2. Statutory and audit regulation

Question 1

What is the process of APPOINTING external auditor?

Answer 1

• normally annually
• by S/Hs resolution
• Directors may appoint in particular circumstances:
  - first auditor
  - casual vacancies

Question 2

How can an external auditor be REMOVED?

Answer 2

• by S/Hs resolution
• auditors are entitled to:
  - notice of resolution
  - make written representation
  - speak at S/Hs meetings

Question 3

The process of RESIGNATION of an external auditor.

Answer 3

• the auditor may resign at any time
• presenting written notice to registered office
• based on a Statement of Circumstances

Question 4

What is the role of IAASB?

Answer 4

Produces ISAs, ISAEs and ISRSs

Question 5

What is the role of IFAC?

Answer 5

Aims to strengthen the global accountancy profession

Promotes adherence to high quality standards and harmonisation of standards

Question 6

What are auditor’s RIGHTS?

Answer 6

• access company’s books and records
• receive information and explanation
• receive notice of/attend general meetings
• speak at general meetings on matters that concern them as auditors
• receive a written copy of any resolution proposed

Question 7

What are auditor’s DUTIES?

Answer 7

• Report on opinion on whether the financial statements are fairly presented
• Report an opinion on additional statutory requirements:
  = adhere to local law
  = maintain adequate records and returns
  = ensure FS agree to records
  = ensure consistency of other information
  = ensure disclosure of director’s benefit

Question 8

Who can APPOINT auditors?

Answer 8

Directors - first appointment, including after a period with no auditors, and to fill a casual vacancy
Shareholders - during a period or if directors fail to do
Secretary of state - if no auditors appointed as above

Question 9

How can auditors be REMOVED?

Answer 9

1. By notice of removal - special notice or written resolution
2. By representations - on why they they ought to stay
3. If resolution passed - company must notify regulatory authority and auditor must deposit statement of circumstances at company registered office

Question 10

Who is eligible for appointment as a company auditor?

Answer 10

1. Individual holding an appropriate qualification

2. Firms controlled by qualified person

Question 11

Who is not eligible for appointment as a company auditor?

Answer 11

1. an officer or an employee of the company
2. a partner or employee of such person
3. a partnership in which such person is partner

Question 12

What is a “Statement of Circumstances”?

Answer 12

A statement that auditors are required to make upon resignation or removal as auditors.
It will state weather there are any untoward reasons for their removal or resignation - such as non-compliance by directors.