The Role of Auditors in the Context of Corporate Governance
THE ROLE OF AUDITORS IN THE CONTEXT OF CORPORATE GOVERNANCE
Asst. Prof. Loganathan Krishnan
Abstract Auditors examine company’s accounts and report to the company on the accounts. Fundamentally, the concern is how auditors carry out these duties effectively. Legislations namely Companies Act 1965, Securities Industry Act 1983 which has been consolidated as Capital Market and Services Act 2007 have made major inroads to ensure that auditors carry out their duties and obligations effectively. Additionally, the Code of Corporate Governance was drawn in 2001 and amended in 2007, to further enhance the effectiveness of audit in the interests of stockholders and stakeholders. Nonetheless, it is pertinent to determine whether the Code of Corporate Governance is adequate and comprehensive in ensuring that auditors play effective role in auditing a company. This is particularly imperative in the light of recent scandals involving auditors in Malaysia and in other parts of the world. The study then proceeds to explore the appropriate litmus test in laying down sound principles governing the duties and obligations of auditors. This is crucial because there is increased reliance by the stockholders and stakeholders on auditors. Moreover, there is a growing concern for corporate governance domestically, regionally and globally. Thus, a comparative study is also carried out as to how the issue of corporate governance is addressed in other parts of the world. Finally, the study shows that the Malaysian Code of Corporate Governance governing the duties and obligations of the auditors has not produced the desired result pertaining to accountability. Field of Research: Corporate Governance, Auditors
KA 601 Department of International Business Faculty of Accountancy and Management Universiti Tunku Abdul Rahman Sungai Long Campus, Lot PT 21144, Jalan Sungai Long Bandar Sungai Long, Cheras, 43000 Selangor, Malaysia Tel: 03 90194722 Fax: 03 90197062 E-mail:
Asst. Prof. Loganathan Krishnan
Abstract Auditors examine company’s accounts and report to the company on the accounts. Fundamentally, the concern is how auditors carry out these duties effectively. Legislations namely Companies Act 1965, Securities Industry Act 1983 which has been consolidated as Capital Market and Services Act 2007 have made major inroads to ensure that auditors carry out their duties and obligations effectively. Additionally, the Code of Corporate Governance was drawn in 2001 and amended in 2007, to further enhance the effectiveness of audit in the interests of stockholders and stakeholders. Nonetheless, it is pertinent to determine whether the Code of Corporate Governance is adequate and comprehensive in ensuring that auditors play effective role in auditing a company. This is particularly imperative in the light of recent scandals involving auditors in Malaysia and in other parts of the world. The study then proceeds to explore the appropriate litmus test in laying down sound principles governing the duties and obligations of auditors. This is crucial because there is increased reliance by the stockholders and stakeholders on auditors. Moreover, there is a growing concern for corporate governance domestically, regionally and globally. Thus, a comparative study is also carried out as to how the issue of corporate governance is addressed in other parts of the world. Finally, the study shows that the Malaysian Code of Corporate Governance governing the duties and obligations of the auditors has not produced the desired result pertaining to accountability. Field of Research: Corporate Governance, Auditors
KA 601 Department of International Business Faculty of Accountancy and Management Universiti Tunku Abdul Rahman Sungai Long Campus, Lot PT 21144, Jalan Sungai Long Bandar Sungai Long, Cheras, 43000 Selangor, Malaysia Tel: 03 90194722 Fax: 03 90197062 E-mail:
References: Ali, R. 1999, ‘The rules of good corporate governance: Methods of efficient implementation’, Proceedings of the 12th Commonwealth Law Conference, September 1999, Kuala Lumpur. 9 ‘A murky sort of pond life’, 2002, Economist, 7 June, p 11 McKinsey & Co, 2002 12 ‘Steps to improve accounting firms’, 2007, New Straits Times, 27 July, p List of Cases Pacific Acceptance Corporation Ltd v Forsyth (1970) 92 WN (NSW) 29 Simonius Vischer & Co v Holt (1979) 2 NSWLR 322 13