Chapter 2 of Audit & Assurance , ACCA Qualification by Seed Financial Academy. Rules and regulations governing Audit & Assurance.

1. RULES AND REGULATION
AUDIT AND ASSURANCE

2. NEED FOR RULES AND REGULATION

3. CORPORATE FAILURES

4. ENRON SCANDAL

5. REGULATORS INITIATIVES
HARMONISATION OF AUDIT
PROCEDURES
FOCUS ON AUDIT QUALITY
ADHERENCE TO A STRICT
ETHICAL CODE OF CONDUCT

6. REGULATORY GUIDANCE
NATIONAL CORPORATE
LAW(Companies Act 2006 in UK
and SOX Act in the US
AUDITING STANDARDS
CODE OF ETHICS

7. NATIONAL LAW
WHICH COMPANIES ARE REQUIRED TO
HAVE AN AUDIT
WHO CAN AND CANNOT CARRY OUT AN
AUDIT
AUDITOR APPOINTMENT, RESIGNATION
AND REMOVAL
THE RIGHTS AND DUTIES OF AND
AUDITOR

8. WHO NEEDS AN AUDIT AND WHY
In most countries companies are required
by law to have an audit
Small or owner managed companies are
often exempt
Normally exemptions often do not apply
to companies in certain regulated sectors
e.g. financial services companies or
companies listed on a stock exchange

9. ACTING AS AN AUDITOR
MAY ACT AS AN AUDITOR
 Member of Recognised Supervisory Body, e.g ACCA
and allowed by the rules of that body to be an
auditor or
 Someone directly authorized by the state
MAY NOT ACT AS AND AUDITOR
 Excluded by law
 Excluded by the Code of Ethics

10. APPOINTMENT OF AUDITOR
Shareholder(Members)- Usually
through Annual General Meeting
Directors-First Auditor or to Fill Casual
Vacancy
Secretary of State-If no auditors are
appointed by the members or directors

11. REMOVAL OF AUDITOR
REMOVAL
 Auditor has sufficiently secure tenure of office, to maintain
independence of management
 Doubts about their continuing abilities to carry out their duties
effectively
SAFEGUARDS
 Auditor can circulate representations stating why they should not
be removed
 Statement of circumstances must be sent to the company and the
regulatory authority to set out issues surrounding the cessation of
office
 Specified notice period

12. RESIGNATION OF AUDITOR
 Auditor and Management find difficult to
work together
 Issues written notice of the resignation and
a statement of circumstances to the
members and the regulatory authority
 If resigns or removed from office before
end of their term of office, they must
notify the recognized supervisory body

13. RIGHTS AND DUTIES OF AUDITOR
Right to
Access
Books
Right to
Receive
Necessary
Information
Receive
Notice of
and Attend
General
Meeting
Heard at
General
Meetings
Receive
Written
Resolutions
of Company
ON APPOINTMENT

14. RIGHTS AND DUTIES OF AUDITOR
Request General meeting of the
company to explain the circumstances
of the resignation
 Require the company to Circulate the
notice of circumstances relating to
the resignation
ON RESIGNATION

15. INTERNATIONAL REGULATION
IFAC(International
Federation of Accountants
IFAC Code of
Ethics
IAASB(Intl’ Auditing
and Assurance
Standards Board)
International Standards on
Auditing(ISAs)
International Standard on
Quality Control(ISQC)

16. MAIN FEATURES OF ISAs
 Ensures Consistency in Audit and Required Standard of
Quality
 ISAs are not legal requirements. Local law will be
preferred over ISAs.
 Usually Relevant to Audit of Financial Statements but also
can be applied to Audit of Other Historical Financial
Information
 ISA must be applied in all but exceptional cases
 Contain Basic Principles and Requirements followed by
Application and other Explanatory Material to Aid the
Auditor on How to Follow the Requirements

17. DEVELOPMENT OF ISAs
Process of
Discussion
and Debate
Exposure
Draft
ISAs

18. RELATIONSHIP-NATIONAL AND INTL’
STANDARDS AND REGULATION
 IFAC Has Not Legal Standing In Individual Countries
 Countries Need To Have Their Own Arrangements In Place
For Regulating The Audit Profession And Implementing The
Audit Standards
National Standard Setters
 May Develop Their Own Auditing Standards And Ethical
Standards
 May Adopt And Implement ISAs, Possibly After Modifying
Them To Suit National Needs
P.S. Local Regulations will prevail in event of Conflict

19. ROLE OF PROFESSIONAL BODIES
 Successful Completion of EXAMS for obtaining membership
 Relevant Practical EXPERIENCE for obtaining membership
 Completion of ETHICAL Assessment for obtaining membership
 Demonstration of CONTINUING PROFESSIONAL
DEVELOPMENT(CPD) requirements for maintaining
membership
 DISCIPLINARY ACTION for Non compliance with Rules of
Professional body
 For Serious offences, matter can be referred to the National
Regulator generally cases involving significant public interest
issues

20. “GROW WITH US”
SEED
FINANCIAL ACADEMY