Module 9: Auditor Responsibilities: Legislation

Question 1

In order to fulfil auditor responsibilities what must the auditor ensure?

Answer 1

1. Adequately plan the audit in such a way as to obtain all the information and explanations considered necessary to reach an opinion
2. Obtain sufficient, appropriate evidence with which to judge the credibility of the financial statements
3. Report their findings and opinion

Question 2

What are the auditors rights under CA 2006?

Answer 2

Can be split into two broad areas:
1. Rights to receive information
Right of access at all times to the company’s books, documents and supporting records.
Right to require any directors or employees to provide them with information and explanations
The right to require any subsidiaries, incorporated in the UK, of the company to provide them with any information they might need.

2. Rights in relation to resolutions and meetings
   Right to receive any copies of all communications relating to any written resolution proposed to be agreed by a private company.
   Right to receive all notices of any general meeting of the company and to attend such meetings
   Right to be heard at any general meeting on any part of the business which concerns them as auditor.

CA 2006 make it an offence to knowingly mislead an auditor (written or verbal)

Question 3

What are the other matters (Matters reported by exception) that the auditor must form an opinion about required by CA 2006 ? RAPID

Answer 3

1. Returns have been received from branches not visited by the auditor
2. Accounts agree with the underlying reports
3. Proper accounting records have been kept
4. Information and explanations necessary for the purpose of the audit have been received.
5. Directors emoluments and other benefits disclosures

Question 4

CA 2006 requires the auditor to be appointed each financial year the audit is required, usually 50% of shareholders agree via vote. What are the three situations where directors can pick?

Answer 4

1. Any time before the company’s first period for appointing auditors
2. To fill a casual vacancy (auditor has resigned during first term of office)
3. The company has previously taken an audit exemption

Question 5

Distinguish between auditor reappointment between private and public companies

Answer 5

Public companies:
Reappointed at each annual general meeting by shareholders

Private company:
Automatically reappointed unless 5% or more of the shareholders object

Question 6

Explain auditor remuneration?

Answer 6

Usually fixed and agreed at general meeting. The company must disclose in p&l and may have to distinguish between audit and non-audit services.

Question 7

Auditors can be removed at any time by shareholders. What are the auditors rights to protect against unwarranted dismissal?

Answer 7

1. If any shareholders propose a motion to remove the auditors, a copy of this motion must be sent to the auditors.
2. An auditor has a right to make written statements regarding their removal and have passed to the shareholders
3. The auditor retains the right to attend the normal AGM of the company in the year which they were removed.

Question 8

What must the auditor do in order to resign from the appointment ?

Answer 8

Auditor must send a letter of resignation, and, where the company is a public interest company, a statement of circumstances.

Question 9

A statement of circumstances must either?

Answer 9

1. Assert that there are no circumstances connected with the departure from the office that the shareholders and creditors of the company should be made aware of
2. Disclose details of such circumstance

It is an offence for an auditor to cease to hold office without depositing a statement of circumstance.

Question 10

What are the regulated sectors for money laundering purposes?

Answer 10

1. Auditors, insolvency practitioners, external accountants and tax advisors
2. Credit institutions
3. Financial institutions
4. Independent legal professionals
5. Trust or company service providers
6. Estate agents and letting agents
7. High value dealers
8. Casinos
9. Art market participants
   10 . Cryptoasset exchange providers.
10. Custodian wallet providers

Question 11

What are the three principal offences set out by POCA?

Answer 11

1. Concealing or transferring the proceeds of criminal conduct
2. Arrangements to facilitate the acquisition, retention, use or control of criminal property
3. Acquiring, using or possessing criminal property

Question 12

What do ML regulations cover by setting out specific policies and procedures?

Answer 12

1. Risk assessment controls
2. Customer due diligence
3. Registration and supervision