TUTORIAL 11- AUDITORS

KOLEJ PROFESSIONAL MARA AYER MOLEK

COMPANY LAW (LAW2513)

TUTORIAL 11 – AUDITORS

1.       Zafrul is an auditor in Rising Connection Bhd. He must prepare the company’s financial report for year 2008 within a month. As an auditor, he has a right to do all of the following EXCEPT

A.            right to access at all reasonable time to all accounts records

B.            rights of access to information and record of subsidiary company

C.       right to use company’s money for his personal expenses

D.       right to attend general meeting

2.       According to section 172(4) of Companies Act, an auditor may not be removed by ______________________ at a general meeting where _________________ of at least 28 days has been given.

I.             Special resolution

II.           Ordinary notice

III.         Ordinary resolution

IV.          Special notice

A.            I and III

B.            I and IV

C.            II and III

D.           III and IV

3.       An auditor of a company should not…

I.       be indebted to the company, its holding company or subsidiaries in an amount exceeding RM 2,500.

II.      be a partner, employer or employee of an officer of the company.

III.         be a shareholder or his spouse is a shareholder of a corporation whose

employee is an officer of the company.

IV.      be a family member or his spouse is a family member of a director of the company

A.       I , II, III

B        I, II, IV

C        I, III, IV

D        I, II, III and IV

4.      The Companies Act 1965 makes it compulsory for companies to appoint this person to ensure that the members, creditors and prospective members of the companies are protected against misappropriation of their money through his independent report on the companies’ financial position. This person is called              .

A.              an auditor

B.              a promoter

C.              a director

D.             a shareholder

5.      Aida, the auditor of Teh Soo Soo Sdn Bhd found out that the managing director of the company had used company’s assets for his personal interest. However, Aida kept the matter as a secret and do not disclose it to the company. The offence committed by Aida is __________.

A.            she had obtained information about the company’s account from its officers

B.            she did not report the irregularities she had found in the company’s account

C.            she had an access to the book and accounts of the company

D.           she defamed the officers of the company

6.       The duties and rights of an auditor are laid down under section 174 of Companies Act 1965. The main statutory duty of auditor is             

A.            to give company’s financial report to directors only.

B.            to give company’s financial report to all members.

C.            to keep the company’s financial report for himself.

D.           to keep the company’s financial report for company’s creditors only.

7.       Which are the correct procedures shall be taken by an auditor if found any irregularities in an account ________.

I.             Report to company’s Board of Directors.

II.           Carry out an investigation by obtaining information and explanation from officers and other sources.

III.         Report to Registrar of Companies.

A.         I, II and III.

B.         I, III and II.

C.         II, I and III.

D.        III, I and II.

Question 1

a)       Who may qualify as an auditor of a company?              

[8 marks]

         

b)       Mr Johnson employed as an auditor at Arena Restu Sdn Bhd. Recently, the company paid the dividend to the shareholders. Later, it was found that payment of dividend made the company suffer a financial loss.

Through an investigation done, it was proved that Mr Johnson has made an overstatement of profits in the company account and as a result the company paid the dividend out of capital.

Arena Restu Bhd would like to sue Mr Johnson because of failure to use reasonable care and skill while auditing the company’s account.

Advise Mr Johnson.                                                                                                                                                                                         [12 marks]

Question 2

(a)      Explain auditors’ statutory duty as provided by section 174 Companies Act 1965                                                                                                       [8 marks]

(b)     Barney is employed as an auditor of Flinstone Bhd. Dino, the managing director of the company had been making obvious alteration to invoices received from suppliers for several years.

Last month Barney was told to prepare the company’s financial report based on information given by Dino. Barney detected the alteration to invoices made by Dino. However, Barney did not investigate and thus verify the accuracy of the information and thus prepared a report based on Dino’s information only.

Fred, a shareholder of Flinstone Bhd read the report and found out that the report was faulty due to the inaccurate information given by the managing director. Lately there is economic recession in Malaysia and the company went into liquidation.

          Advise Fred whether Flinstone Bhd can sue Barney for breach of auditor’s duty.

                                                                                                         

                                                                                                          [12 marks]