This post is also available in: 
Melayu (Malay) 
简体中文 (Chinese (Simplified))
Can An Company Audit Firm Act As Your Company Secretary?
When talked about company secretary, the frequently asked questions seem to be “why do I need a company secretary?” and “what are the roles and responsibilities of a company secretary?” However, this question: “Can an audit firm being appointed as your company secretary?” is rather important as it stipulates the restrictions when appointing company secretary and how to appoint one.
So, can you appoint the audit firm to be your company secretary? The answer is clearly a big NO.
Firstly, we have to understand that there are very few restrictions when considering who cannot act as your company secretary in a private limited company:
- Company auditors, or
- Any employee of the auditor, or
- An undischarged bankrupt unless given leave by the court.
Why can’t you appoint the audit firm to be your company secretary?
The reasons why your company auditors cannot act as your company secretary are clearly stated in the BY-LAWS (On Professional Ethics, Conduct and Practice) of the Malaysia Institute of Accountants and Section 264 of the Companies Act 2016.
According to the following clauses,
Clause 290.128
When an immediate family member of a member of the audit team is:
(a) A director or officer of the audit client; or
(b) An employee in a position to exert significant influence over the preparation of the client’s accounting records or the financial statements, on which the firm will express an opinion, or was in such a position during any period covered by the engagement or the financial statements, the threats to independence can only be reduced to an acceptable level by removing the individual from the audit team. The closeness of the relationship is such that no other safeguards could reduce the threat to an acceptable level. Accordingly, no individual who has such a relationship shall be a member of the audit team.
Clause 291.135
If a partner or employee of the firm serves as a director or officer of an assurance client, the self-review and self-interest threats would be so significant that no safeguard could reduce the threats to an acceptable level. Accordingly, no partner or employee shall serve as a director or officer of an audit client.
Clause 290.146
If a partner or employee of the firm serves as a director or officer of an audit client, the self-review and self-interest threats created would be so significant that no safeguard could reduce the threats to an acceptable level. Accordingly, no partner or employee shall serve as a director or officer of an audit client.
Clause 290.148
If a partner or employee of the firm serves as Company Secretary for an audit client, self-review and advocacy threats are created that would generally be so significant that no safeguards could reduce the threats to an acceptable level. Despite paragraph 290.146, when this practice is specifically permitted under local law, professional rules or practice, and provided management makes all relevant decisions, the duties and activities shall be limited to those of a routine and administrative nature, such as preparing minutes and maintaining statutory returns. In those circumstances, the significance of any threats shall be evaluated and safeguards applied when necessary to eliminate the threats or reduce them to an acceptable level.
In summary, when an audit firm is appointed as the auditor of the company, every audit partner’s spouse cannot be an officer of the company (the Company Act 2016 defines an officer as including any director, secretary or employee of the company). Therefore, an audit firm would appear to be conflicted from acting for a company (where the spouse of an audit partner is merely an employee of the company).
What are the consequences if your company auditors act as your company secretary?
Fine penalties will be imposed if the company fail to comply with the law by appointing the audit firm to act as the company secretary.
Any person who is or any firm which is appointed as an auditor contravenes subsection (1) or (4) respectively
Understanding the roles and responsibilities of the Company Secretary
Despite the name, the role of a company secretarial is not clerical or secretarial. In fact, the company secretary is responsible for the efficient administration of a company and to ensure that the company complies with statutory and regulatory requirements.
What can 3E Accounting do for you?
In 3E Accounting, we do not provide audit service internally, but we work with many affiliated auditors to assist you in audit matters. This is because we believe that auditing service is not a one-size-fits-all solution. Hence, we will customize the audit service based on your business need.
Although we do not provide auditing services, we are still the one-stop solution provider that works with affiliated auditors and we stay compliant with the BY-LAWS (On Professional Ethics, Conduct and Practice) of the Malaysia Institute of Accountants. You do not need to worry that you might get the summon from the regulators due to non-compliance offences like appointing your company auditor to be your company secretary. At 3E Accounting, we make sure that you stay compliant with the laws and you can really have the peace of mind.
