BDC 304 Co Sec N Auditor Week 8

BDC 304
INTRODUCTION TO PARTNERSHIP &

COMPANY LAW
CHAPTER 7
COMPANY SECRETARY & AUDITOR
COMPANY SECRETARY & AUDITOR
PREPARED BY:
MS. JANE YAP

SCHOOL OF ACCOUNTANCY
FACULTY OF BUSINESS AND MANAGEMENT
CHAPTER 7: Company Secretary & Auditor
Recap on Last Classs Lectures

TOPIC
Last week we were looking at:Figure 3
1. The role of a director of a company.

2. The types of company directors.
3. The methods of appointment of a director.
4. The duties, powers and liabilities of the
director.
5. The rules regarding the removal and
retirement of directors.
Slide 2 of 48
Objectives of Todays lecture
Objectives of Todays Class

1. To acquire the legal knowledge regarding the rules regarding the
functions of both the company secretary and the auditor.
2. To equip students with the knowledge regarding the qualifications and
appointment of the both the Company Secretary and the Auditor.
3. To expose students to the legal rules regarding the duties, powers,
functions and liabilities of both the Company Secretary and the
Auditor.
Slide 3 of 48
Learning Outcomes of Todays Lectures
Learning Outcomes of Todays Class

Students will be able to:
1. describe the roles of both the Company Secretary and the Auditor of a
company.
2. comment on the rules regarding the qualifications and appointment of
both a Company Secretary and an auditor.
3. analyse the the duties, powers, functions and liabilities of both the
Company Secretary and the Auditor.
Slide 4 of 48
The Company Secretary
Company Secretary
S. 139 (1) CA 1965 provides every company must have at
least 1 secretary.
A company secretary is an officer of the company with statutory duties.
Slide 5 of 48
Appointment of a Company Secretary

TOPIC
How is a Company
Secretary
appointed?
Slide 6 of 48
Appointment of A Company Secretary
1. T he first Company Secretary must be named in the Memorandum of

Association or the Articles of Association.
2. The office of the Company Secretary must not be vacant for more than
1 month.
3. The director shall appoint the Company Secretary and determine the
salary and other terms of employment of the Company Secretary.
Slide 7 of 48
Qualifications of a Company Secretary

TOPIC
Who qualifies to be a
Company Secretary?
Slide 8 of 48
Qualifications of a Company Secretary
1. T he Company Secretary must be a natural person of full age with his

or her principal or only place of residence in Malaysia.
2. A Company Secretary must be a member of a professional body or any
body prescribed by the Minister or licensed by the CCM.
Slide 9 of 48
Disqualifications of a Company Secretary

TOPIC
Who is disqualified
from being a
Company Secretary?
Slide 10 of 48
Disqualifications of a Company Secretary
1. The company secretary is an undischarged bankrupt.

2. The company secretary has been convicted of any of the following
offences such as:
a.
b.
c.
d.
e.
offences in connection with the promotion, formation or management

of a corporation.
offences involving fraud or dishonesty where the punishment is
imprisonment for a period of 3 months or more.
offences involving dishonesty and lack of reasonable diligence in the
discharge of directors duties
insider trading; or
offences involving improper keeping of accounts.
Slide 11 of 48
Function of a Company Secretary
Functions of a
Company Secretary
Historical View
Present View
Slide 12 of 48
Historical Judicial View
19th Century Judicial Views

1.
A company secretary have functions which were clerical and

ministerial only.
2. A company secretary is a mere servant of the company.
Slide 13 of 48
Current Judicial View
Current Judicial Views

1.
A company secretary in a large company is the companys chief

administrative officer.
2. A company secretary has the authority to enter into contracts

connected with the administration of a company and the countersigning of the affixation of the companys seal pursuant to a
resolution of the Board.
3. A company secretary may have an advisory role in a public listed
company but the directors are not under a duty to accept such advice.
Slide 14 of 48
Responsibilities of the Company Secretary
Responsibilities
1. A company secretary is responsible in preparing the companys
accounting records.
2. A company secretary is responsible in maintaining the companys
registered office.
3. A company secretary is responsible in lodging the returns regarding the
particulars of directors, managers and secretaries with the CCM.
4. A company secretary is responsible in lodging the annual return of the
company with the CCM.
Slide 15 of 48
Duties of the Company Secretary
Duties
1. A company secretary carries the role of the chief administrative officer
of the company.
2. A company secretary ensures the necessary register including the
register of members is established and properly maintained.
3. A company secretary is responsible in organising and attending
meetings of the shareholders and directors, including sending out
notices, preparing the agenda etc..
Slide 16 of 48
Duties of the Company Secretary
Duties
4. A company secretary must be conversant with meeting procedures.
5. A company secretary must supervise the companys share capital
including the preparation of allotment letters and issue of share
certificates.
6. A company secretary supervises the preparation of tax returns and
attending to the companys insurance requirements.
Slide 17 of 48
The Company Auditor
Functions of the Company Auditor
An auditor
investigates/
audits the
accounts of a
company as an
external check on
the integrity of the
financial
statements
prepared by the
directors.
An auditor detects
whether or not
proper accounting
principles have
been used by the
management and
directors .
An auditor
prepares a reliable
accurate
independent report
on the accounts
and the financial
position of a
company.
Slide 18 of 48
Company Auditor
Lord Dennings view in Fomento (Sterling

Area) Ltd v Selsdon Fountain Pen Co Ltd
[1958] as to the manner in which an auditor
should carry out his auditing task
An auditor must approach the task of auditing the

accounts and the financial records of the company
with an inquiring mind
and be alert to the
possibility of mistakes which may have been made
in the accounting practice by the company.
Slide 19 of 48
Powers and Rights of Auditors
1. An auditor has a right of access at all reasonable times to accounting

and other records of the company.
2. An auditor is entitled to obtain such information and explanations which
he requires for the audit from any officer of the company.
3. An auditor has the right of access to the records of any subsidiary
including obtaining any information and explanation regarding the
subsidiary from an officer or an auditor of the subsidiary.
4. An auditor is entitled to attend any general meeting of the company and
to receive all notices relating to the general meeting and to be heard on
any matter concerning him in his capacity as an auditor.
Slide 20 of 48
Qualifications of a Company Auditor

TOPIC
Who qualifies to be
an auditor?
Slide 21 of 48
Qualifications of a Company Auditor
1. T he company auditor must be at least 21 years old and must be a

person of good character and competent to perform the duties of an
auditor.
2. A company auditor must registered as a public accountant with the
Malaysian Institute of Accountants.
3. A company auditor must be independent and not closely related to
the company nor likely to be unduly influenced by officers of the
company.
Slide 22 of 48
Disqualifications of a Company Auditor
1. A person cannot act as an auditor if he is not an approved company

auditor.
2. A person cannot act as an auditor if he owes the company money or its
related company in an amount exceeding RM2500.
3. A person cannot act as an auditor if he is an officer of the company,
a partner, employer or employee of an officer of the company.
4. A person cannot act as an auditor if he is the partner, employer or
employee of a person responsible for the keeping of the register of
members or the register of the holders of debentures of the
company.
Slide 23 of 48
Appointment of a Company Auditor
1. Section 8 of the Companies Act 1965 provides only an approved

company auditor can be appointed to act as the auditor of a company.
2. Section 9 of the Companies Act 1965 provides that a company may
appoint a firm as its auditors. All partners of the firm must be approved
company auditors.
3. Appointment of the first Auditor may be made by the companys
directors. If the directors do not appoint then the appointment of the first
auditor can be made by the shareholders Ordinary Resolution at the
companys general meeting.
4. The auditor will hold office until the conclusion of the forthcoming AGM.
Slide 24 of 48
Duties of the Company Auditor
Duties
1. Duty to audit the companys accounts and to verify whether the
accounts provide a true accurate and fair view of the companys
financial affairs before the accounts are tabled at the companys AGM.
2. Duty to exercise reasonable care and skill which a reasonably
careful, competent and cautious auditor would use when doing his
audit work and applies prevalent and generally accepted auditing
standards.
3. Duty under the Companies Act 1965 to send a copy of the companys
audited financial statements to the debenture holders
4. Duty under the Companies Act 1965 to report to the members of the
company on the accounts to be laid out at the companys AGM.
Slide 25 of 48
Duties of the Company Auditor
Duties
5. Duty under the Companies Act 1965 to the Registrar of Companies to
report any breach or non-observance of any provision in the
Companies Act 1965 which in the auditors opinion will be not
adequately dealt with by himself or will not be adequately dealt with
even if he reports the matter to the directors of the company.
6. Duty under the Companies Act 1965 to report in writing to the ROC
any serious offence involving fraud or dishonesty committed or
being committed against the company which is a public company.
7. Duty to be independent
8. Duty to the company under the contract of appointment
Slide 26 of 48
Liabilities of the Company Auditor
Liabilities
1. Failure to provide a true, fair and accurate statement about the
companys accounts will attract the civil liability based on the tort of
negligent misstatement and the company can sue him for damages.
2. Failure to apply prevalent and generally accepted auditing
standards may attract the civil liability of tort of negligence.
3. The company can sue the auditor for breach of contract and sues for
damages.
Slide 27 of 48

Class Exercises
Multiple Choice Questions

How well do you consider yourself to have understood about
the role and duties of both the Company Secretary and the
Auditor of a company compared to a Director of a
company?
Slide 28 of 48
Activity : Quiz
| Click the correct answer.|
1
A
An auditor of a company has duties such as _______when

doing his audit work.
Specialised and reasonable care skill and

diligence
B Special and reasonable care skill and due

diligence
C reasonable care skill and due diligence

D
Personalised and reasonable care, skill and

diligence
Slide 29 of 48
activity : Quiz
The duty to maintain confidentiality of companys information is

a ______________ duty.
fiduciary
moral
religious
technical
Slide 30 of 48
activity : Quiz
Failure to provide a true, fair and accurate statement about the

companys accounts will attract the civil liability based on the
_________.
auditors law
copy rights law
tort of negligence
directors law
Slide 31 of 48
activity : Quiz
The company secretary in a large company is also known as

________ based on his functions.
chief executive officer
chief administrative officer
chief supervisory officer
chief monitoring officer
Slide 32 of 48
activity : Quiz
The office of the secretary must not be vacant for more than ________.
twelve months
two months
two weeks
one month
Slide 33 of 48
activity : Quiz
The ______ shall appoint the company secretary and determine

the salary and other terms of employment of the secretary.
the majority shareholders
the Board of Directors
non-executive directors
the auditor
Slide 34 of 48
activity : Quiz
A Company Director will be disqualified from its position if he is

________________.
convicted of any offences involving fraud or

dishonesty
discharged bankrupt
not feeling at most times
punished for speeding
Slide 35 of 48
Activity : Quiz
| Click on the correct answer.|
T he company auditor must be of at least____________.
18 years and a person of good character
C 21 years and a person of good character

D
Slide 36 of 48
Activity : Quiz
An appointment of a _____________ must last till the

conclusion of the companys AGM UNLESS he dies or resigns
or is removed from his position.
Company non-executive director
Company executive director
Company auditor
Company secretary
Slide 37 of 48
Activity : Quiz
10
A formally appointed director who prefers not to be seen as a

director but he directs another director to carry out his wishes is
called a ______________.
de facto director
shadow director
non executive director
executive director
Slide 38 of 48
Activity : Quiz
11
There are ________ types of appointment of a director.
three
five
four
two
Slide 39 of 48
Activity : Quiz
12
Shareholding is compulsory for the directors of a _____

company.
private
public
charitable
qualified
Slide 40 of 48
Activity : Quiz
13
A
Directors of a company have duties such as _______.
Specialised and reasonable care skill and

diligence
B Special and reasonable care skill and due

diligence
C Fiduciary and reasonable care skill and due

diligence
Personalised and reasonable care, skill and

diligence
Slide 41 of 48
activity : Quiz
24
The duty to maintain confidentiality of companys information for

a director is a ______________ duty.
fiduciary
moral
religious
technical
Slide 42 of 48
activity : Quiz
25
There must be a minimum number of ______ directors under

the Companies Act 1965.
five
ten
two
unlimited
Slide 43 of 48
activity : Quiz
26
The retirement age for a director of a public company is _____

unless the constitution states a lower age.
60
70
80
55
Slide 44 of 48
activity : Quiz
27
The statutory duty of skill care and reasonable diligence under the
Companies Act 1965 is applicable to a ________________.
Creditor of a company
Member of a company
employee of a company
executive director of a company
Slide 45 of 48
activity : Quiz
28
Appointment of a director requires a courts approval where

______.
the person is under 18 years of age
the person is an undischarged bankrupt
the person is not legally qualified
the person is not professionally qualified
Slide 46 of 48
activity : Quiz
29
Removal of a director, if such a power is provided in the

Constitution, requires a ________________.
Ordinary Resolution With a Special Notice
Special Resolution With a Special Notice
Special Resolution with a Special Notice
Absolute Resolution with a Special Notice
Slide 47 of 48
Activity : Quiz
30
Directors of a company have duties such as ____________.
personalised duties
special duties
C Statutory duties of care skill and diligence

D
none of the above
Slide 48 of 48

BDC 304 Co Sec N Auditor Week 8

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BDC 304

INTRODUCTION TO PARTNERSHIP &

MS. JANE YAP

CHAPTER 7: Company Secretary & Auditor

Recap on Last Classs Lectures

Last week we were looking at:Figure 3

1. The role of a director of a company.

CHAPTER 7: Company Secretary & Auditor

Objectives of Todays lecture

Objectives of Todays Class

CHAPTER 7: Company Secretary & Auditor

Learning Outcomes of Todays Lectures

Learning Outcomes of Todays Class

CHAPTER 7: Company Secretary & Auditor

The Company Secretary

A company secretary is an officer of the company with statutory duties.

CHAPTER 7: Company Secretary & Auditor

Appointment of a Company Secretary

CHAPTER 7: Company Secretary & Auditor

Appointment of A Company Secretary

1. T he first Company Secretary must be named in the Memorandum of

CHAPTER 7: Company Secretary & Auditor

Qualifications of a Company Secretary

CHAPTER 7: Company Secretary & Auditor

Qualifications of a Company Secretary

1. T he Company Secretary must be a natural person of full age with his

CHAPTER 7: Company Secretary & Auditor

Disqualifications of a Company Secretary

CHAPTER 7: Company Secretary & Auditor

Disqualifications of a Company Secretary

1. The company secretary is an undischarged bankrupt.

offences in connection with the promotion, formation or management

CHAPTER 7: Company Secretary & Auditor

Function of a Company Secretary

CHAPTER 7: Company Secretary & Auditor

Function of a Company Secretary

Historical Judicial View

19th Century Judicial Views

A company secretary have functions which were clerical and

2. A company secretary is a mere servant of the company.

CHAPTER 7: Company Secretary & Auditor

Function of a Company Secretary

Current Judicial View

Current Judicial Views

A company secretary in a large company is the companys chief

2. A company secretary has the authority to enter into contracts

CHAPTER 7: Company Secretary & Auditor

Responsibilities of the Company Secretary

CHAPTER 7: Company Secretary & Auditor

Duties of the Company Secretary

CHAPTER 7: Company Secretary & Auditor

Duties of the Company Secretary

CHAPTER 7: Company Secretary & Auditor

The Company Auditor

Functions of the Company Auditor

CHAPTER 7: Company Secretary & Auditor

Lord Dennings view in Fomento (Sterling

An auditor must approach the task of auditing the

CHAPTER 7: Company Secretary & Auditor

Powers and Rights of Auditors

1. An auditor has a right of access at all reasonable times to accounting

CHAPTER 7: Company Secretary & Auditor

Qualifications of a Company Auditor

CHAPTER 7: Company Secretary & Auditor