COMPANI ES ACT 2016
INTRODUCTION The Companies Act 2016 (CA) provides that the accounts of a company need to be audited by a competent third party who is independent from the management of the company. This third party is referred to the “auditor”. The auditor’s duty is to verify whether the company’s accounts provide a true and fair view of its affairs. • Sect. 264(1)(c)(i) provides that a person may act as an auditor as appointed by the Minister charged with responsibility for finance. • A person may not be appointed as the auditor of the company unless he has given his written consent to the appointment. • Sect. 264(1) further provides that an approved company auditor may not accept the appointment or act as an auditor for a particular company if he falls into one of the categories of persons stated in the said provision.
APPOINTMENT OF AUDITORS The CA 2016 provides for different procedures for the appointment of an auditor by a private and public company.
FIRST AUDITOR
Is appointed by a newly incorporated company to audit the company’s account
PRIVATE COMPANY a) In case of newly appointed companies, the Board of Directors (BOD) may appoint the first auditor at least 30 days before the end of the period for the submission of the first financial statements to the ROC, or b) To fill casual vacancy in the office of auditor.
The financial statements shall be submitted to the ROC within 30 days from the circulation of the statement to the members. The financial statement shall be circulated to the members within 6 months of the company’s financial year end
• The Board of Directors (BOD) must appoint the first auditor not later than six months after the company’s financial year end. • If BOD does not appoint an auditor for the company, the ROC may appoint one or more auditors upon receipt of an application in writing from any member of the company.
PUBLIC COMPANY BOD shall appoint the first auditor at any time before the company’s first annual general meeting (AGM) And He shall hold office until the conclusion of the first AGM
A public company can hold its first AGM within 18 months after its incorporation • If BOD does not appoint an auditor for the company, the ROC may appoint one or more auditors upon receipt of an application in writing from any member of the company.
QUALIFICATION OF AUDITORS sect. 263, a person who wants to be a company auditor must first
APPROVED COMPANY AUDITOR
Obtain approval from the Minister charged with responsibility for finance. The approval is for a period of 2 years.
Sec. 2 (1) approved company auditor means a person who has been approved by the Minister Sect.22 of the Accountants Act 1967, provides that a person may practise as an auditor only if he is a member of, and registered as a chartered accountant with the Malaysian Institute of Accountants; AND
Sec. 263 (2) if the Minister is satisfied that the applicant is of good character & competent to perform the duties of an auditor
DISQUALIFICATION OF AUDITORS
sect. 264, a person shall not prepare a report on behalf of a company if:
not an approved company auditor indebted to the company in an amount not exceeding RM2500 an officer of the company partner, employer/employee of an officer of the company he/his spouse - shareholder of a company whose employee is an officer of the company responsible for keeping the register of membrs he is an undischarged bankrupt has been convicted of any offence involving fraud or dishonestly punishable with imprisonment for 3 months or more.
SUBSEQUENT AUDITORS
Is the approve company auditor appointed to audit the company’s subsequent years’ financial statements.
PRIVATE COMPANY Sect. 269 (1) an auditor of a private company ceases to hold office 30 days after the company’s audited financial statements are circulated to its members. However, he will be automatically re-appointed as auditor unless:a)Another auditor has already been appointed by the members; b)Auditor was appointed by the board c)The private company’s constitution requires actual re-appointment d)The members have passed a resolution that auditor should not be re-appointed.
• If the previous auditor is not re-appointed, the members can appoint an auditor by passing an ordinary resolution as per sect. 267(4). • The ROC may appoint one or more auditors upon receipt of an application in writing from any member of the company.
PUBLIC COMPANY Members may appoint the auditor at AGM And He shall hold office until the conclusion of the first AGM
No provision for the automatic re-appointment of an auditor
The appointment is on yearly basis
• If no auditor is appointed during the AGM, the members by ordinary resolution may appoint an auditor at the general meeting held later. • The ROC may appoint one or more auditors upon receipt of an application in writing from any member of the company
Auditors’ remuneration Section 274 The remuneration of an auditor:If appointed by the members- shall be fixed by the persons by the members by ordinary resolution or the members may determine. If appointed by the Board- shall be fixed by the Board or if not so fix by the company. If appointed by the Registrar- shall be fixed by Registrar or the Board or by the company.
QUALIFIED PRIVILEGE IN CERTAIN CIRCUMSTANCES
Sec. 286 Auditor of a company in the absence of malice is protected from a defamation suit by any person in respect of any statement (orally/in writing) which he makes in the course of his duties as an auditor. Sec. 286 Auditor of a company in the absence of malice is protected from a defamation suit by any person in respect of the publication which he makes in the course of his duties as an auditor.
Resignation of auditor • Sect. 281 of CA allows an auditor to resign his office by giving notice to the company at its registered office. The resignation will be effective at the end of 21 days after the notice is given or from the date stated in the notice. • The company is requires to send the auditor’s notice of resignation to the ROC within 7 days from receipt of the notice.
Removal of auditor Sect. 276 provides that an auditor may be removed from office by an ordinary resolution of the members at a general meeting of which special notice has been given. The section also prohibits the removal of an auditor by a private company by passing a written resolution.