) Professional Competence and Due Care - to
maintain professional knowledge and skill at the
level required

(d) Confidentiality – to respect the confidentiality

of information acquired as a result of professional
and business relationships

(e) Professional Behaviour – to comply with

relevant laws and regulations and should avoid any
conduct that discredits the profession.
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 MIA By-Law Fundamental principle
Confidentiality
The following are circumstances where may be
required to disclose confidential information is
considered appropriate:
1. Disclosure is permitted by law and is authorised
by the client.
2. Disclosure as evidence in the course of legal
proceedings.
3. There is a professional duty or right to disclosure
to comply with quality review of MIA, to protect
the professional interest and to comply with
ethical requirements. 20

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Specific threats to independence

 Financial interests
 Loans and guarantees
 Close business, family and personal relationships
 Employment relationships
 Recent service and serving as an officer on the
board of assurance clients
 Long association

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Specific to independence

Threats to independence and objectivity may arise in

the form of :
 self-review,
 self-interest,
 advocacy,
 familiarity and
 intimidation threats.
 Appropriate safeguards must be put in place to
eliminate or reduce such threats to acceptable
levels.
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Threats to independence-self-interest
 Self-interest threats may arise as a result of the financial or
other interests of members or of immediate or close family.

 A financial interest exists where an audit firm has a

financial interest in a client's affairs, for example, the
audit firm owns shares in the client, or is a trustee of a
trust that holds shares in the client.

 Examples of when an audit firm and an audit client have a

close business relationship include: having a financial
interest in a joint venture with either the client or a
controlling owner, director, officer or other individual who
performs senior managerial activities for that client.
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 Threats to independence-
self-review

 Self-review threats arise when members review

their own work or advice as part of an assurance
engagement.

 Example :Individuals who have been a director or

officer of the audit client, or an employee in a
position to exert direct and significant influence
over the preparation of the accounting records or
financial statements in the period covered by the
audit report, should not be assigned to the audit
team.
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 Threats to independence-
Advocacy

 Advocacy threats arise in those situations where

the audit firm promotes a position or opinion to the
point that subsequent objectivity is compromised.

 Examples include commenting publicly on future

events in particular circumstances, having made
assertions without detailing the assumptions, or
acting as an advocate on behalf of an audit client
in litigation or disputes with third parties. Advocacy
threats might also arise if the firm promoted shares
in a listed audit client..
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 Threats to independence-
Familiarity
 Having an audit client for a long period of time
may create a familiarity threat to independence.
 The severity of the threat depends on such factors
as how long the individual has been on the audit
team, how senior the person is, whether the
client's management has changed and whether the
client's accounting issues have changed in nature or
complexity.

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 Threats to independence-
Familiarity
 Possible safeguards of familiarity threats include:
 • Rotating the senior personnel off the audit team
 • Having a professional accountant who was not a
member of the audit team review the work of the
senior personnel
 • Regular independent internal or external quality
reviews of the engagement

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 Threats to independence-
Intimidation
 An intimidation threat arises when members of
the audit team may be deterred from acting
objectively by threats, actual or perceived.
These could arise from family and personal
relationships, litigation, or close business
relationships.
 These are also examples of self-interest threats,
largely because intimidation may only arise
significantly when the audit firm has something
to lose.
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 The demand for financial statement audit

Principal & agent relationship

 Shareholders (principals) employ directors and managers (agents) to
conduct the business, in the interest of the owners
 First, this often results in information asymmetry
 Second, there is natural conflict of interest between manager and
owner
 The manager agree on some type of monitoring provisions in
employment contract, therefore manager prepare financial
statement
 The managers assume a stewardship function and are expected to
manage the business in the best interest of the principals
 Audit is in demand because its plays valuable role in monitoring the
contractual relationship between entity's and it shareholders,
manager, employees and creditors

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Relationships Among Auditors, Client,
and External Users

Client or audit Auditor issues

committee hires report relied
auditor
Auditor upon by users to reduce
information risk

Provides capital
External
Client
Users
Client provides financial
statements to users
AGENCY THEORY & THE
The principal-agent
NEED FOR AUDITING
relationship between the
owner and manager often
AGENCY RELATIONSHIP resulted in information
asymmetry between the two
parties. The manager
generally has more
INFORMATION ASYMMETRY
information about the true
financial position of the
Company. Because their
CONFLICT OF INTEREST goals may not coincide, there
is a natural conflict of interest
between the manager and the
owner. This gives rise to the
THE NEED FOR AUDITING
need for auditing.
 Objective of financial statement audit(ISA200)

 In general, audit of financial statements is a subset of assurance

engagements.

 In conducting an audit of financial statements, the overall objectives

of the auditor are:
(a) To obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether
due to fraud or error, thereby enabling the auditor to express an
opinion on whether the financial statements are prepared, in all
material respects, in accordance with an applicable financial
reporting framework; and
(b) To report on the financial statements, and communicate as required
by the ISAs, in accordance with the auditor’s findings.

• The phrases used to express the auditor’s opinion are "give a true and
fair view" or "present fairly, in all material respects," which are
equivalent terms.
Concept of Reasonable Assurance
Inherent limitation of audit
The auditor cannot obtain absolute assurance that the financial
statements are free from material misstatement due to fraud or error.
This is because there are inherent limitations of an audit, which
result in most of the audit evidence on which the auditor draws
conclusions and bases the auditor’s opinion being persuasive rather
than conclusive. The inherent limitations of an audit arise from:

• The nature of financial reporting

• The nature of audit procedures; and

• The need for the audit to be conducted within a reasonable period

of time and at a reasonable cost.
 Concept of Reasonable Assurance
The Nature of Financial Reporting

The preparation of financial statements involves judgment by management in

applying the requirements of the entity’s applicable financial reporting
framework to the facts and circumstances of the entity.

In addition, many financial statement items involve subjective decisions or

assessments or a degree of uncertainty, and there may be a range of
acceptable interpretations or judgments that may be made. Consequently,
some financial statement items are subject to an inherent level of variability
which cannot be eliminated by the application of additional auditing
procedures.

For example, this is often the case with respect to certain accounting
estimates. Nevertheless, the ISAs require the auditor to give specific
consideration to whether accounting estimates are reasonable in the context
of the applicable financial reporting framework and related disclosures, and
to the qualitative aspects of the entity’s accounting practices, including
indicators of possible bias in management’s judgments.
 Concept of Reasonable Assurance
The Nature of Audit Procedures

There are practical and legal limitations on the auditor’s ability to obtain
audit evidence. For example: There is the possibility that management or others
may not provide, intentionally or unintentionally, the complete information
that is relevant to the preparation of the financial statements or that has
been requested by the auditor. Accordingly, the auditor cannot be certain of
the completeness of information, even though the auditor has performed audit
procedures to obtain assurance that all relevant information has been
obtained.

• Fraud may involve sophisticated and carefully organized schemes designed to

conceal it. Therefore, audit procedures used to gather audit evidence may be
ineffective for detecting an intentional misstatement that involves, for
example, collusion to falsify documentation which may cause the auditor to
believe that audit evidence is valid when it is not. The auditor is neither
trained as nor expected to be an expert in the authentication of documents.

• An audit is not an official investigation into alleged wrongdoing. Accordingly, the

auditor is not given specific legal powers, such as the power of search, which may
be necessary for such an investigation
 Concept of Reasonable Assurance
Timeliness of Financial Reporting and the Balance
between Benefit and Cost

The matter of difficulty, time, or cost involved is not in itself a valid basis for the
auditor to omit an audit procedure for which there is no alternative or to be
satisfied with audit evidence that is less than persuasive.

Appropriate planning assists in making sufficient time and resources available for
the conduct of the audit.

Notwithstanding this, the relevance of information, and thereby its value, tends
to diminish over time, and there is a balance to be struck between the reliability
of information and its cost. This is recognized in certain financial reporting
frameworks .

Therefore, there is an expectation by users of financial statements that the

auditor will form an opinion on the financial statements within a reasonable
period of time and at a reasonable cost, recognizing that it is impracticable to
address all information that may exist or to pursue every matter exhaustively on
the assumption that information is in error or fraudulent until proved otherwise
Organization relates to Financial
Reporting and auditing
The Malaysian Institute of
The Malaysian Institute Certified Public Accountants
of Accountants (MICPA)
 Regulatory Body , Formed in 1958
established by
A professional body
Accountants Act
1967 Managed by Council
 Business managed by elected by members
council members
Conducts professional exams
 Issue auditing
standards and Code
of ethics
 Does not conduct
professional exams
 Organization relates to
Financial Reporting and auditing
International Federation of Accountants (IFAC)
Develops and implements international auditing standards. The International
Statement of Auditing (ISA) and International Statement of Quality Control
(ISQC) are adopted and used by most jurisdictions including Malaysia
The Quality Standards recommended by IFAC includes the following:

•having audit policies and a methodology for conducting transnational audits

in accordance with International Standards of Auditing
•complying with the IFAC Code of Ethics
•maintaining training programmes to keep partners and staff up to date on
international developments in financial reporting
•maintaining quality control standards and conducting regular quality
assurance reviews to monitor compliance with the firm’s policies and
methodology
 Organization relates to Financial
Reporting and auditing
 Companies Commission
- Administrating body responsible for enforcement of the
Companies Act,2016, other laws, ensure good corporate
governance

 Securities Commission
- Streamlining and consolidation of the regulatory functions of
capital market

 Bursa Malaysia
- Set out the listing requirement and disclosure standard
Regulations

 In Malaysia, the accountancy profession is

regulated by the Audit Oversight Board (AOB),
the Companies Commission of Malaysia
(Suruhanjaya Syarikat Malaysia or SSM), the
Malaysian Institute of Accountants (MIA), and
the Malaysian Institute of Certified Public
Accountants (MICPA).
Certified Public Accounting Firms

 The four largest CPA firms in the United

States are called the “Big Four” international
CPA firms.
 These four firms have offices in most major
cities in the United States and in many cities
throughout the world.
Certified Public Accounting
Firms

Big Accounting Firms Small Medium Practices

PWC (SMP)
Ernst and Young KHR
KPMG Grant Thornton
Deloitte Stephen Moore
BDO Cheng & Co
Audit Oversight Board(AOB)

The AOB is responsible for the independent

oversight of auditors of Public Interest
Entities (PIEs). Section 31U of the Securities
Commission Act of 1993 provides legislative
authority to the AOB for ensuring and
enforcing compliance with auditing and
ethical standards by auditors of PIEs and
registering auditors of PIEs. Under the same
act, the AOB is also given legislative
authority to set auditing standards. The
AOB, however, has delegated this
responsibility to MIA.
AOB- responsibilities
 Implement policies and programs in ensuring an
effective audit oversight system in Malaysia;
 Register auditors of public interest entities (PIEs);
 Establish or adopt, or by way of both, the auditing
and ethical standards to be applied by auditors;
 Conduct inspections and monitor programs on
registered auditors to assess the degree of
compliance of auditing and ethical standards;
 Conduct inquiries and impose appropriate sanctions
against auditors who fail to comply with auditing and
ethical standards;
 Cooperate with relevant authorities in formulating
and implementing strategies for enhancing standards
of financial disclosures of PIEs;
Auditing Standard

 Guide auditors work and serve as measure of

quality of the auditors
 International Standards of Auditing (ISA) designated
as AI [issued by International Auditing and
Assurance Standard Board(IAASB) and approved for
adoption by MIA];
 Malaysian Standards on Auditing (MSA) designated
as AM [issued by the MIA]; and
 Statements or guidelines issued by MIA in relation
to recommended practices, which forms part of the
general accepted auditing principles.
Auditing Standard
Conceptual Basis

ISA 200 Overall Objectives of the Independent Auditor

and the Conduct of an Audit in Accordance with
International Standards on Auditing
ISA 210 Agreeing the Terms of Audit Engagements
ISA 220 Quality Control for an Audit of Financial
Statements
ISA 230 Audit Documentation
ISA 240 The Auditor's Responsibilities Relating to Fraud
in an Audit of Financial Statements
ISA 250 Consideration of Laws and Regulations in an
Audit of Financial Statements
ISA 260 Communication with Those Charged with
Governance
ISA 265 Communicating Deficiencies in Internal Control
to Those Charged with Governance and
Management
Performance or Field Work Standards
ISA 300 Planning an Audit of Financial Statements
ISA 315 Identifying and Assessing the Risks of Material Misstatement through
Understanding the Entity and Its Environment
ISA 320 Materiality in Planning and Performing an Audit
ISA 330 The Auditor's Responses to Assessed Risks
ISA 402 Audit Considerations Relating to an Entity Using a Service Organization
ISA 450 Evaluation of Misstatements Identified during the Audit
ISA 500 Audit Evidence
ISA 501 Audit Evidence-Specific Considerations for Selected Items
ISA 505 External Confirmations
ISA 510 Initial Audit Engagements-Opening Balances
ISA 520 Analytical Procedures
ISA 530 Audit Sampling
ISA 540 Auditing Accounting Estimates Including Fair Value Accounting Estimates and
Related Disclosures
ISA 550 Related Parties
ISA 560 Subsequent Events
ISA 570 Going Concern
ISA 580 Written Representations
ISA 600 Special Considerations-Audits of Group Financial Statements (Including the Work
of Component Auditors)
ISA 610 Using the Work of Internal Auditors
ISA 620 Using the Work of an Auditor's Expert
Reporting Standards
Audit Opinion (ISA 700, ISA 701, ISA 702)

The format of a typical audit report has the following sections:

• title
• addressee
• introductory paragraph
• management’s responsibility for the financial statements
• auditor’s responsibility
• auditor’s opinion
• other reporting responsibilities
• auditor’s signature
• date of the auditor’s report
• auditor’s address
 Quality Control

 ISQC 1 (International Standards on Quality

Controls) Quality control for firms that perform
audits and reviews of historical financial
information, and other assurance and related
services engagements (Effective date 15 Dec
2009)
 ISA 220 – Quality Control for an Audits of
Financial statement (Effective date 15 Dec
2009)
 Quality Control for Audit Work

 The firm should establish a system of

quality control designed to provide it
with reasonable assurance that the firm
and its personnel comply with
professional standards and regulatory
and legal requirements, and that
reports issued by the firm or
engagement partners are appropriate in
the circumstances.
 Elements of Quality Control

1. Leadership responsibilities for quality within the firm

2. Ethical requirements
3. Acceptance and continuance of client relationships and
specific engagements
4. Human resources
5. Engagement performance(On-the job
coaching,Supervision and Review,Consultation,Resolving
Diff Opinion,Engagement Quality Control Review)
6. Monitoring
7. Documentation
Refer to ISQC 1Para 16
 Overview of The Audit
Process

1. Preliminary 2. Obtain 3. Materiality

understanding
Engagement and assess
of the entity
risk
• Client
acceptance
• Terms of
engagement
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Overview of The Audit
Process
4. Audit 5. Test of
Planning control and
substantive
procedures

7. Issue the 6. Complete

auditor’s report the audit

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 External vs Internal auditors
 Internal auditors (IA) are normally employed by management,
while external auditors (EA)work for an outside audit firm.
 IA are hired by the company, while EA are appointed by a
shareholder vote.
 IA do not have to be MIA members.
 IA are responsible to management, while EA are responsible to
the shareholders.
 IA can issue their findings in any type of report format, while EA
must use specific formats for their audit opinions and
management letters.
 Internal audit reports are used by management, while external
audit reports could be used by creditors, and lenders.
Introduction
 An auditor is empowered under the
Companies Act 2016 (CA) to conduct an
audit of the financial statements of
companies limited by shares. It is the
responsibility and the duty of an auditor,
during an audit, to conduct the audit
with reasonable care. ( Para 271)
Introduction
 Auditors are accountable to
statutory law, common law, MIA By-
Laws and auditing standards for
their professional conduct. The
duties of auditor under other
statutory laws and common laws
will be discussed further under the
topic of auditors’ liabililties
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CONCEPT OF True and Fair
view
 Thisis the phrase used to express
the auditor’s opinion .
 Thisphrase is also used in the
auditing standard and specified in
the Companies Act 2016 ( Para
266)
 Directors responsibilities

 Section 248 of Companies Act stated that the directors of

every company shall, at some date not later than
eighteen months after the incorporation of the company
and subsequently once at least in every calendar year at
intervals of not more than fifteen months, to present at
its annual general meeting a financial statements for the
thje financial years.
 The date of financial statement must be less than six
months before the date of the meeting.
 The financial statement of a company shall be duly
audited before they are presented in the annual general
meeting
Responsibilities of an auditor

 The auditor’s opinion on the financial

statements is based on the concept of
obtaining reasonable assurance; hence, in
an audit, the auditor does not guarantee
that material misstatements, whether
from fraud or error, will be detected.
 However, it is important to note that
auditor is still responsible to detect
material fraud and error.

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 Power of an auditor
An auditor is given statutory power under sec 266
of the Company Acts to carry out his duties:

(1) the right of access at all reasonable times to the

accounting and other records (including registers)
of the company and its subsidiaries if the company
audited is a holding company.
(2) the right to enquire from any officers of the
company information and explanation as required
for the purpose of audit.
Power of an auditor

(3) the right to enquire from any auditors of the

related companies in connection with any
business transacted with the company being
audited.
(4) the right to attend annual general meetings
and is entitled to receive all notices and
communications relating to the meeting. The
auditor is also entitled to speak at any general
meeting which he attends on any part of the
business of the meeting which concerns the
auditor.
Duties of an auditor
An auditor must, state in his opinion whether the accounts,
or consolidated accounts are properly drawn up so as to
give a true and fair view of the matters required by section
266 to be dealt with financial statement, in accordance
with the provisions of this Act and the applicable approved
accounting standards, so as to give a true and fair view of
the company's affairs;

and

whether the accounting and other records and the registers

required by this Act to be kept by the company and have
been in his opinion properly kept in accordance with the
provisions of Company Act ( Sec 266)
Duties of an auditor
It is the duty of an auditor of a company to form an opinion as to each
of the following matters:
(a) whether he has obtained all the information and explanations that
he required;
(b) whether proper accounting and other records (including registers)
have been kept by the company as required by Company Act;
(c) whether the returns received from branch offices of the company
are adequate; and
(d) whether the procedures and methods used by a holding company or
a subsidiary in arriving at the amount taken into any consolidated
accounts were appropriate to the circumstances of the consolidation,
and he shall state in his report particulars of any deficiency, failure or
shortcoming in respect of any matter referred to in this subsection.

( Section 266 CA2016)

First Appointment

 Before the first annual general meeting of a

company, the directors of the company may
appoint, or (if the directors do not make an
appointment) the company at a general meeting
may appoint, a person to be the auditor of the
company, and any auditor so appointed shall hold
office until the conclusion of the first annual
general meeting.

( Section 271, CA 2016)

Subsequent Appointment

 A company shall at each annual general meeting

of the company appoint a person to be the
auditor of the company, and any auditors so
appointed shall hold office until the conclusion of
the next annual general meeting of the company.

( Section 271, CA2016)

Shareholders’ Right
 If a company does not appoint an auditor as required by Section 172,
the Registrar may on the application in writing of any member of the
company make the appointment

 A person shall not be capable of being appointed auditor of a company

at an annual general unless he held office as auditor of the company
immediately before the meeting or notice of his nomination as auditor
was given to the company by a member of the company not less than
twenty-one days before the meeting.

 The company shall, not less than seven days before the annual general
meeting, send a copy of the notice to the person nominated of the
company and to each person entitled to receive notice of general
meetings of the company.

( Sec 272, CA2016)

Nomination of Auditors - Process

Section 271 of the Companies Act, 2016

Notice of nomination given by members

of the company 21 days before AGM

Notice of nomination to be sent to the

person nominated 7 days before AGM
 Disqualification of auditors
A person shall prohibited from acting or accepting an appointment of
the auditors of the company
(a) if he is not an approved company auditor;
(b) if he is indebted to the company or related company by virtue of
section 6 in an amount exceeding RM2,500
(c) if he is an officer of the company, a partner, employer or
employee of an officer of the company
(d) a partner or employee of an employee of an officer of the
company; or
(e) a shareholder or his spouse is a shareholder of a corporation
whose employee is an officer of the company;
(f) if he is responsible for or if he is the partner, employer or employee
of a person responsible for the keeping of the register of members or
the register of holders of debentures of the company.

( Section 264, CA 2016)

Casual Vacancy

 Death of sole auditor

 Outgoing auditor decline reappointment
at AGM
 Directors of the company may appoint
an auditor to fill any casual vacancy
( Section 271, CA 2016)
 Failure to Appoint New
Auditor

 Companies Commission of Malaysia

(CCM) can appoint an auditor for
the company under Section 272 of
the Companies Act, 2016.
 Resignation of Auditors
 Auditors will only resign from office:
 If he is not the sole auditor of the company;
 At a general meeting of the company
 Written notice by the auditors
 Directors must call a general meeting as soon
as is practicable to appoint another auditor
 The auditor’s resignation will take effect once
another auditor is appointed
( Sec 282)
Remuneration of auditor

 An audit client may decide to change

auditors for the reasons that:
 the audit fee is perceived to be too
high;
 the audit service(s) provided is
perceived not to be value for money;
 audit fee is not negotiable; or
 audit fee is not competitive.
Remuneration of auditor
Audit fees charged by audit firm should be a
fair reflection of the value of the work
performed for the client, and should take into
account inter alia:
1. the skill and knowledge required for the type
of work involved;
2. the level of training and experience of the
persons necessarily engaged on the work;
3. the time necessarily occupied by each person
engaged on the work; and
4. the degree of responsibility and urgency that
the work entails.
THE END