W2 Rules and Regulations

Question 1

Why is there a need for audit regulation

Answer 1

Auditor have come under increased scrutiny due to many high profile audit failures.

To regain trust, standard setters have introduced three initiatives:

• Harmonisation of audit procedures
• focus on audit quality

-adherence to a strict ethical code

Question 2

Who can act as an auditor

Answer 2

The person must be

• a member of a recognized supervisory body (RSB) e.g ICAEW or ACCA and allowed by them to be an auditor

or

-someone directly authorised by the state

Question 3

Who can appoint an auditor

Answer 3

The members (shareholders) of the company at the AGM/ other general meeting

The directors
-filling a causal vacancy
-first auditor

By secretary of State
- if no auditor is appointed by members or directors

Question 4

How can an auditor be removed

Answer 4

Auditor can be removed by ordinary resolution at a general meeting

Question 5

What happens if an auditor resigns

Answer 5

If an auditor resigns, they must submit a written notice to the company and send a statement of circumstances to the members and the regulator authority

Question 6

What are the 5 auditors rights

Answer 6

Access to the company’s books and records at any reasonable time

2. To receive information and explanations necessary for the audit
3. To receive notice of and attend any general meeting of members of the company
4. To speak at such meetings on matters affecting the auditor or the audit
5. To receive copies of any written resolutions of the company

Question 7

What are the duties of an auditor

Answer 7

Primary responsibility is to audit the financial statements and provide an opinion on whether they give a true and fair view

May have additional reporting responsibilities required by local national laws

Question 8

Explain the relationship between International Standards on Auditing and national standards

Answer 8

International standards have no legal standing in individual countries, therefore countries need to have their own arrangements in place for:

-Regulating the audit profession

-Implementing auditing standards (they can make their own or modify ISA’s to suit national needs)

If there is a conflict between the two, local regulations apply