P7. External audit Flashcards
Which companies can qualify as exempt from audit? (3)
Micro/small companies
Subsidiary companies
Dormant companies
What is the primary function and objective of the auditor?
Obtain reasonable assurance that the FS are free from material misstatement (whether fraud or error), issuing a report to the company’s members including the auditors opinion in this regard
Other than accounts, what do auditors report on for quoted companies? (2)
Auditable parts of remuneration report
Corporate governance statement (consistency with accounts)
Does an audit contain any assessment of the future viability of a company or any judgement on efficiency or effectiveness of management?
No
Which documents is an auditor entitled to access?
Books, accounts and records (and of subsidiaries)
Auditors and general meetings…
Entitled to receive all notices and comms, and attend and speak at
The auditor cannot be…
An officer, partner or employee of the company, or any associated undertaking - a partner or employee of such a person - or a partnership of which such a person is a partner
Argument against allowing audit firms to provide non-audit services
Auditor independence will inevitably be compromised by self-interest, self-review, being in an advocacy position, over-familiarity or intimidation
Regarding which companies are audit firms prohibited from providing certain non-audit services
PIEs (public interest entities)
What is the restriction on fees payable by a PIE to their audit firm for non-audit services?
70% of average audit fees of previous 3 consecutive financial years
5 services which auditors cannot provide to PIEs
Tax services
Payroll services
Valuation services
Bookkeeping and preparing FS
Playing a role in decision-making
What is the period for appointing auditors in first audited financial year?
Before the end of the period allowed for sending accounts to members, or before the date the accounts were sent to members (if this was earlier)
What is the period for appointing auditors after first audited financial year?
Within 28 days commencing on the deadline for sending accounts to members, or within 28 days of the date the accounts were sent to members (if earlier)
(PRIVATE CO) Who typically makes initial auditor appointment?
Directors
(PRIVATE CO) Who, and how often, confirm the appointment of auditors?
Members, annually
What if auditors have not been appointed?
Company gives notice to Secretary of State (within 7 days of expiry of period allowed), and SoS will appoint to fill vacancy
(PRIVATE CO) If not auditor has been appointed by end of next period allowed , who is deemed to have bene reappointed?
Previous auditors
(PRIVATE CO) When is it not possible for previous auditors to be deemed to have been reappointed? (5)
Appointment was by directors
Articles require actual reappointment
Deemed reappointment is prevented by members
Resolution to reappoint auditors is lost
Directors have resolved that no auditor should be appointed
(PRIVATE CO) When can members prevent deemed reappointment?
If members with more than 5% voting rights give notice to the company to that effect
(PUBLIC CO) Before which meeting, and by who, are the auditors appointed in first financial year?
Meeting at which accounts are laid, usually by directors
(PUBLIC CO) When must auditors be appointed for subsequent years?
At the conclusion of the meeting at which the accounts for previous year are laid before members
Does the appointment of an auditor of a public co automatically renew? (deemed reappointment)
No
Criteria for being a PIE (1 of 3)
Issuer with any transferable securities admitted to trading on regulated market
Credit institution
Insurance undertaking
Restrictions on continuous audit of a PIE
Max 20 year term
Tender for provision must be done at least once every 10 years
