PRELIMINARY ENGAGEMENT ACTIVITIES Flashcards
What is the Tenure of the Auditors?
The tenure of auditors is from the date of their appointment till the
conclusion of the next AGM.
How are auditors removed before
expiry of tenure?
Auditors can be removed before expiry of their tenure by members through
a special resolution.
When are First Auditors appointed?
First auditors are appointed within 90 days from incorporation of a
company
When are Subsequent Auditors
appointed?
Subsequent auditors are appointed at each AGM of the company.
How are Subsequent Auditors
appointed?
Subsequent auditors are appointed by the members in an AGM.
The Board of directors recommend the incoming auditors along with the
notice of the AGM. Consent of the incoming auditors must be obtained
before such notice and the retiring auditors must be notified as well.
Registrar must be intimated within 14 days of appointment.
Members having shareholding of 10% or more can propose auditors after
sending a notice for the resolution 7 days before the AGM
When are auditors appointed in case
of a Casual Vacancy?
Casual vacancy is filled within 30 days by the directors of the company.
What are the Rights of the Retiring
Auditors?
Retiring auditors have the right to make a representation in writing to the
company at least 2 days before the AGM. Such representation must be read
out at the AGM before taking up the agenda for appointment of auditors.
What are the Responsibilities of the
Retiring Auditors?
In case a representation is made to the company 2 days before the AGM,
the retiring auditor is required to attend the AGM by himself or a person
authorized by him in writing. Furthermore, a copy of the representation
must be sent to ICAP as well.
What are the Statutory Rights of the
Auditors?
Rights to Information:
- Right of access to the company’s books, accounts and vouchers
- Right of access to copies of books and accounts of a branch
- Right to require information and explanation from a director, officer or
an employee of the company or its subsidiary
Rights with regard to General Meetings:
- Right to receive all notices of a general meeting
- Right to attend and speak at general meetings
- Right to make a representation if a change in auditors is proposed
Who is Qualified to act as an auditor?
For a public company, its subsidiaries and a private company with paid up
capital of 3 million or above a Chartered Accountant with a valid certificate
of practice from ICAP is qualified to act as an auditor.
In any other case, a Chartered Accountant and Cost and Management
Accountant with valid certificates of practice may act as an auditor
What is an Engagement Letter?
An engagement letter is a written agreement between the auditor and
client which states the terms and conditions of the audit engagement.
What are the Contents of an
Engagement Letter?
Contents of the engagement letter include:
1. Objective and scope of audit.
2. Responsibilities of the auditor.
3. Responsibilities of the management.
4. Identification of the applicable financial reporting framework.
5. Expected form and contents of report to be issued.
6. Inherent limitations of an audit and internal controls.
7. Fee or basis or fees.
8. Expectation that management will provide written representations
