Chapter 2 - Rules And Regulation

Question 1

Who may act as an auditor?

Answer 1

1. A member of a Recognised Supervisory Body e.g. ACCA

2. Someone directly authorised by the state.

Question 2

Who may not act as an auditor?

Answer 2

1. Excluded by law:
   The law in most countries excludes those involved with managing the company and those who have business or personal connections with them from auditing that company.
2. Excluded by the Code of Ethics:
   Requires the auditor to consider any factors that would prevent them acting as an auditor e.g. Independence, competence or confidentiality.

Question 3

Who appoints the auditor?

Answer 3

Members (shareholders) - vote them in

Directors - can appoint the first auditor or fill a casual vacancy with members approval.

Secretary of State - if no auditors are appointed by the members of directors.

Auditors of public companies are appointed from one AGM to the next one.
Auditors of private companies are appointed until they are removed.

Question 4

Removing the auditor

Answer 4

1. The auditor has sufficiently secure tenure of office to maintain independence of management.
2. Incumbent auditors can be removed if there are doubts about their abilities to carry out effective duties.

Removal of auditors can be achieved by a simple majority at a general meeting of the company.

Question 5

The auditor’s rights

Answer 5

1. 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 be heard at such meetings on matters of concern to the auditor.
5. To receive copies of any written resolutions of the company.

Question 6

The auditor’s duties

Answer 6

1. To audit the FS and provide an opinion whether they give a true and fair view to the shareholders.