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Adequacy of Legal Protection for Auditors

Loganathan Krishnan

Department of International Business, Faculty of Accountancy and Management, Universiti Tunku Abdul Rahman, loganathan@utar.edu.my

This paper was presented at the International Conference on Emerging Issues in Public Law: Challenges and Perspectives, Faculty of Law, Universiti Teknologi MARA (UiTM), 13th to 14 December 2011, Shah Alam, Malaysia.

ABSTRACT

In Newton v Birmingham Small Arms Co (1906), the English court made it clear that the rights of auditors cannot be abridged nor restricted by any regulations of the company. This is to ensure that the auditors’ rights are secured. The rights are unqualified and this will enable auditors to discharge their role and duties effectively. Additionally, the Companies Act 1965 (CA) gives substantive powers to enable auditors to carry out their duties effectively. This is because if their hands are tied, they will not be able to uncover any wrongdoings by the company’s management. In fact, any one who obstructs their duties, is in breach of the CA. Auditors have a right of access at all reasonable times to the accounting records and other records, including registers of the company. Moreover, the CA provides that auditors enjoy qualified privilege in certain circumstances. Thus, this study investigates imperative issues on the office of auditors concerning rights, powers and privilege. This is to strengthen the role and duties of auditors to bring about a more meaningful existence of auditors. In doing so, this study will explore the necessary reforms that should be made on the issues concerning the office of auditors. Auditors’ office and powers should not be taken lightly. Nevertheless, the provisions in ‘the Companies Act’, Banking and Financial Institutions Act 1989 (BAFIA) and Capital Market and Services Act 2007 (CMSA) which grant rights,

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