Tutorial question 1 (Chapter 2: Companies Act 2016)

Based on the following case, please state whether it had violated and provide the reason.

#  En.Kassim refuses to become the auditor of Layu Mekar Berhad because he has a
partnership business with En.Malek, the Finance Officer of Layu Mekar Berhad

Answer : With accord to Section 264(1)(a)(iii)(B) of the companies act 2016.’ A person shall not
knowing consent to be appointed as an auditor fo any company if he is a partner, employer or
employee of an officer of the company’. Since Encik Kassim was a partner to Encik Malek therefore
Encik Kassim should not become the auditor of the company as it may considered as conflict of
interest. Based on the case, since encik kassim refuse to become the auditor of Layu Mekar berhad,
therefore he has not violated the law.

Tutorial question 2 (Chapter 2: Companies Act 2016)

Based on the following case, please state whether it had violated and provide the reason.

Pn.Rahmah, the partner of Rahmah & Co. has accepted the appointment as auditor of ABC Bank
Berhad. Currently, Pn.Rahmah has a RM50,000 hire-purchase loan with ABC bank

Answer : Pn Rahmah’s action on accepting the appointment as an auditor of ABX Bank Berhad has
violated the law. In accordance to companies Act 2016, Section 264(1)(a)(ii)(A) – ‘a person shall not
knowingly consent to be appointed as an auditor for any company auditor if he is indebted to a
company or to corporation that is deemed to be related to that company by virtue of section 7 in an
amount exceeding twenty-five thousand ringgit’.

Currently, puan Rahmah has RM50,000 hire purchase loan with ABC bank which is exceeding the
amount as mentioned in the section that is RM25,000. Thus her action to become an auditor to ABC
Bank Berhad has violated the laws.

Based on the following case, please state whether it had violated and provide the reason.

Sejati Mulia Berhad has appointed Razak & Co. as the company auditor. En. Razak, a
partner in Razak & Co. was the previous Chief Financial Controller of Sejati Mulia Berhad
that had resigned for the past 8 months.  

Answer: In accordance of Section 264 (2) of companies act 2016, for the purpose of subparagaraph
1(C)(iii), a person shall be deemed to be an officer of a company if he is an officer of a corporation
that is deemed to be related to the company by virtue of section 7 of he has been an office or
promoter of the company or such corporation at any time within the preceding period of 12 months
unless the minister direct otherwise.

Based on the situation, Sejati Mulia Bhd has appointed Razak & Co. as the company, from which,
Razak was previously Chief Financial Controller of the company that had resigned for the past 8
months. If Encik Razak accept and act as an auditor for the company, he would probably violated the
law. This is because, under this section,the acts provided that the person can only be an auditor if
the person is not related to the company for 12 months. However, Encik Razak is considered to be
related to the company because he has been resigned from the company for only eight months.
Therefore, if he become auditor to the company, he will violated the law. He can only be the auditor
of the company if he has already completed the 12 months terms as provided by the law.