chapter 2 - rules and regulations

Question 1

what are auditor’s rights ?

Answer 1

Access to the company’s books and records at any reasonable time.
 To receive information and explanations necessary for the audit.
 To receive notice of and attend any general meeting of members of the company.
 To be heard at such meetings on matters of concern to the auditor.
 To receive copies of any written resolutions of the company.

Question 2

what are auditor’s duties?

Answer 2

The external auditor’s primary duty is to audit the financial statements and
provide an opinion on whether the financial statements give a true and fair view
(or are fairly presented in all material respects).
They may have additional reporting responsibilities required by local national
law, such as confirming that the financial statements are properly prepared in accordance with those laws
confidentiality

Question 3

Is auditor an agent of shareholders ?

Answer 3

Agent is someone who works on the behalf of an another party. Auditor is an agent of shareholders as Auditor works for the shareholders.

Question 4

who can appoint an auditor?

Answer 4

Director - to fill a casual vacancy or appoint a first auditor. this requires members approval at the members meeting.
Members - During the period of appointing auditors. if the company who should have appointed the auditor but failed to do so. if the directors failed to appoint the auditor.
Secretory of state - can appoint auditors if the auditor is not appointed by the above mentioned methods

Question 5

when can auditors be removed ?

Answer 5

auditors can be removed if there are doubts about their continuing abilities to carry out their duties effectively.

Question 6

how can the auditor be removed ?

Answer 6

Removal of the auditor can usually be achieved by a simple majority at a
general meeting of the company.

Question 7

what are the initiatives introduced under the regulation?

Answer 7

Harmonisation of auditing procedures, so that users of audit services are confident in the nature of audits being conducted around the world.
 Focus on audit quality, so that the expectations of users are met.
 Adherence to a strict ethical code of conduct, to try and improve the perception of auditors as independent, unbiased service providers.

Question 8

Reasons for exemptions of audit for small companies?

Answer 8

 The owners and managers of the company are often the same people.
 The advice and value which accountants can add to a small company is more likely to concern other services, such as accounting and tax.
 The impact of misstatements in the financial statements of small companies is unlikely to be material to the wider economy.
 The audit fee and disruption of an audit are seen as too great a cost for any benefits the audit might bring.

Question 9

who can be an auditor ?

Answer 9

member of an recognized supervisory body and allowed by the rules of the body to be an auditor or authorized by the state.

Question 10

how is a casual vacancy created?

Answer 10

death of an auditor
disqualification of an auditor
resignation of an auditor
dissolution of an audit firm

Question 11

what is auditors period of office?

Answer 11

public - till next AGM

private - till vacated

Question 12

do national audit standards override international standards ?

Answer 12

yes

Question 13

how many ISAs are there currently

Answer 13

37 and one ISQC

Question 14

what is the requirement for ISAs to come into force

Answer 14

approval of 2/3 rd IAASB members

Question 15

what is the Role of IFAC ?

Answer 15

1) sets high quality audit ( ISAs) and assurance ( ISAEs) standards.
2) facilitates convergence of national and international standards
3) strengthens the public confidence in the profession..
4) elects board members and determines financial contribution.

Question 16

Features of international standards on audit?

Answer 16

1) professional guidance that the auditors must follow
to ensure audit is performed consistently and up to the required standard of quality
2) international standards dont override the national standards. if the ISAs are inconsistent with the national standards , local law should be followed.
3) ISAs are designed in context of an audit of FS but they can be applied to historical financial information.
4) ISAs must be applied in all but exceptional cases in which the auditor deems it necessary to depart from ISAs to achieve the overall aim of audit. the departure must be justified.