Rules and Regulation Flashcards
How do laws and Regulations determine which companies require and audit?
National law will usually determine which companies require an audit,
- Small/owner managed companies are often exempt from requiring audit.
- Companies in regulated sectors will not be able to claim exemption.
Who can carry out an audit?
Persons eligible to carry out an audit are:
- Members of a recognised supervisory body and allowed by the rules of that body to carry out audits.
- Directly authorised by the state.
Persons cannot be auditors if:
- They are excluded from that role by law - i.e work for the company being audited.
- Are excluded by the code of ethics.
How is an auditor appointed?
The usual method is for an auditor to be appointed by the shareholders of a business:
- Public companies - appointment runs AGM-AGM
- Private companies - Appointed until removed.
If the shareholders are unable to appoint an auditor the following parties may make the appointment instead:
- Directors - does require members approval.
- Secretary of State - if shareholders and directors do not appoint.
How can an Auditor be removed?
- The auditors appoint has to be structured in such a way as to ensure they can maintain independence of management.
- They can be removed if there are doubts about ability to carry out the role.
- Usually achieved through simple majority at a general meeting.
Safeguards include:
- Notice period, so removal cannot be “sprung” upon them at a meeting.
- Auditor can circulate a statement against removal if appropriate.
- Statement of circumstances must be sent to members and regulatory authority when ceasing to act.
Auditors may also resign if they are unable to work with management, statement of circumstances must be issued.
What are the rights of an Auditor?
During Appointment
- Access to company books and records at any reasonable time.
- To receive information and explorations necessary for the audit.
- To receive notice of and attend any general meeting of members of the company.
- To be heard at general meetings on matters of concern to the auditor.
- To receive copies of any written resolutions of the company.
After Removal/Resignation.
- To request GM of company to explain circumstances of the resignation.
- To require the company to circulate the notice of circumstances.
What are the duties of an auditor?
- Primary duty is to audit the financial statements and provide an opinion on whether the statements give a true and fair view.
- Additional reporting responsibilities my be required by:
- Local national Law
- Regulatory bodies.
What are the professional standards that apply to auditing called?
Audit standards are set by a subsidiary board of IFAC called the International Audit and Assurance Standards Board (IAASB).
This board sets the international standards on Auditing (ISA’s)
