Question 1 : Engagement Letter

Engagement letter is a document that confirms an auditor’s acceptance of appointment, the

objective and scope of the audit, the extent of audit responsibilities to the client and to form any
reports. It is in the interest of both client and auditor to sends an engagement letter before the
commencement of engagement so that it could avoid misunderstanding. Therefore, engagement
letter information is important in planning the audit as it can affect the timing of the test and the
total amount of them the audit will take. However, if unexpected problems occur, arrangement
must be done to extent the amount of time of engagement.
FORMAT OF ENGAGEMENT LETTER
CONTENT OF ENGAGEMENT LETTER
1) Management’s responsibilities

Client should acknowledge auditor that they will prepare and present the financial
statement which give a true and fair view that also comply with Companies Acts and the
accounting standards. Client also acknowledge auditor about the agreement in designing,
implementing and maintain the internal control that relevant to preparation and presentation of
financial statement which is free from misstatement. Other than that, client must also acknowledge
the auditor that they will provide complete information to the auditor.

2) Auditor’s Responsibilities

Auditors responsibilities is to report on any aspect that they are not satisfied such as
whether proper accounting records have been kept by the company or whether the auditor have
obtained all the information that are necessary for the purpose of audit. Moreover, auditors can
report if the financial statement do not comply respect with the accounting standards.

3) Scope of Audit

Auditor must express that they audit the financial statement that comprise balance sheet
and income statement, statement of changes in equity and cash flow. Therefore auditor should
acknowledge their acceptance and understanding of the audit engagement. Thus, audit will
perform with auditor’s objective by expressing opinion on the financial statement.

4) Limitation of the engagement

Auditor should address the fact that the audit is meant to provide reasonable assurance
regarding whether the financial statement are free of misstatement. However, auditor don’t
examine all transaction and therefore, there is risk that error, fraud or illegal act exist and aren’t
detected.

Engagement letter is a document that confirms an auditor’s acceptance of appointment, the

objective and scope of the audit, the extent of audit responsibilities to the client and to form any
reports. It is in the interest of both client and auditor to sends an engagement letter before the
commencement of engagement so that it could avoid misunderstanding. Therefore, engagement
letter information is important in planning the audit as it can affect the timing of the test and the
total amount of them the audit will take. However, if unexpected problems occur, arrangement
must be done to extent the amount of time of engagement.

Question 2 : Section 266 Power and duties of auditors

Every auditor of a company must report to the member about the financial statement and
on the company’s accounting also on the others records related to the financial statement. The
report shall be before the company annual general meeting for a public company and laid before
meeting of members for private company. Under this section, auditor shall state whether the
financial statement or if the company is a holding company for which consolidate financial
statement are properly prepared in the report which the financial statement give a true and fair
view and also accordance with this Act and approved accounting standards. In the opposite, auditor
shall state if in his opinion the financial statement or consolidate financial statement have not been
drawn up in accordance with the approved accounting standards. Besides, auditor must also report
the name of subsidiaries of which he has not acted as auditor in the case of consolidate financial
statement.

Next, an auditor of a company should have a duty to form an opinion to the matters whether
the auditor has obtained all the information and explanation that he required or did the company
kept all the proper accounting and records required by the Act. Other than that, auditor also shall
form a duty to express an opinion whether the procedures or methods used by a holding company
into any consolidate account were appropriate and the auditor shall state in the report the
particulars of any deficiency, failure or shortcoming cause by any matter.

An auditor of a company also have the right of access at all the reasonable times to the
accounting and other records, including register of the company and any auditor of a related
company information and explanation for the purpose of audit. Therefore, for an auditor so a
holding company, auditor has a right of access at all reasonable time to the accounting and other
records including any subsidiary and is entitled to require any officer

Therefore, an auditor’s report shall be attached to the financial statement or consolidated

financial statement and shall be read before the company in the general meeting and can be open
for inspection by any members at any time. In accordance of it, an auditor of a company or his
agent will be entitled to attend any general meeting of the company and receive all notice and other
communications relate to the general meeting which a member is entitled to receive or to be heard
at any general meeting.

Furthermore, if an auditor perform his duty as an auditor is satisfied that there has been a
breach or non-observance of any provision of this Act and having circumstances that in his opinion
the matter has not been adequately dealt with by include in his report on the financial statement or
consolidate financial statement or notify the directors, then he shall forthwith report the matter in
writing to the Registrar.

Thus, an officer of a corporation that refuse or fail without lawful excuse to allow an auditor
or in contracts to have access to any accounting and other records, including registers of the
corporation in his custody or to give any information and explanation as required under this section
or obstructs or delays an auditor perform his duties or exercise his power shall be liable to
imprisonment for a term not exceeding three years or to be fine not exceeding RM500, 000 or to
both.