Chapter 2 Flashcards
(14 cards)
Rights of an auditor
- access to company’s records
- receive information and explanations
- receive notice of/attend general meetings
- speak at general meetings on matters that concern them as auditors
- receive a copy of any written resolution proposed
Auditor duties
report on whether the financial statements are fairly presented
report opinon on additional statutory requirements:
adhere to local laws
maintain adequate records and returns
ensure FS agree to records
ensure consistency of other information
ensure disclosure of director benefits
Auditor rights are set out in law. Relevant UK legislation is Companies Act 2006
Yes
Sources that regulate accountancy
national legislation
professional bodies
national legislation and standard setting
international standard setting
Who should appoint auditors?
shareholders
When can a director appoint auditors
- before company’s first period for appointing auditors
- following a period during which the company did not have an auditor or at any time before the next period for appointing auditors
- to fill a casual vacancy
When can members/shareholders appoint directors?
can appoint by ordinary resolution:
1. during a period for appointing auditors
2.if a company should have appointed an auditor during a period for appointing auditors but failed to do so
3. if directors fail to do so
Removal of an auditor (UK Companies act 2006)
Auditor can be removed by ordinary resolution of shareholders before the end of their term.
Special notice (28 days) must be given before the meeting where the resolution will be passed.
Directors must convene the meeting within a reasonable period of time
Company must send a copy of the notice to the auditor immediately.
Auditor’s rights:
Submit written representations (not exceeding a reasonable length) on why they ought to stay in office
Request the company to circulate the representations to shareholders (at the company’s expense).
If not circulated, the auditor can require it to be read aloud at the meeting.
Auditor has the right to attend and speak at the meeting where removal is discussed.
If the resolution is passed:
Company must notify regulatory authority
Auditor must deposit statement of circumstances at company’s registered office within 14 days of ceasing to hold office
The auditor is formally removed.
The company must appoint a new auditor as soon as possible to avoid a vacancy.
when can secretary of state appoint directors?
when shareholders or the directors did not appoint
Who fixes the remuneration of an auditor
whoever made the appointment
How often should an auditor be appointed
for each financial year unless the directors reasonably resolve that audited FS are unlikely to be required
What is IFAC (international federation of accountants)
IFAC is the global organization for the accountancy profession.
It supports the development and adoption of high-quality international standards in auditing, ethics, education, and public sector accounting.
IFAC does not set standards directly but works through independent standard-setting boards.
Boards under IFAC
IAASB – International Auditing and Assurance Standards Board
Issues ISAs (International Standards on Auditing).
IESBA – International Ethics Standards Board for Accountants
Issues the Code of Ethics for Professional Accountants.
Key for auditor independence, integrity, objectivity, etc.
IFAC Education Board
it oversees global accountancy education.
Development of IAASB standards
Research and consultation - a project task force is established to develop a draft standard or practice statement
Transparent debate- a proposed standard is discussed at a meeting open to the public
Exposure for public comment - exposure drafts are put on the IAASC website and widely distributed for comment for a minimum of 120 days
Consideration of comments - any comments as a result of the exposure draft are considered at an open meeting of the IAASB and is revised as necessary
Affirmative approval - approval is made by the affirmative vote of at least 2/3 of IAASB members
