Chapter 6 Flashcards
Who has the appointing authority for auditor.
First auditor:
- By Directors within 90 days of incorporation.
- If not appointed, Commission.
Subsequent auditor:
- By members at AGM.
- If not appointed, Commission.
Casual vacancy: (death, disqualification)
- By directors within 30 days of occurrence.
- If not appointed, Commission
Mid-term removal of auditor:
1. By directors with prior approval of Commission.
If disqualified person is appointed:
- Appointment is void.
- Commission will appoint now.
If appointed auditor is unwilling to act:
1. Commission will appoint now
What is the normal tenure of an Auditor.
from date of appointment till conclusion of next AGM
How an auditor can be removed.
- At AGM (=Retirement):
Tenure completes. New appointment made. - Before AGM (= Mid-term Removal):
By members through Special Resolution.
How the remuneration of an auditor is determined.
Determined
- by members; or
- by the board (if appointed by Board) or Commission (if appointed by Commission).
Who can sign the auditor’s report
If auditor is individual, report shall be signed by himself.
If auditor is a partnership firm, report shall be signed by:
- By Partner of firm.
- In the name of firm
Procedures for Appointment and Removal of Statutory Auditor
- Recommendation by Directors:
i. BOD shall recommend an auditor after obtaining consent of proposed auditor.
ii. Send recommendation with notice of AGM to members and Retiring auditor.
(Retiring auditor can also be recommended.) - Recommendation by Members:
i. Obtain consent of proposed auditor.
ii. 10% shareholder.
iii. Send notice 07 days before AGM.
Company to send notice to retiring auditor and upload on website. - Right of Retiring Auditor:
i. To make representation in writing, atleast 02 days before AGM.
ii. Representation to be read out at AGM before taking agenda for appointment of auditor.
Retiring auditor or an authorized person shall attend AGM. - Appointment at AGM:
i. By members through resolution. - Notification after Appointment:
i. To Registrar within 14 days of appointment
Ethical Responsibilities of Outgoing Auditor:
- To reply to Professional Clearance Letter with permission of client.
- To file ICAP a copy Representation in writing (if made at AGM).
- To file ICAP “Statement of Facts/Circumstances” (in mid-term removal).
Ethical Responsibilities of Incoming Auditor:
- To send Professional Clearance Letter with permission of client.
- To obtain and read a copy of Representation in writing (if made at AGM).
- To inform ICAP about the offer and shall not accept offer until prior clearance from ICAP. ICAP usually give clearance in 15 days (in mid-term removal).
Statutory Rights of Auditor with regard to information.
- To access company‘s books, accounts and vouchers.
- To access books, accounts and vouchers of branches as have been transmitted to principal office.
- To require information from :
i. any employee, officer, director of company, or
ii. any employee, officer, director of subsidiary of company, or
iii. person who holds company’s books etc.
Rights of Auditor with regard to the general meeting:
Rights with regard to the general meeting:
- To receive notices general meetings.
- To attend general meetings. However, in case of a listed company or when a representation in writing is made, it is the duty of auditor to attend AGM.
- To speak at general meetings.
- To make representation in writing if change of auditor is propossed.
Statutory Duties of Auditor
To report:
- whether F/S conform with AFRF and give information required by companies act, 2017 and give true and fair view.
- whether all information and explanations obtained.
- whether proper books of account kept as required by companies act, 2017.
- whether F/S drawn up as per Act, and in agreement with books of account.
- whether investments, expenditure and gaurantees extended were for the purpose of business.
- whether zakat deductible at source under Zakat and Usher ordinance, 1980 has been deducted and deposited
What cost accounting records are required to kept.
- Utilization of Material.
- Utilization of Labour.
- Utilization of other inputs or items of cost.
Which company is required to maintain Cost Accounting Records
A company engaged in production, processing, manufacturing or mining activities
When to conduct Cost Audit.
It is conducted when Commission may direct that audit of cost account of company shall be conducted in manner as may be prescribed in order.
Which persons are authorized to conduct Cost Audit.
- A Chartered Accountant within the meanings of Chartered Accountants Act, 1961
- Cost and Management Accountant within the meaning of Cost and Management Accountant Act, 1966.
Such auditor shall have same powers, duties and liabilities as an auditor of company and other powers, duties and liabilities as may be prescribed.