Module 9 - Auditor Responsibilities: Legislation

Question 1

Auditors rights to receive info are:

Answer 1

Right of access at all times to company’s records

Right for employees and directors to provide necessary info and explanations

Right for subsidiaries to provide them with any information they need

Question 2

Auditors rights in relation to resolutions and meetings:

Answer 2

Receive copies of all communications relating to any written resolution

Receive all notices of any general meetings and also to attend such meetings

Right to be heard at any general meeting which concerns them as auditor

Question 3

Is it an offence to knowingly or recklessly give misleading, false or deceptive statements to an auditor?

Answer 3

Yes

According to CA 2006

Question 4

Mnemonic for auditors requirements to form opinions beyond the key reporting responsibilities

Answer 4

RAPID

Question 5

What does RAPID stand for?

Answer 5

Returns have been received from branches not visited by the auditor

Accounts agree with the underlying records

Proper accounting records have been kept

Info and explanations necessary for the purpose of the audit have been received

Directors emoluments (salary, bonuses etc) and other benefits disclosures are complete

Question 6

Do LSE listed companies have to comply with more onerous disclosure requirements

Answer 6

Yes

Question 7

Does the CA 2006 require an auditor to be appointed for each financial year that an audit is required?

Answer 7

Yes

Question 8

How is the auditor usually appointed

Answer 8

By the shareholders via the passing of an ordinary resolution

(Over 50% of shareholders agree via a vote)

Question 9

Are there any situations in which the directors are allowed to appoint the auditor?

Answer 9

Yes

Question 10

What are the situations in which directors are allowed to appoint the auditor?

Answer 10

The first time a company requires an auditor

To fill a casual vacancy (eg an auditor resigns during the term of office)

If the company previously had audit exemption but have lost the exemption and now need an auditor

Question 11

Where the auditor has been appointed by directors, what do they shareholders have to decide?

Answer 11

Whether that auditor should be reappointed next year

Question 12

How does choosing an auditor work in a public company?

Answer 12

An auditor will be appointed / re-appointed at each annual general meeting (‘AGM’) by the shareholders

Question 13

How does choosing an auditor work in a private company?

Answer 13

The auditor is deemed to be automatically reappointed unless 5% or more of shareholders object (or auditors first appointed by directors)

Some companies may have something which prohibits automatic re-appointment

Question 14

Can the auditor be removed at any time by shareholders?

Answer 14

Yes

Question 15

Does an auditor have rights to protect against unwarranted dismissal?

Answer 15

Yes

Question 16

What are the auditor rights to protect against unwarranted dismissal?

Answer 16

Copy of motion to remove auditors must be sent to auditors

Auditor has right to make written statements regarding their removal and have these passed to shareholders

Auditor retains the right to attend the normal AGM of the company in the year they were removed

Question 17

Does an auditor have to be notified if they are to be removed / not reappointed?

Answer 17

Yes

Question 18

In order for an auditor to resign, what must they do?

Answer 18

Letter of resignation

If the company is public - a statement of circumstances to the registered office of the company

Question 19

Do auditors on non-public interest companies have to provide a statement of circumstances?

Answer 19

Yes (there are exemptions though)

Question 20

What exemptions may mean that an auditor of a non-public company does have to provide a statement of circumstances?

Answer 20

Company being exempt from audit

Being wound-up due to insolvency

Auditor ceasing to hold office at the end of their term

Question 21

Where a statement of circumstances is deposited with a company, the auditor may request what?

Answer 21

That a General meeting is called to consider the circumstances connected with the registration

Question 22

A statement of circumstances must either:

Answer 22

Assert there are no circumstances connected with the departure from office that shareholders should be made aware of

Disclose details of such circumstances

Question 23

Is it an offence for an auditor to not deposit a statement of circumstances in a situation where they are required to?

Answer 23

Yes

Question 24

In most cases, the statement of circumstances must be sent to who?

Answer 24

The company’s shareholders and debenture holders

The appropriate audit authority (the FRC) / the auditors RSB

Companies house - unless company obtains a court order to prevent this

Question 25

Is it an offence for the auditor to cease to hold office without sending a statement of compliance to the relevant places?

Answer 25

Yes

Question 26

What is money laundering?

Answer 26

Involves possessing, concealing or dealing with the proceeds of any crime

Question 27

Examples of money laundering?

Answer 27

Tax evasion and other financial crimes Drug dealing Terrorism

Question 28

Where is the guidance for accountants on money laundering?

Answer 28

The CCAB Anti-Money Laundering (AML) Guidance

Question 29

The AML Guidance incorporates and interprets the main legislation applicable to accountants such as:

Answer 29

the Proceeds of Crime Act (‘POCA’) ML Regulations the Serious and Organised Crime and Police act 2005 (‘SCOPA’)

Question 30

Any accountant, or their clients may conduct money laundering by:

Answer 30

Knowingly and / or actively becoming involved in money laundering Inadvertently becoming involved - being used by an employee, client/customer, or third party, so that they do not know that a transaction involves money laundering

Question 31

POCA sets out three principal offences in relation to money laundering:

Answer 31

Concealing or transferring the proceeds of criminal conduct Arrangement to facilitate the acquisition, retention, use or control of criminal property Acquiring, using or possessing criminal property

Question 32

Penalties for offences laid out in POCA:

Answer 32

Up to 14 years in prison A fine Or both

Question 33

ML Regulations identify a specific group of businesses that are termed regulated sectors:

Answer 33

``` Credit institutions Auditors Financial institutions Independent or legal professionals Trust or company service providers Estate agents and letting agents High value dealers Casinos Art market participants Crypto asset exchange providers Custodian wallet providers ```

Question 34

Potential additional offence for those in regulated sectors under the POCA include:

Answer 34

Failure to report Tipping off

Question 35

When does an MLRO commit an offence?

Answer 35

If they fail to report to the NCA in a timely fashion

Question 36

ML Regulations cover some key areas:

Answer 36

Risk assessment and controls Customer due diligence Registration and Supervision of relevant businesses

Question 37

Within ML Regulations, Risk assessment and controls is covered. Policies and procedures in this include:

Answer 37

Risk assessment Policies, controls and procedures Internal controls Training

Question 38

Within ML Regulations, customer due diligence is covered. How does a firm deal with this?

Answer 38

Seek satisfactory evidence from a reliable and independent source. Eg passports of directors / companies house search (for the company itself) / beneficial owners Accounts should obtain more evidence when there is a higher degree of risk

Question 39

How long should records of any client identification procedures and risk assessment (ML Regulations) be kept for?

Answer 39

Five years

Question 40

How soon after should records relating to client identity be deleted after completion of a relationship / transaction?

Answer 40

Five years

Question 41

With supervision and registration (ML Regulations), is it a criminal offence to provide accountancy services within the regulated sector without being supervised by an appropriate AML supervisory body:

Answer 41

Yes

Question 42

Circumstances where the auditor must be cautious not to tip off the client:

Answer 42

Instances of non-compliance Communication with those charged with governance Resigning unexpectedly from the audit engagement Issuing a modified audit report Delaying the audit report

Question 43

Is there any obligation for those working outside the regulated sectors to make a money laundering report?

Answer 43

No Unless it relates to terrorism