Lecture 4 - Audit Regulation

Question 1

What ways is the audit profession regulated?

Answer 1

1. Self regulation
2. By the state
3. By other independent bodies

Question 2

Which regulation first required balance sheets to be audited?

Answer 2

Companies Act 1844

Abandoned 1856-1900

Question 3

What did the Companies Act 1900 require?

Answer 3

Truth and CORRECTNESS

Not required to be independent

Question 4

What did the Companies Act 1948 require?

Answer 4

1. P&L and B/S required to be audited

2. Report on “Truth and Fairness” not “Truth and Correctness”

Question 5

What were the provisions from the Companies Act 1985 and 1989?

Answer 5

1. Appointment
2. Resignation
3. Removal
4. Rights
5. Remuneration
6. Responsibilities
7. Eligibility
   “ARRRRRE”

Question 6

What are the regulations in terms of appointment

Answer 6

• DIRECTORS may appoint auditors any time before 28 DAYS after the previous financial year accounts are sent out
• SHAREHOLDERS may appoint auditor by passing an ordinary resolution
• Failing the above, auditors will be reappointed, unless
  - Articles of association disallows this
  - >5% of shareholders prevent it
  - Members have passed a resolution
  - Directors have passed a resolution

Question 7

What are the regulations in terms of removal?

Answer 7

If auditor proposes so, representations must be made in AR/AGM!

Question 8

What are the regulations in terms of resignation?

Answer 8

Auditor must give notice and include statement of circumstances

Question 9

Who are the self regulators?

Answer 9

• Recognised Qualifying Bodies

- Recognised Supervisory Bodies

Question 10

What is the role of the Recognised Qualifying Bodies?

Answer 10

Admit people into a course to gain qualification

RQB > RSB

Question 11

What is the role of the Recognised Supervisory Bodies?

Answer 11

Assess the eligibility of someone to be a company’s auditor

RQB > RSB

Question 12

What are the three boards in the FRC?

Answer 12

• the codes and standards committee
• the conduct committee
• the executive committee

Question 13

What is the codes and standards committee in charge of?

Answer 13

Matters relating to codes, standard setting and policy.

Has accountancy, actuarial, audit assurance councils etc

Question 14

What is the conduct committee in charge of?

Answer 14

Ensures high quality reporting

Question 15

What is the executive committee in charge of?

Answer 15

Advises on strategic issues

Question 16

Who issues auditing standards?

Answer 16

IAASB

International Audit and Assurance Board

Question 17

What are the auditing standards called?

Answer 17

ISAs

Question 18

What does the AQRT do?

Answer 18

Monitors audits of listed and other PIE companies focusing on quality

Question 19

What does the AQRT stand for?

Answer 19

Audit Quality Review Team