Section 40 — BANKING AND FINANCIAL INSTITUTIONS ACT 1989

(2)

Where a licensed institution fails to appoint an auditor under subsection (1) before the date specified thereunder, the Minister may appoint for the institution an auditor recommended by the Bank, and specify his remuneration and expenses, and the same shall be paid to such auditor by the institution.

(3)

If the Minister at any time, on the recommendation of the Bank, considers it desirable that another auditor should act with the auditor appointed under subsection (1) or (2), he may appoint another auditor recommended by the Bank and specify his remuneration and expenses, and the same shall be paid to such auditor by the institution.

(4)

No licensed institution shall knowingly appoint as its auditor any person, and no person shall knowingly consent to be appointed as an auditor of a licensed institution by the institution or by the Minister, if such person—

(a)

is not an approved company auditor;

(b)

has any interest whatsoever in any form or of any description in that institution, including an interest in the shares of the institution;

(c)

is a director, controller or officer of that institution;

(d)

is indebted to that institution or to any related corporation of that institution;

(e)

is a partner, employer or employee of a director, controller, or officer, of that institution;

(f)

is a partner or employee of an employee of a director, controller, or officer, of that institution;

(g)

is a shareholder, or his spouse is a shareholder, of a corporation whose employee is an officer of that institution;

(h)

is responsible, or is the partner, employer, or employee of a person responsible, for the keeping of the register of members or the register of holders of debentures of that institution; or

(i)

has been convicted of any offence under this Act or the Companies Act 1965, or of any offence under any other written law involving fraud or dishonesty:

Provided that the Minister may, on the recommendation of the Bank, remove the disqualification under this paragraph which any auditor is subject to if the Minister is satisfied that it would not be contrary to the public interest to do so.

(5)

For the purposes of subsection (4), a person shall be deemed to be an officer of an institution—

(a)

if he is an officer of a related corporation of such institution; or

(b)

except where the Minister, on the recommendation of the Bank, in the circumstances of the case, otherwise directs, if he has, at any time within the preceding period of twelve months, been an officer or promoter of such institution or such related corporation.

(6)

A firm shall not knowingly consent to be appointed, and shall not knowingly act, as auditor for any licensed institution and shall not prepare, for or on behalf of a licensed institution, any report required by this Act to be prepared by an auditor unless—

(a)

all the partners of the firm resident in Malaysia are approved company auditors and, where the firm is not registered as a firm under any law for the time being in force, a return showing the full names and addresses of all the partners of the firm has been lodged with the Bank; and

(b)

no partner is disqualified under subsection (4) (b) to (i), inclusive, from acting as the auditor of the institution.

(7)

No person shall be appointed as auditor under this section unless he has prior to his appointment consented in writing to act as such auditor, and no firm shall be appointed as auditor under this section unless the firm has prior to the appointment consented in writing under the hand of at least one partner of the firm to act as such auditor.

(8)

The appointment of a firm in the name of the firm as auditor under this section shall take effect and operate as an appointment as auditor of the licensed institution concerned of the persons who are members of that firm at the time of the appointment.

(9)

For the purposes of this section, a person shall not be deemed to be an officer of an institution or its related corporation by reason only of his having been appointed an auditor of the institution or its related corporation.

(10)

Any person appointed as auditor for a licensed institution who, at any time after such appointment, becomes subject to any of the disqualifications mentioned in this section or in section 9 of the Companies Act 1965, shall immediately thereupon cease to be the auditor of that institution and shall not thereafter act as its auditor or be required or permitted by the institution to act as such.

(11)

The duties of an auditor appointed under subsection (1) or (2) shall be—

(a)

to carry out, in the case of a licensed local institution, an audit of the accounts of the institution;

(b)

to carry out, in the case of a licensed foreign bank, an audit of the accounts of that bank in respect of its operations in Malaysia; and

(c)

subject to section 41 (4), to submit a report of such audit to the members of the licensed institution.

(12)

The report of the auditor referred to under subsection (11) (c) shall—

(a)

in the case of a licensed institution which is a company, be made in accordance with section 174 of the Companies Act 1965; and

(b)

in the case of a licensed institution, other than a company, certify the following:

(i)

whether or not all the information and explanations which are in the opinion of the auditor necessary for the purposes of the audit have been obtained;

(ii)

whether or not, according to the best of the information and explanations given to him; the balance sheet and profit and loss account referred to in the report give, in his opinion, a true and fair view of the state of the affairs of the licensed institution at the date of the balance sheet, and of the profit and loss account for the financial year concerned, regard being had, inter alia, to the provisions of this Act;

(iii)

whether or not in his opinion proper books of account have been properly kept by the licensed institution so far as it appears from the audit of the accounts; and

(iv)

whether or not in his opinion proper returns, adequate for the purposes of the audit, have been received by him from offices of the licensed institution not visited.

(13)

The Bank may, at any time, require an auditor appointed under this section to—

(a)

submit such additional information in relation to his audit as the Bank may specify;

(b)

enlarge or extend the scope of his audit of the business and affairs of the institution in such manner or to such extent as the Bank may specify;

(c)

carry out any specific examination or establish any procedure in any particular case; or

(d)

submit a report on any of the matters referred to in the foregoing paragraphs, and the Bank may specify the time within which any of the aforesaid requirements shall be complied with by the auditor and specify the remuneration which the institution shall pay to the auditor in respect thereof.

(14)

The auditor shall comply with any requirement of the Bank under subsection (13) and the institution shall pay to the auditor the remuneration of the auditor referred to therein.

(15)

If an auditor appointed under this section, in the course of his duties as an auditor of an institution, is satisfied that—

(a)

there has been a contravention of any provision of this Act or that any offence under any other law has been committed by the institution or by any other person;

(b)

losses have been incurred by the institution which reduce its capital funds by fifty percent or more;

(c)

any irregularity which jeopardises the interests of depositors or creditors of the institution, or any other serious irregularity, has occurred; or

(d)

he is unable to confirm that the claims of depositors or creditors are covered by the assets of the institution, he shall immediately report the matter to the Bank.

(16)

A licensed institution, and any director, controller or officer of that institution, shall—

(a)

furnish to an auditor appointed under this section—

(i)

all information within its or his knowledge or capable of being obtained by it or by him; or

(ii)

any information which the auditor requires, to enable him to carry out his duties; and

(b)

ensure that all information which is furnished to the auditor, including information furnished under paragraph (a), is not false or misleading in any material particular.

(17)

The Bank may at any time examine the books, other documents, accounts and transactions of any person which was at any time, or is, an auditor of a licensed institution and for the purposes of such examination, the Bank shall have and may exercise all such powers as it has or may exercise in relation to an examination of a licensed institution under this Act.

(a)

its latest audited annual balance sheet, profit and loss account and statement setting out the sources of its funds, the purposes for which, and the manner in which, such funds have been utilised; and

(b)

the report of—