This document discusses compliance with legal requirements for statutory auditors under the Companies Act, 2017. It covers the appointment and removal of statutory auditors, their rights and duties, and qualifications.
The key points are:
- Appointment of first auditors is done by the board within 90 days, and subsequent auditors are appointed by members at the AGM. SECP can appoint auditors if the company fails to do so.
- Removal of auditors requires a special resolution by members. Procedures for changing auditors at the AGM involve recommendations by the board and members at least 7 days prior.
- Statutory auditors have rights to company information and attendance at meetings. They
This document provides an overview of compliance with ethical requirements for auditing. It discusses the following key points in 3 paragraphs:
Paragraph 1 discusses the fundamental principles of ethics for auditors, which are integrity, objectivity, confidentiality, professional competence and due care, and professional behavior. It explains what each principle entails.
Paragraph 2 defines and provides examples of threats to the fundamental principles, including self-interest threats, familiarity threats, self-review threats, intimidation threats, and advocacy threats. Common examples of each threat are outlined.
Paragraph 3 discusses safeguards to the fundamental ethical principles, including procedures to address threats like segregation of duties, using staff with sufficient training and experience for assignments,
The document discusses final matters related to auditing, including written representations, subsequent events, and facts discovered after the auditor's report.
It defines written representations as written statements from management to confirm certain matters or support audit evidence. It outlines the representations required by ISAs regarding management responsibilities, financial statements, and specific assertions.
It describes the auditor's course of action if oral or written representations are provided, including evaluating the reliability of written representations. It also outlines steps the auditor would take if written representations are not provided.
The document explains the auditor's responsibility regarding events between the financial statement date and the auditor's report date. It lists procedures for the auditor to fulfill this responsibility, such as inquiring with management
1) The document discusses the origin, advantages, and disadvantages of assurance services. Assurance services originated to enhance the credibility of financial statements prepared by management for shareholders, as management may not provide a true and fair view due to incentives or pressures.
2) It defines an assurance engagement and its key elements - a three party relationship between intended users, responsible party, and practitioner. It also discusses the subject matter, suitable criteria, evidence, and written assurance report.
3) It explains the different levels of assurance - reasonable assurance provided in an audit, and limited assurance provided in a review. Absolute assurance cannot be provided due to inherent limitations of assurance engagements, such as some accounts involving estimates, the use of sampling
This document provides an overview of compliance with legal requirements for auditing in Pakistan. It covers the authority for appointing and removing statutory auditors, the procedures for appointment and removal, the powers and duties of statutory auditors, qualifications and disqualifications for the role, and requirements for auditing cost accounting records. The key points are:
- Appointment of first auditor is by directors, subsequent auditors are appointed by members at the AGM. SECP appoints if they fail to.
- Removal of auditors requires notice and they have rights to make representations.
- Statutory auditors have rights to access documents and require information from the company. Their duties include reporting on financial statements and
The group auditor is responsible for expressing an opinion on the group financial statements. A group audit involves auditing the financial statements of a holding company and its subsidiaries. It is considered high risk due to consolidation adjustments and involvement of component auditors. The group auditor must obtain an understanding of components, assess risk, determine materiality and decide the type of work to be performed on each component. The group auditor relies on work of component auditors and must evaluate their competence and independence before placing reliance. Effective communication between group and component auditors is important.
This document provides an overview of external confirmations as an audit procedure. It defines external confirmation as obtaining evidence directly from a third party in written form. External confirmations are commonly used to verify information with debtors, creditors, banks, lawyers, and those holding company assets/investments. The document outlines factors to consider when using confirmations, such as timing, sample selection, request design. It distinguishes between positive and negative confirmation requests and the risks of each. It also describes audit procedures to follow up on responses, such as investigating exceptions or non-responses to positive confirmations.
The document discusses International Standards on Review Engagements (ISREs) for conducting review engagements. It defines a review engagement as providing moderate assurance, with procedures deliberately reduced from an audit. Key differences from an audit are the level of assurance is limited rather than reasonable, and procedures are inquiries and analytical reviews rather than tests of controls or other substantive procedures.
The document outlines the objectives, procedures, and report for a review engagement. The objective is to obtain limited assurance to provide a negative conclusion about whether anything has come to the auditor's attention that causes them to believe the financial statements are not fairly presented. Procedures include inquiry of management, analytical reviews, agreeing amounts to records, and obtaining
1. The document discusses fraud, including the types of fraud (fraudulent financial reporting and misappropriation of assets), fraud risk factors, and the responsibilities of management and auditors regarding fraud.
2. It describes risk assessment procedures auditors perform to identify risks of material misstatement due to fraud, such as making inquiries of management and testing journal entries.
3. The document also discusses procedures to respond to the risk of management override of controls, such as reviewing accounting estimates and understanding the business rationale for significant unusual transactions.
This document provides an overview of compliance with ethical requirements for auditing. It discusses the following key points in 3 paragraphs:
Paragraph 1 discusses the fundamental principles of ethics for auditors, which are integrity, objectivity, confidentiality, professional competence and due care, and professional behavior. It explains what each principle entails.
Paragraph 2 defines and provides examples of threats to the fundamental principles, including self-interest threats, familiarity threats, self-review threats, intimidation threats, and advocacy threats. Common examples of each threat are outlined.
Paragraph 3 discusses safeguards to the fundamental ethical principles, including procedures to address threats like segregation of duties, using staff with sufficient training and experience for assignments,
The document discusses final matters related to auditing, including written representations, subsequent events, and facts discovered after the auditor's report.
It defines written representations as written statements from management to confirm certain matters or support audit evidence. It outlines the representations required by ISAs regarding management responsibilities, financial statements, and specific assertions.
It describes the auditor's course of action if oral or written representations are provided, including evaluating the reliability of written representations. It also outlines steps the auditor would take if written representations are not provided.
The document explains the auditor's responsibility regarding events between the financial statement date and the auditor's report date. It lists procedures for the auditor to fulfill this responsibility, such as inquiring with management
1) The document discusses the origin, advantages, and disadvantages of assurance services. Assurance services originated to enhance the credibility of financial statements prepared by management for shareholders, as management may not provide a true and fair view due to incentives or pressures.
2) It defines an assurance engagement and its key elements - a three party relationship between intended users, responsible party, and practitioner. It also discusses the subject matter, suitable criteria, evidence, and written assurance report.
3) It explains the different levels of assurance - reasonable assurance provided in an audit, and limited assurance provided in a review. Absolute assurance cannot be provided due to inherent limitations of assurance engagements, such as some accounts involving estimates, the use of sampling
This document provides an overview of compliance with legal requirements for auditing in Pakistan. It covers the authority for appointing and removing statutory auditors, the procedures for appointment and removal, the powers and duties of statutory auditors, qualifications and disqualifications for the role, and requirements for auditing cost accounting records. The key points are:
- Appointment of first auditor is by directors, subsequent auditors are appointed by members at the AGM. SECP appoints if they fail to.
- Removal of auditors requires notice and they have rights to make representations.
- Statutory auditors have rights to access documents and require information from the company. Their duties include reporting on financial statements and
The group auditor is responsible for expressing an opinion on the group financial statements. A group audit involves auditing the financial statements of a holding company and its subsidiaries. It is considered high risk due to consolidation adjustments and involvement of component auditors. The group auditor must obtain an understanding of components, assess risk, determine materiality and decide the type of work to be performed on each component. The group auditor relies on work of component auditors and must evaluate their competence and independence before placing reliance. Effective communication between group and component auditors is important.
This document provides an overview of external confirmations as an audit procedure. It defines external confirmation as obtaining evidence directly from a third party in written form. External confirmations are commonly used to verify information with debtors, creditors, banks, lawyers, and those holding company assets/investments. The document outlines factors to consider when using confirmations, such as timing, sample selection, request design. It distinguishes between positive and negative confirmation requests and the risks of each. It also describes audit procedures to follow up on responses, such as investigating exceptions or non-responses to positive confirmations.
The document discusses International Standards on Review Engagements (ISREs) for conducting review engagements. It defines a review engagement as providing moderate assurance, with procedures deliberately reduced from an audit. Key differences from an audit are the level of assurance is limited rather than reasonable, and procedures are inquiries and analytical reviews rather than tests of controls or other substantive procedures.
The document outlines the objectives, procedures, and report for a review engagement. The objective is to obtain limited assurance to provide a negative conclusion about whether anything has come to the auditor's attention that causes them to believe the financial statements are not fairly presented. Procedures include inquiry of management, analytical reviews, agreeing amounts to records, and obtaining
1. The document discusses fraud, including the types of fraud (fraudulent financial reporting and misappropriation of assets), fraud risk factors, and the responsibilities of management and auditors regarding fraud.
2. It describes risk assessment procedures auditors perform to identify risks of material misstatement due to fraud, such as making inquiries of management and testing journal entries.
3. The document also discusses procedures to respond to the risk of management override of controls, such as reviewing accounting estimates and understanding the business rationale for significant unusual transactions.
The document provides an overview of related parties and related party transactions from an auditing perspective. It defines related parties and related party transactions. It discusses the responsibilities of management and auditors regarding related parties. It outlines procedures auditors should perform to identify related party relationships and transactions, such as making inquiries of management and examining records. It also discusses risks identified related to related parties and the auditor's course of action to address those risks. Finally, it covers materiality, written representations, communication with those charged with governance, and documentation requirements regarding related parties.
The document provides information about engagement letters in an auditing context. It discusses the purposes of engagement letters, the key information that should be included in engagement letters, factors to consider when accepting changes to engagement terms, and circumstances where engagement letters may need to be revised for recurring audits. Specifically:
1. Engagement letters confirm the appointment of the auditor, define the scope and objectives of the audit, and outline the responsibilities of the auditor and management.
2. Key information in an engagement letter includes the scope and objective of the audit, applicable financial reporting framework, responsibilities of the auditor and management, expected audit report, and statement that the report may differ from expectations.
3. Auditors should only accept
Auditor evaluates several matters before forming an opinion on financial statements, including whether misstatements or scope limitations exist, and if so, whether their effects are material or pervasive. The auditor must conclude that the financial statements present a true and fair view, include adequate disclosures, and have reasonable accounting estimates and policies selected, applied and disclosed in accordance with accounting standards. If a change in accounting policy occurs, the auditor will note the exception to consistent application in the report and refer to the related disclosure in the financial statements, stating whether concurrence with the change exists. When a misstatement is identified, the auditor accumulates all misstatements, evaluates whether uncorrected misstatements are material, and determines the effect on the audit report.
Planning an audit involves establishing the overall audit strategy and developing an audit plan. The audit strategy sets the scope, timing, and direction of the audit at a high level. The audit plan includes the nature, timing, and extent of specific audit procedures. There are additional considerations for initial audit engagements, such as obtaining an understanding of opening balances and predecessor auditor communications. Interim audits are performed before the year-end and allow for earlier issue identification, while final audits conclude with an opinion on the full-year financial statements.
The document summarizes key aspects of an examinable supplement issued by ICAP related to auditing. It covers 5 learning objectives:
1. Elements of an auditor's report under ISA 700 (revised).
2. Differences between report formats under ISA 700 versus Form 35A.
3. Determining and communicating key audit matters to those charged with governance.
4. Communication of key audit matters in the auditor's report for listed entities.
5. Revised definition and examples of emphasis of matter.
This document provides an overview of understanding entity and inherent risk assessment in auditing based on 10 learning objectives. It covers risk-based audit approach, audit risk model, risk assessment procedures, inherent risk assessment and classification, and response to risks. Key points include defining inherent risk, control risk, risk of material misstatement, and detection risk. It also discusses obtaining an understanding of the entity, levels of risk, and overall responses to address risks at the financial statement level such as adequate planning, supervision, unpredictability in audit procedures, and changes to audit procedures.
The document provides an overview of key concepts in auditing based on a study notes chapter. It discusses:
1) The components of a complete set of financial statements including the balance sheet, income statement, cash flow statement, statement of changes in equity, and notes to the accounts.
2) The two main types of financial reporting frameworks - compliance frameworks and fair presentation frameworks - and the concept of a true and fair view.
3) The responsibilities of various parties in an audit including management, those charged with governance, auditors, and stakeholders. It also discusses the expectation gap faced by auditors.
4) The scope of an audit and essentials for proper audit conduct including professional judgement, professional
The document provides an overview of internal controls related to the sales system of an entity. It discusses control objectives, control activities, and tests of controls for the order department, dispatch department, and invoicing/billing department of the sales system. The key control objectives covered are related to authorization of sales orders and credit limits, accuracy of order recording and invoicing, and segregation of duties. The document also provides examples of control activities and procedures that can be implemented to achieve the control objectives as well as examples of audit tests that can be performed to evaluate the operating effectiveness of the controls.
Legal requirements (revised practice set) - COMPLIANCE WITH LEGAL REQUIREMENTS MUHAMMAD HUZAIFA CHAUDHARY
This document contains questions related to compliance with legal requirements regarding company auditors under the Companies Act, 2017 of Pakistan. It includes questions on the appointment, removal, rights and duties of auditors. Some key points addressed are who can appoint the first auditor of a company, how auditor vacancies are filled, requirements for auditor signatures on reports, and circumstances under which auditors can be removed before the end of their term.
The document provides learning objectives and substantive procedures for auditing various accounts including non-current assets, intangible non-current assets, inventory, trade receivables, bank, cash, trade payables, accruals, provisions, contingencies, non-current liabilities/long term borrowings, equity, directors' emoluments, revenue, purchases, payroll, interest expense and income, and other expenses. The learning objectives cover verification of additions and disposals for non-current assets, valuation of intangible assets, verification of inventory existence and valuation, and cutoff testing for trade receivables among other procedures.
The document discusses the auditor's responsibility to consider fraud and error in an audit of financial statements. It defines fraud and error, noting that misstatements can arise intentionally from fraud or unintentionally from error. The primary responsibility for preventing and detecting fraud and error rests with management and those charged with governance of the entity. As part of an audit conducted in accordance with BSAs, the auditor is responsible for obtaining reasonable assurance about whether the financial statements are free from material misstatement due to fraud or error, though an audit cannot guarantee the detection of fraud. The auditor's responsibilities are limited by the inherent limitations of an audit.
This document provides an overview of auditing. It defines auditing as the systematic examination of records of a business or organization to verify financial operations and results. The document outlines the key features, types, and classifications of auditing. It also discusses the qualities needed in an auditor and the advantages and disadvantages of auditing.
This chapter discusses professional ethics, independence, and audit quality for accountants. It covers the key duties and ethical principles for accountants, including competence, integrity, objectivity, and confidentiality. The chapter also examines the conceptual framework and guidelines for independence in the Code of Ethics. It describes reforms to enhance audit quality, such as auditor appointment, independence and rotation requirements. Finally, it discusses the importance of technical and ethical competence, as well as disciplinary measures, for upholding audit quality standards.
This document outlines the steps of an auditing assignment submitted by four students to their professor. It describes the six main phases of an audit: 1) planning, 2) gathering evidence, 3) evaluating evidence, 4) field work, 5) issuing a report, and 6) follow up. Key aspects of each phase are defined, such as preparing an audit program during planning, obtaining sufficient and competent evidence during field work, and verifying resolution of findings during follow up.
This document summarizes the key points of an International Standard on Auditing (UK) regarding audit documentation:
1) It establishes requirements for audit documentation relating to the timing of preparation, documentation of procedures performed and evidence obtained, and assembly of the final audit file.
2) Audit documentation provides evidence of the audit work performed and conclusions reached, and promotes quality and consistency in the audit.
3) The auditor must document significant matters, judgments made, and any departures from audit standards. Audit documentation must be sufficient to allow an experienced auditor to understand the nature, timing and extent of procedures performed.
Internal and external auditing in private schoolJonna May Berci
Internal auditing is conducted by auditors within an organization to evaluate risk management, controls, and governance processes. It helps improve operations and prevent fraud. External auditing is conducted periodically by an independent accountant to provide reasonable assurance that financial statements fairly present the organization's financial position. It ensures compliance with laws and regulations and provides a second check of the organization's finances and internal audit. Both internal and external auditing aim to improve an organization's processes and operations.
This document discusses key aspects of audit reports, including:
- The auditor's standard report provides an opinion on whether the financial statements are presented fairly and in accordance with GAAP.
- Audit reports typically include opinions on the financial statements themselves (balance sheet, income statement, etc.) and the related disclosures.
- Modifications to the standard report may be needed if certain conditions are present, such as material departures from GAAP or scope limitations.
- The auditor's report for public clients follows specific requirements regarding titles, addresses, references to auditing standards, and inclusion of opinions on internal control over financial reporting.
- The opinion paragraph states the auditor's opinion on whether the financial statements
This document discusses auditing principles and goals. It defines auditing as an independent examination of an organization's financial and non-financial transactions to express an opinion on their validity and accuracy. An auditor is the person who performs this examination and issues an audit report. Audits can be classified based on their method (such as management, system, or transaction audits) or nature (internal, external, statutory, or non-statutory). The goals of an auditor include expressing an opinion in a report, reviewing management information, ensuring compliance with procedures, investigating aspects of business as directed, and safeguarding assets. The scope of auditing for this company covers all operational areas and any assignments from management.
The board of directors is responsible for ensuring the integrity of published financial statements. This includes working with management to set the parameters for accounting quality and internal controls, and retaining an external auditor to test financial statements for material misstatements.
This Quick Guide reviews the process by which the board carries out this function.
It provides answers to the questions:
• What does the audit committee do?
• How does it oversee financial reporting?
• How often do companies restate financials and why?
• What does the external audit do?
• Do auditors have agency problems?
For an expanded discussion, see Corporate Governance Matters: A Closer Look at Organizational Choices and Their Consequences (Second Edition) by David Larcker and Brian Tayan (2015): http://www.gsb.stanford.edu/faculty-research/books/corporate-governance-matters-closer-look-organizational-choices
Buy This Book: http://www.ftpress.com/store/corporate-governance-matters-a-closer-look-at-organizational-9780134031569
For permissions to use this material, please contact: E: corpgovernance@gsb.stanford.edu
Copyright 2015 by David F. Larcker and Brian Tayan. All rights reserved.
The document discusses the roles and responsibilities of a company auditor. It provides definitions of a company auditor and outlines their statutory qualifications. It describes the professional qualities expected of an auditor including knowledge, impartiality, and maintaining confidentiality. The document also outlines the appointment, reappointment, rotation and casual vacancy processes for company auditors. It discusses an auditor's rights, duties, and potential liabilities in performing their role.
Key Takeaways:
Appointment of auditors under Singapore Companies Act
Exemption from auditors' appointment
Powers and duties of auditors
Remuneration of auditors
Resignation and removal of auditors
The document provides an overview of related parties and related party transactions from an auditing perspective. It defines related parties and related party transactions. It discusses the responsibilities of management and auditors regarding related parties. It outlines procedures auditors should perform to identify related party relationships and transactions, such as making inquiries of management and examining records. It also discusses risks identified related to related parties and the auditor's course of action to address those risks. Finally, it covers materiality, written representations, communication with those charged with governance, and documentation requirements regarding related parties.
The document provides information about engagement letters in an auditing context. It discusses the purposes of engagement letters, the key information that should be included in engagement letters, factors to consider when accepting changes to engagement terms, and circumstances where engagement letters may need to be revised for recurring audits. Specifically:
1. Engagement letters confirm the appointment of the auditor, define the scope and objectives of the audit, and outline the responsibilities of the auditor and management.
2. Key information in an engagement letter includes the scope and objective of the audit, applicable financial reporting framework, responsibilities of the auditor and management, expected audit report, and statement that the report may differ from expectations.
3. Auditors should only accept
Auditor evaluates several matters before forming an opinion on financial statements, including whether misstatements or scope limitations exist, and if so, whether their effects are material or pervasive. The auditor must conclude that the financial statements present a true and fair view, include adequate disclosures, and have reasonable accounting estimates and policies selected, applied and disclosed in accordance with accounting standards. If a change in accounting policy occurs, the auditor will note the exception to consistent application in the report and refer to the related disclosure in the financial statements, stating whether concurrence with the change exists. When a misstatement is identified, the auditor accumulates all misstatements, evaluates whether uncorrected misstatements are material, and determines the effect on the audit report.
Planning an audit involves establishing the overall audit strategy and developing an audit plan. The audit strategy sets the scope, timing, and direction of the audit at a high level. The audit plan includes the nature, timing, and extent of specific audit procedures. There are additional considerations for initial audit engagements, such as obtaining an understanding of opening balances and predecessor auditor communications. Interim audits are performed before the year-end and allow for earlier issue identification, while final audits conclude with an opinion on the full-year financial statements.
The document summarizes key aspects of an examinable supplement issued by ICAP related to auditing. It covers 5 learning objectives:
1. Elements of an auditor's report under ISA 700 (revised).
2. Differences between report formats under ISA 700 versus Form 35A.
3. Determining and communicating key audit matters to those charged with governance.
4. Communication of key audit matters in the auditor's report for listed entities.
5. Revised definition and examples of emphasis of matter.
This document provides an overview of understanding entity and inherent risk assessment in auditing based on 10 learning objectives. It covers risk-based audit approach, audit risk model, risk assessment procedures, inherent risk assessment and classification, and response to risks. Key points include defining inherent risk, control risk, risk of material misstatement, and detection risk. It also discusses obtaining an understanding of the entity, levels of risk, and overall responses to address risks at the financial statement level such as adequate planning, supervision, unpredictability in audit procedures, and changes to audit procedures.
The document provides an overview of key concepts in auditing based on a study notes chapter. It discusses:
1) The components of a complete set of financial statements including the balance sheet, income statement, cash flow statement, statement of changes in equity, and notes to the accounts.
2) The two main types of financial reporting frameworks - compliance frameworks and fair presentation frameworks - and the concept of a true and fair view.
3) The responsibilities of various parties in an audit including management, those charged with governance, auditors, and stakeholders. It also discusses the expectation gap faced by auditors.
4) The scope of an audit and essentials for proper audit conduct including professional judgement, professional
The document provides an overview of internal controls related to the sales system of an entity. It discusses control objectives, control activities, and tests of controls for the order department, dispatch department, and invoicing/billing department of the sales system. The key control objectives covered are related to authorization of sales orders and credit limits, accuracy of order recording and invoicing, and segregation of duties. The document also provides examples of control activities and procedures that can be implemented to achieve the control objectives as well as examples of audit tests that can be performed to evaluate the operating effectiveness of the controls.
Legal requirements (revised practice set) - COMPLIANCE WITH LEGAL REQUIREMENTS MUHAMMAD HUZAIFA CHAUDHARY
This document contains questions related to compliance with legal requirements regarding company auditors under the Companies Act, 2017 of Pakistan. It includes questions on the appointment, removal, rights and duties of auditors. Some key points addressed are who can appoint the first auditor of a company, how auditor vacancies are filled, requirements for auditor signatures on reports, and circumstances under which auditors can be removed before the end of their term.
The document provides learning objectives and substantive procedures for auditing various accounts including non-current assets, intangible non-current assets, inventory, trade receivables, bank, cash, trade payables, accruals, provisions, contingencies, non-current liabilities/long term borrowings, equity, directors' emoluments, revenue, purchases, payroll, interest expense and income, and other expenses. The learning objectives cover verification of additions and disposals for non-current assets, valuation of intangible assets, verification of inventory existence and valuation, and cutoff testing for trade receivables among other procedures.
The document discusses the auditor's responsibility to consider fraud and error in an audit of financial statements. It defines fraud and error, noting that misstatements can arise intentionally from fraud or unintentionally from error. The primary responsibility for preventing and detecting fraud and error rests with management and those charged with governance of the entity. As part of an audit conducted in accordance with BSAs, the auditor is responsible for obtaining reasonable assurance about whether the financial statements are free from material misstatement due to fraud or error, though an audit cannot guarantee the detection of fraud. The auditor's responsibilities are limited by the inherent limitations of an audit.
This document provides an overview of auditing. It defines auditing as the systematic examination of records of a business or organization to verify financial operations and results. The document outlines the key features, types, and classifications of auditing. It also discusses the qualities needed in an auditor and the advantages and disadvantages of auditing.
This chapter discusses professional ethics, independence, and audit quality for accountants. It covers the key duties and ethical principles for accountants, including competence, integrity, objectivity, and confidentiality. The chapter also examines the conceptual framework and guidelines for independence in the Code of Ethics. It describes reforms to enhance audit quality, such as auditor appointment, independence and rotation requirements. Finally, it discusses the importance of technical and ethical competence, as well as disciplinary measures, for upholding audit quality standards.
This document outlines the steps of an auditing assignment submitted by four students to their professor. It describes the six main phases of an audit: 1) planning, 2) gathering evidence, 3) evaluating evidence, 4) field work, 5) issuing a report, and 6) follow up. Key aspects of each phase are defined, such as preparing an audit program during planning, obtaining sufficient and competent evidence during field work, and verifying resolution of findings during follow up.
This document summarizes the key points of an International Standard on Auditing (UK) regarding audit documentation:
1) It establishes requirements for audit documentation relating to the timing of preparation, documentation of procedures performed and evidence obtained, and assembly of the final audit file.
2) Audit documentation provides evidence of the audit work performed and conclusions reached, and promotes quality and consistency in the audit.
3) The auditor must document significant matters, judgments made, and any departures from audit standards. Audit documentation must be sufficient to allow an experienced auditor to understand the nature, timing and extent of procedures performed.
Internal and external auditing in private schoolJonna May Berci
Internal auditing is conducted by auditors within an organization to evaluate risk management, controls, and governance processes. It helps improve operations and prevent fraud. External auditing is conducted periodically by an independent accountant to provide reasonable assurance that financial statements fairly present the organization's financial position. It ensures compliance with laws and regulations and provides a second check of the organization's finances and internal audit. Both internal and external auditing aim to improve an organization's processes and operations.
This document discusses key aspects of audit reports, including:
- The auditor's standard report provides an opinion on whether the financial statements are presented fairly and in accordance with GAAP.
- Audit reports typically include opinions on the financial statements themselves (balance sheet, income statement, etc.) and the related disclosures.
- Modifications to the standard report may be needed if certain conditions are present, such as material departures from GAAP or scope limitations.
- The auditor's report for public clients follows specific requirements regarding titles, addresses, references to auditing standards, and inclusion of opinions on internal control over financial reporting.
- The opinion paragraph states the auditor's opinion on whether the financial statements
This document discusses auditing principles and goals. It defines auditing as an independent examination of an organization's financial and non-financial transactions to express an opinion on their validity and accuracy. An auditor is the person who performs this examination and issues an audit report. Audits can be classified based on their method (such as management, system, or transaction audits) or nature (internal, external, statutory, or non-statutory). The goals of an auditor include expressing an opinion in a report, reviewing management information, ensuring compliance with procedures, investigating aspects of business as directed, and safeguarding assets. The scope of auditing for this company covers all operational areas and any assignments from management.
The board of directors is responsible for ensuring the integrity of published financial statements. This includes working with management to set the parameters for accounting quality and internal controls, and retaining an external auditor to test financial statements for material misstatements.
This Quick Guide reviews the process by which the board carries out this function.
It provides answers to the questions:
• What does the audit committee do?
• How does it oversee financial reporting?
• How often do companies restate financials and why?
• What does the external audit do?
• Do auditors have agency problems?
For an expanded discussion, see Corporate Governance Matters: A Closer Look at Organizational Choices and Their Consequences (Second Edition) by David Larcker and Brian Tayan (2015): http://www.gsb.stanford.edu/faculty-research/books/corporate-governance-matters-closer-look-organizational-choices
Buy This Book: http://www.ftpress.com/store/corporate-governance-matters-a-closer-look-at-organizational-9780134031569
For permissions to use this material, please contact: E: corpgovernance@gsb.stanford.edu
Copyright 2015 by David F. Larcker and Brian Tayan. All rights reserved.
The document discusses the roles and responsibilities of a company auditor. It provides definitions of a company auditor and outlines their statutory qualifications. It describes the professional qualities expected of an auditor including knowledge, impartiality, and maintaining confidentiality. The document also outlines the appointment, reappointment, rotation and casual vacancy processes for company auditors. It discusses an auditor's rights, duties, and potential liabilities in performing their role.
Key Takeaways:
Appointment of auditors under Singapore Companies Act
Exemption from auditors' appointment
Powers and duties of auditors
Remuneration of auditors
Resignation and removal of auditors
Audit I - Chapter 2, Pt. I, The Auditing Profession (1).pptxKalkaye
The document discusses the auditing profession and the need for its regulation. It covers several topics:
- The regulatory framework for auditing including international and national standard setters like the PCAOB which was established in response to accounting scandals.
- The rights and responsibilities of auditors including their appointment, access to company records, duties to report to shareholders.
- Reasons for regulation including restoring public trust after events like Enron, and the need for harmonized standards, quality control, and ethics.
The document discusses the roles and responsibilities of auditors in Malaysia. It covers the legal framework for auditing, including the relevant governing bodies like the Malaysian Accounting Standards Board and Audit Oversight Board. It also outlines the scope of an audit, qualifications and appointments of auditors, reasons for termination, and duties and responsibilities of auditors to shareholders, the company, third parties, and in maintaining confidentiality.
This document discusses the regulation of the auditing profession. It explains that auditing became more regulated due to public scandals that eroded trust. International and national standard setters now aim to harmonize standards and ensure audit quality and ethics. Auditors must follow regulatory guidance from bodies like IFAC, national laws, auditing standards, and ethics codes. The roles of organizations like the PCAOB and AICPA in regulating audits and auditors in the US are also summarized.
The document summarizes the key provisions around appointment and qualifications of auditors under the Companies Act. It discusses who can be appointed as an auditor, circumstances for disqualification, appointment of first, subsequent and casual vacancy auditors, appointment through special/ordinary resolution, remuneration of auditors, ceiling on number of audits, and provisions for special, cost and branch audits.
CA NOTES ON COMPNAY ACCOUNTS AND AUDITS
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The document summarizes key changes to auditing and accounting provisions under the Companies Act 2013 in India. It discusses new definitions, requirements for auditor appointment and rotation, increased auditor responsibilities and reporting duties, prohibitions on certain auditor services, and increased penalties for non-compliance. The main goals of the changes were to improve governance, increase transparency after several corporate scandals, and align with international standards.
This document provides information on company auditors, including their appointment, qualifications, rights, duties, and removal. It defines auditing as the systematic examination of a company's books and records to verify financial operations. An auditor must be independent, have integrity, be objective, and have communication skills. Their rights include access to records and attendance of shareholder meetings. Duties include complying with standards, reporting fraud, and signing audit reports. Auditors are typically appointed by directors or shareholders and can be removed before their term with proper notice and representation rights.
This document outlines a policy regarding audit and non-audit services provided by audit firms to ensure auditor independence and integrity of the audit process. It categorizes non-audit services into three categories: wholly compatible, potentially compatible requiring case-by-case approval, and wholly incompatible. It establishes approval thresholds for non-audit services and restrictions on employment of former auditors. The objectives are to ensure an effective policy covering the external auditor relationship and compliance with statutory and regulatory obligations regarding auditor independence.
The Walgreen Co. Audit Committee Charter establishes the committee to oversee the quality and integrity of financial reporting, compliance with legal requirements, the qualifications and independence of external auditors, and performance of external and internal audits. The committee is comprised of at least three independent directors with financial expertise, and is responsible for appointing external auditors and overseeing relationships with auditors and management to ensure transparency and accuracy of financial reporting.
The Audit and Finance Committee Charter establishes the purpose, composition, and responsibilities of the Audit and Finance Committee of Quest Diagnostics Incorporated. The primary purpose of the committee is to oversee the quality and integrity of the company's financial reporting, compliance with legal and regulatory requirements, the independence and performance of the independent auditor, and the performance of the internal audit function. The committee is responsible for appointing, overseeing, and evaluating the independent auditor. It is also responsible for reviewing the company's financial statements, accounting policies, internal controls, compliance, and financial policies and actions. The committee has the authority to retain outside advisors as needed to fulfill its duties of oversight over the company's financial reporting and auditing.
This document discusses the appointment, removal, and resignation of auditors under the Companies Act 2013. It covers the eligibility, qualifications, and disqualifications of auditors. Key points include:
- Only chartered accountants can be appointed as auditors. A firm can be appointed if the majority of partners are practicing in India.
- Certain persons are disqualified from being auditors such as employees of the company, relatives of employees/directors, those with financial interests in the company, etc.
- The first auditor is appointed by the board or members within a specified time period. Subsequent auditors are appointed at the AGM for a 5 year term, subject to rotation requirements for listed/
1) The audit committee is comprised of members designated by the board of directors who meet independence and experience requirements. At least one member must be a financial expert.
2) The audit committee assists the board in overseeing the integrity of financial reporting, compliance with legal and regulatory requirements, the independent auditor's qualifications and independence, and internal audit functions.
3) The audit committee has responsibility for appointing, compensating, and overseeing the independent auditor, approving audit fees, and pre-approving non-audit services. It also oversees the company's internal audit department.
This document provides an overview of auditing financial reports. It discusses the appointment and duties of independent auditors, including their relationships with shareholders, boards, audit committees, internal auditors, and management. Auditors must comply with auditing standards set by the Auditing and Assurance Standards Board and express an opinion on whether financial reports comply with applicable standards. Their goal is to provide assurance to shareholders that management has properly reported the company's financial position.
ISA 250 (Revised) Section B – The Auditor’s Statutory Right and Duty to Report to Regulators of Public Interest Entities and Regulators of Other Entities in the Financial Sector
This notification outlines new rules related to audit and auditors under the Companies Act 2013. Some key points:
- It specifies the process for selecting and appointing auditors, including the role of the audit committee and requirements for auditor qualifications.
- It defines classes of companies required to mandatorily rotate auditors to maintain independence. The rules specify maximum periods an individual or firm can serve as auditor before rotation is required.
- Requirements are provided for removing an auditor before the end of their term, auditor resignation, and disqualifications.
- The duties of auditors are elaborated, including requirements to report any fraud to the central government within 60 days of knowledge.
- Guidance
This document outlines the charter of the Audit Committee for The Pantry, Inc. It discusses the purpose, composition, meetings, responsibilities, and specific functions of the Audit Committee. The Audit Committee is appointed by the Board of Directors to assist in overseeing the integrity of financial reporting, compliance with legal and regulatory requirements, and independence of internal and external auditors. Key responsibilities include overseeing the financial reporting process, internal controls, internal audit function, and selection of the independent auditor.
Similar to Legal requirements (revised notes and case studies) - COMPLIANCE WITH LEGAL REQUIREMENTS (20)
Abhay Bhutada, the Managing Director of Poonawalla Fincorp Limited, is an accomplished leader with over 15 years of experience in commercial and retail lending. A Qualified Chartered Accountant, he has been pivotal in leveraging technology to enhance financial services. Starting his career at Bank of India, he later founded TAB Capital Limited and co-founded Poonawalla Finance Private Limited, emphasizing digital lending. Under his leadership, Poonawalla Fincorp achieved a 'AAA' credit rating, integrating acquisitions and emphasizing corporate governance. Actively involved in industry forums and CSR initiatives, Abhay has been recognized with awards like "Young Entrepreneur of India 2017" and "40 under 40 Most Influential Leader for 2020-21." Personally, he values mindfulness, enjoys gardening, yoga, and sees every day as an opportunity for growth and improvement.
5 Tips for Creating Standard Financial ReportsEasyReports
Well-crafted financial reports serve as vital tools for decision-making and transparency within an organization. By following the undermentioned tips, you can create standardized financial reports that effectively communicate your company's financial health and performance to stakeholders.
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"Does Foreign Direct Investment Negatively Affect Preservation of Culture in the Global South? Case Studies in Thailand and Cambodia."
Do elements of globalization, such as Foreign Direct Investment (FDI), negatively affect the ability of countries in the Global South to preserve their culture? This research aims to answer this question by employing a cross-sectional comparative case study analysis utilizing methods of difference. Thailand and Cambodia are compared as they are in the same region and have a similar culture. The metric of difference between Thailand and Cambodia is their ability to preserve their culture. This ability is operationalized by their respective attitudes towards FDI; Thailand imposes stringent regulations and limitations on FDI while Cambodia does not hesitate to accept most FDI and imposes fewer limitations. The evidence from this study suggests that FDI from globally influential countries with high gross domestic products (GDPs) (e.g. China, U.S.) challenges the ability of countries with lower GDPs (e.g. Cambodia) to protect their culture. Furthermore, the ability, or lack thereof, of the receiving countries to protect their culture is amplified by the existence and implementation of restrictive FDI policies imposed by their governments.
My study abroad in Bali, Indonesia, inspired this research topic as I noticed how globalization is changing the culture of its people. I learned their language and way of life which helped me understand the beauty and importance of cultural preservation. I believe we could all benefit from learning new perspectives as they could help us ideate solutions to contemporary issues and empathize with others.
Optimizing Net Interest Margin (NIM) in the Financial Sector (With Examples).pdfshruti1menon2
NIM is calculated as the difference between interest income earned and interest expenses paid, divided by interest-earning assets.
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A toxic combination of 15 years of low growth, and four decades of high inequality, has left Britain poorer and falling behind its peers. Productivity growth is weak and public investment is low, while wages today are no higher than they were before the financial crisis. Britain needs a new economic strategy to lift itself out of stagnation.
Scotland is in many ways a microcosm of this challenge. It has become a hub for creative industries, is home to several world-class universities and a thriving community of businesses – strengths that need to be harness and leveraged. But it also has high levels of deprivation, with homelessness reaching a record high and nearly half a million people living in very deep poverty last year. Scotland won’t be truly thriving unless it finds ways to ensure that all its inhabitants benefit from growth and investment. This is the central challenge facing policy makers both in Holyrood and Westminster.
What should a new national economic strategy for Scotland include? What would the pursuit of stronger economic growth mean for local, national and UK-wide policy makers? How will economic change affect the jobs we do, the places we live and the businesses we work for? And what are the prospects for cities like Glasgow, and nations like Scotland, in rising to these challenges?
Legal requirements (revised notes and case studies) - COMPLIANCE WITH LEGAL REQUIREMENTS
1. Auditing – Study Notes Chapter 6 Compliance with Legal Requirements
CHAPTER SIX
COMPLIANCE WITH LEGAL
REQUIREMENTS
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For explanation of star symbol, refer to page # v at start of the book.
Coverage from ICAP’s Question Bank (2017 Edition)
After completion of this chapter, you will be able to attempt following concept review questions
in ICAP's Question Bank:
106b (ISA 620: Using the Work of an
Auditor’s Expert)
122 (ABD Limited)
After completion of this chapter, you will be able to attempt following case studies in ICAP's
Question Bank:
7 (Zaman and Bilal)
14 (ABC Limited)
19 (Alpha)
23 (Companies Ordinance 1984)
28 (Kashif and Company)
30 (Daud and Company)
38 (Fruit and nuts)
Tick the box of each question, if you have completed the question from ICAP’s
Question Bank (2017 Revised edition).
Alternatively, you can attempt practice questions from Volume – II of this book
which substantially covers these questions as well as further questions to have
sufficient practice.
1
2. Auditing – Study Notes Chapter 6 Compliance with Legal Requirements
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Appointing Authority for Auditor:
Appointment of first auditor:
First auditor is appointed by Board of Directors within 90 days of incorporation.
Appointment of subsequent auditor:
Subsequent auditor is appointed by company at each AGM (on recommendation of the board).
Appointment in case of casual vacancy:
Casual vacancy (i.e. death or disqualification of auditor during audit) is filled by directors within 30
days of its occurrence.
Appointment in case of mid-term removal of auditor:
If auditor is removed before expiry of his term, board of directors shall appoint the auditors with
prior approval of the Commission.
If a disqualified person is appointed by company:
If a disqualified person is appointed as auditor, this appointment shall be void, and SECP will
appoint qualified auditor in his place.
Appointment by SECP/Commission:
Commission may (on its own, or on application by company or any member) direct company to
make good the default if:
1. the company fails to appoint the first auditors within ninety days of incorporation, or
2. the company fails to appoint subsequent auditors at an annual general meeting; or
3. the company fails to fill up a casual vacancy within thirty days of occurrence of the vacancy;
or
4. the appointed auditors are unwilling to act as auditors of the company;
If the company does not comply order within specified time, the Commission shall appoint auditors
of the company.
Tenure/Term of Auditor:
Tenure of auditor appointed in each case is from date of appointment till the conclusion of next
AGM.
Mid-Term Removal of Auditor: (i.e. removal before expiry of tenure)
An auditor, whether appointed by Directors or appointed by Members, can be removed before
expiry of his term by members through Special Resolution.
Remuneration of Auditor:
The remuneration of the auditor shall be fixed:
(a) by the company in the general meeting; or
(b) by the board or by the Commission, if the auditors are appointed by the board or the
Commission, as the case may be.
2
3. Auditing – Study Notes Chapter 6 Compliance with Legal Requirements
CONCEPT REVIEW QUESTION
Write short notes on the following:
- Appointment of first auditors. (03)
(ICAP, CAF 03 Level – Autumn 2003)
State the circumstances in which the auditors may be appointed by the directors and by the members of a company. (03)
(Institute of Chartered Accountants in England and Wales, Professional Level – December 2001, Amended)
Narrate the circumstances in which SECP becomes empowered to appoint auditors under the Companies Act, 2017. (06)
(ICAP, CAF 03 Level – Spring 2008)
Can auditor of a listed company be removed during the term of his office? (02)
(ICAP, CAF 09 Level – Spring 2002)
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Legal Procedure for Removal/Appointment/Change of Statutory Auditor at AGM:
1. Board of Directors shall recommend auditors, after obtaining consent of proposed auditors.
A notice of recommendation shall be sent to members with the notice of AGM.
2. A member or members (having 10% or more shareholding in company) can also propose an
auditor, provided:
a. consent of proposed auditors has been obtained by member, and
b. member has sent a notice in this regard to company atleast 7 days before AGM.
Company shall send copy of this notice to retiring auditor and shall also post on its website.
3. Retiring auditor has a right to make a representation in writing to company atleast two days
before the date of general meeting.
If such a representation in writing is made by retiring auditor:
a. It shall be read out at AGM before taking up the agenda for appointment of the
auditor.
b. it shall be mandatory for the auditor or a person authorized by him in writing to
attend the general meeting.
4. At AGM, members will pass a resolution to appoint auditor from proposed auditors.
5. Within 14 days of appointment of auditor, company shall send Registrar intimation of
appointment of auditor alongwith written consent of appointed auditor.
Ethical Responsibilities when there is change of auditor:
Responsibilities of Incoming (Proposed/Successor) Auditor:
1. Incoming auditor shall send professional clearance letter to outgoing auditor to ensure that
incoming auditor knows and considers all relevant facts of client before making decision to
accept.
2. Incoming auditor shall obtain a copy of the Representation before acceptance (if made by
retiring auditor).
3. Additional responsibility if predecessor auditor is removed during audit,
Incoming auditor should also inform ICAP about the offer of appointment.
Incoming auditor should not accept offer of appointment without prior clearance from ICAP.
ICAP usually gives clearance within 15 days.
Responsibilities of Outgoing (Existing/Predecessor) Auditor:
1. To maintain confidentiality (even after change of appointment).
3
4. Auditing – Study Notes Chapter 6 Compliance with Legal Requirements
2. To transfer all books and papers of client (to client or to incoming auditor if advised so by
client).
3. To reply promptly to incoming auditor’s Professional Clearance Letter.
4. Outgoing auditor will file with ICAP a copy of Representation (if made).
5. Additional responsibility if predecessor auditor is removed during audit, he must immediately
file with ICAP a “Statement of Facts/Circumstances”.
CONCEPT REVIEW QUESTIONS
Describe the procedure prescribed in the Companies Ordinance, 1984 for removal of auditor of a listed company. (06)
(ICAP, CAF 09 Level – Spring 2002)
Set out the responsibilities of the outgoing firm of auditors relating to the change of appointment in order to comply with
the ICAEW Code of Ethics. (06)
(Institute of Chartered Accountants in England and Wales, Professional Level – 2007 June)
On March 15, 2006, Karom Textile Limited received a notice from a shareholder of the company nominating another firm
of Chartered Accountants as auditors in place of the existing auditors at the annual general meeting to be held on March
31, 2006.
Explain the conditions required to be fulfilled by a member of the company while making such nomination under the
Companies Act, 2017. Also describe the company’s responsibilities on receiving such notice, towards other members and
the existing auditors of the company. (05)
(ICAP, CAF 03 Level – Autumn 2006)
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Statutory Rights of Auditor:
Auditors’ right to information
1. An auditor of a company has a right:
of access to the company‘s books, accounts and vouchers (in whatever form they are
held).
of access to copies of books, accounts and vouchers of branches (transmitted to
principal office).
to require any director, officer or employee of the company or its subsidiary to
provide him with such information and explanation as he thinks necessary for the
purpose of audit.
Rights with regard to the general meeting:
2. Right to receive all notices of any general meetings which members of company are entitled
to receive.
3. Right to attend general meetings. However, in case of listed company, it is duty of auditor or
a person authorized by him in writing to attend general meeting in which financial
statements and auditor’s report are considered.
4. Right to speak at general meetings on audit related matters.
5. Right to make representation in writing if change of auditor is proposed.
Exam Tip
In exam question, be careful whether question relates:
Legal procedures or Ethical procedures.
Change of auditor during tenure or at end of tenure.
Course of Action by Incoming auditor or Outgoing auditor.
4
5. Auditing – Study Notes Chapter 6 Compliance with Legal Requirements
Statutory Duties of Auditor:
1. A company‘s auditor shall conduct the audit and prepare his report in accordance with the
requirements of ISAs as adopted by ICAP.
2. A company‘s auditor shall examine whether:
a. adequate records have been kept and returns have been received by company from
branches not visited by him.
b. accounting records and returns are in agreement with financial statements.
3. The auditor shall make a report to the members of the company which shall state:
(a) whether or not they have obtained all the information and explanations which to the
best of their knowledge and belief were necessary for the purposes of the audit; and
if not, the details and effect of such information on financial statements.
(b) whether or not in their opinion, proper books of accounts have been kept by the
company as required by the Companies Act, 2017.
(c) whether or not in their opinion, the ‘statement of financial position’ and ‘profit and
loss account and other comprehensive income’ (or income and expenditure
account) and cash flows have been drawn up in conformity with the requirements
of accounting and reporting standards as notified under the Companies Act , 2017,
and are in agreement with the books of accounts and are further in accordance
with accounting policies consistently applied;
(d) whether or not in their opinion and to the best of their information and according to
the explanations given to them,:
(i) Statement of financial position give a true and fair view of state of affairs of
company at end of financial year.
(ii) Profit and loss account and other comprehensive income give a true and fair
view of profit or loss (or surplus or deficit) for its financial year.
(iii) Statement of cash flows give a true and fair view of generation and
utilization of cash and cash equivalents of the company for its financial yr.
(e) whether or not in their opinion
(i) investments made, expenditure incurred and guarantees extended, during
the year, were for the purpose of company’s business.
(ii) zakat deductible at source under the Zakat and Ushr Ordinance, 1980, was
deducted by the company and deposited in the Central Zakat Fund
established under that Ordinance.
If any of the above matters is answered in “negative” or in “qualification”; auditor shall state its reason
with factual position in auditor’s report.
Signing of Audit Report:
Audit report shall be signed, dated and shall indicate the place at which it is signed.
If the auditor is an individual, report shall be signed by him.
If the auditor is a firm, report shall be signed by firm, with the name of engagement partner.
CONCEPT REVIEW QUESTION
What are the rights and duties of an auditor under the Companies Ordinance, 1984? (10)
(ICAP, CAF 09 Level – Spring 2000)
Your firm has received notice from Ash plc (Ash), a listed company, that your firm will not be re-appointed as external
auditor when its term of office expires as the audit committee of Ash has recommended the appointment of another firm.
Set out the rights and responsibilities of your firm, including those under the Companies Ordinance 1984, relating to the
change in appointment. (03)
(Institute of Chartered Accountants in England and Wales, Professional Level – 2016 June, amended)
5
6. Auditing – Study Notes Chapter 6 Compliance with Legal Requirements
(a) What are the provisions of the Companies Act, 2017, regarding remuneration of auditors of a company. (03)
(b) What are the provisions of Companies Act, 2017 regarding auditors signature on audit report? (03)
(ICAP, CAF 03 Level – Autumn 2001)
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In Pakistan, annual audit is required for all types of companies, except a private company having
paid up capital of one million or less.
Qualification Criteria:
Audit of a Public Company, or a Private company which is subsidiary of a public company, or a
private company with paid up capital of Rs. 3 million or more, shall be conducted by a chartered
Accountant or a firm of chartered accountants (having valid certificate of practice from ICAP).
Audit of other companies shall be conducted by:
a chartered Accountant or a firm of chartered accountants (having valid certificate of
practice from ICAP), or
a cost and management accountant or firm of cost and management accountants (having
valid certificate of practice from ICMAP)
Disqualification Criteria:
Following persons shall not be appointed as auditor in a company:
1. A person or his spouse or minor child holds any shares in the audit client or any of its
associated company. However, if such a person holds shares at time of appointment, he can
be appointed if he discloses the fact at time of appointment and disinvest shares within 90
days of appointment.
2. A person is indebted to the company, other than in ordinary course of business of such
entities.
However following are not considered debt in this regard:
a. sum payable to a credit card issuer upto Rs. 1,000,000.
b. sum payable to a utility company unpaid upto 90 days.
3. If a person is or was an employee (or officer or director) of the company in last 3 years.
4. If a person is a partner or employee of an employee (or officer or director) of the company.
5. If a person is Spouse of a director.
6. If a person is a Body corporate.
7. A person who has given guarantee or security to the company in connection with the
indebtedness of third person.
8. A person or firm who has business relationship with the company (directly or indirectly),
other than in ordinary course of business of such entities.
9. A person who has been convicted by a Court of an offence involving fraud in last 10 years.
10. A person who is not eligible for appointment as auditor under Code of Ethics adopted by
ICAP and ICMAP.
If a person is disqualified for a company, he is also disqualified for its subsidiaries, its holding, and
holding’s other subsidiaries. Therefore, always be sure about status if question involves two companies.
Exam Tips
A firm can be appointed as auditor if majority of its partners are qualified for appointment. However, only a
qualified person can act as auditor or can sign on behalf of firm.
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7. Auditing – Study Notes Chapter 6 Compliance with Legal Requirements
CONCEPT REVIEW QUESTION
The Directors of Sunshine Limited, a listed company, intend to appoint the first auditors of the company. In view of the
provisions of the Companies Act 2017, advise the directors in respect of the following:
(i) The time frame within which the first auditors should be appointed.
(ii) The person(s) who may or may not be eligible for appointment as auditor(s). (10)
(ICAP, CAF 03 Level – Autumn 2014)
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Cost Accounting Records:
A company engaged in production, processing, manufacturing or mining activities is required to
keep prescribed particulars relating to following cost accounting records:
1. Utilisation of Material,
2. Utilisation of Labour,
3. Utilisation of Other inputs or items of cost.
Audit of Cost Accounting Records:
Where a company is required to keep Cost Accounting records, Commission may direct (subject to
the recommendation of the regulatory authority supervising the business of relevant sector) that an
audit of cost accounts of the company shall be conducted in the manner as may be specified in the
order.
Audit of cost accounts shall be conducted by an auditor who is a:
Chartered accountant within the meaning of the Chartered Accountant Ordinance, 1961, or
Cost and management accountant within the meaning of the Cost and Management
Accountants Act, 1966.
Such auditor shall have the same powers, duties and liabilities as an auditor of the company and
such other powers, duties and liabilities as may be prescribed.
CONCEPT REVIEW QUESTION
Narrate the provisions of the Companies Act, 2017 regarding audit of cost accounts. (04)
(ICAP, CAF 03 Level – Autumn 2006)
Exam Tips
1. All conditions of disqualification apply at time of appointment as well as during term of
appointment.
2. Carefully note which relatives are covered in which case of disqualification.
3. Word “Limited” in the name of an organization shows that it is a Company. Similarly, word “Private”
in the name confirms that it is a private company.
4. Make sure you know definitions of “Associated Company”, “Holding” and “Subsidiary”.
5. As per Companies Act 2017, auditor means only sole-proprietor/partners of audit firm.
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8. Auditing – Study Notes Chapter 6 Compliance with Legal Requirements
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Situation Penalty
A person who is not qualified (or is subsequently disqualified)
to be an auditor of a company, acts as auditor of a company
Penalty of Level 2 at Standard Scale i.e. Penalty @ Rs.
1,000 per day subject to maximum of Rs. 500,000.
If auditor’s report or review report or any other document is
signed/authenticated in contravention of the requirements of
the Act, or
If auditor’s report or review report or any other document is
untrue or fails to bring out material facts about the affairs of
the company
Penalty of Level 2 at Standard Scale i.e. Penalty @ Rs.
1,000 per day subject to maximum of Rs. 500,000.
If the auditor’s report is made with the intent to profit the
auditor or any other person or to put another person to a
disadvantage or loss or for a material consideration
Penalty of Level 2 at Standard Scale i.e. Penalty @ Rs.
1,000 per day subject to maximum of Rs. 500,000.
+
Auditor shall be punishable with imprisonment for a
term which may extend two years and with a penalty
which may extend to one million rupees.
If company or an officer of company refuses or fails (without
lawful justification):
to allow auditor access to books and papers in his custody or
to provide auditor information and explanation required by
him or
obstructs or delays an auditor in performance of his duties or
fails to give notice of a general meeting to auditor, or
provides false or incorrect information
Penalty of Level 3 at Standard Scale i.e. Penalty @ Rs.
500,000 per day subject to maximum of Rs.
100,000,000.
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9. Auditing – Case Studies Chapter 6 Compliance with Legal Requirements
CHAPTER SIX (CASE STUDIES)
COMPLIANCE WITH LEGAL
REQUIREMENTS
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Structure of the Case:
You may be given different short situations and requirement will be to comment on
appointment/qualification/independence of statutory auditor in each situation.
Suggested Approach to Answer:
Decide whether it is a situation of legal requirements or ethical requirements:
If words like “Companies Ordinance”, “Legal”, “Statutory” are used, apply legal provisions.
If words like “Code of Ethics”, “Ethical”, “Threats, Safeguards” are used apply ethical provisions.
If words “applicable rules and regulation” are used, apply legal provision if situation is
discussed in law. Otherwise, apply ethical provisions.
Remember: In exam, both (legal and ethical) regulations are not discussed in a single situation.
If question relates to legal requirements:
1. There may be THREE issues involved in the case:
a. Whether appointment is made by appropriate authority.
b. Whether qualification criteria is complied.
c. Whether disqualification criteria is complied.
2. If appointment is not appropriate on more than one grounds, you will cover BOTH one by one.
3. Whatever is the case, do not reproduce provision of law; rather state your decision by directly
applying legal provisions to the facts of case. (this is because usually 2 or 3 marks only are
allocated to each case of legal provisions in exam question)
If question relates to ethical requirements:
When faced with an ethical conflict, a chartered accountant should consider relevant facts of the
situation and should:
1. Identify threat(s) involved in the situation.
2. Evaluate threat (i.e. whether significant or insignificant).
3. Apply relevant safeguards (or course of actions) to reduce threat to acceptable level.
4. All ethical issues and relevant considerations should be documented.
If a significant ethical conflict/threat cannot be resolved, chartered accountant should consider
withdrawal from engagement, if possible and practicable.
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10. Auditing – Case Studies Chapter 6 Compliance with Legal Requirements
Model Case Study From Examination Questions:
Case Study – First Example
Comment on each of the following situations with reference to the appointment of external auditors in accordance with
the requirements of the Companies Act, 2017:
(a) Farrukh & Co., Chartered Accountants, has received an offer to be appointed as the external auditor of Ebrahim Gas
Company. The firm is indebted to the company as it has not paid the last two months’ bills amounting to Rs. 4,860.
(b) After seventy days of incorporation, the directors of Rahman Limited (RL) decided to appoint Mr. Shahid as the
company’s statutory auditor. Mr. Shahid was employed by RL before he started his own practice.
(c) The directors of Fazal Limited (FL) have decided to appoint Syed & Company, Chartered Accountants, as external
auditor of the company. One of the partner’s spouse holds 1,000 shares in the subsidiary of FL.
(d) The directors of Najam (Pvt.) Limited having paid-up capital of Rs. 4.5 million have appointed Mr. Dawood to act as the
external auditor of the company. Mr. Dawood has been awarded a diploma in International Financial Reporting Standards
by the Institute of Chartered Accountants of Pakistan and has completed the mandatory period of training from a leading
firm of chartered accountants.
(e) All directors of Hussain Associates (Pvt.) Limited are chartered accountants. The company has recently received an
offer for appointment as the external auditor of Masood (Pvt.) Limited which has a paid-up share capital of Rs. 1,000,000.
(10 marks)
(ICAP, CAF 09 Level – Spring 2010)
Suggested Solution:
(a)
Farrukh & Co. can be appointed as statutory auditor of Ebrahim Gas Company because the firm is not indebted to the
company as the sum payable to utility company does not exceed period of 90 days.
(b)
Although, directors have power to appoint first auditor within 90 days of incorporation; however, Mr. Shahid cannot be
appointed as statutory auditor of RL because he has been an employee of the company in last three years.
(c)
Syed & Company can be appointed as statutory auditor of FL only if:
Shareholding by spouse of partner in associated company of FL is disclosed at time of appointment, and
Shares are disinvested within 90 days of appointment.
(d)
Mr. Dawood cannot be appointed as statutory auditor of Najam (Pvt.) Limited because audit of a private company having
paid up capital of three million or more can be conducted only by a chartered accountant (within the meanings of CA
Ordinance 1961).
(e)
Hussain Associates (Pvt) Limited cannot be appointed as statutory auditor of any company because it (auditor) is a body
corporate and, therefore, is disqualified.
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11. Auditing – Case Studies Chapter 6 Compliance with Legal Requirements
Case Study – Second Example
Analyze the following independent situations with reference to qualification of statutory auditor:
(i) Mr. Zakir Ali, a practicing chartered accountant, has been offered appointment in Heera Limited as external auditor. He
was an employee of the company before he started his own practice.
(ii) Diamond Associates (Pvt) Limited, a consultancy company, the majority of whose directors are chartered accountants,
have been offered appointment as external auditor in Lal (Pvt) Limited whose share capital is less than Rs. 1.5 million.
(iii) Miss Fatima Khan, a practicing chartered accountant, has been offered appointment in Neelam Limited as external
auditor. She was an employee of the company’s director two months before the offer.
(iv) Mr. Farid Hussain is a partner of Farid & Company, Chartered Accountants. The firm has been offered appointment in
Feroza Limited as external auditor. Son of Mr. Farid holds shares of Feroza Limited. (08 marks)
(ICAP, CAF 09 Level – Autumn 2006)
Suggested Solution:
(i)
Mr. Zakir Ali can be appointed as auditor of Heera Limited if he has not been an employee of the company in last three
years.
(ii) Diamond Associates (Pvt) Limited cannot be appointed as statutory auditor of any company because it (auditor) is a
body corporate and, therefore, is disqualified.
(iii) Miss Fatima Khan can be appointed as statutory auditor of Neelam Limited because she is no more an employee of
director of Neelam Limited.
(iv) If son of partner is major:
Farid & Company can be appointed as statutory auditor of Feroza Limited because there is no violation of law if major son
of auditor holds shares in audit client.
If son of partner is minor:
Firm can be appointed as statutory auditor of Feroza Limited only if:
Shareholding of a minor son of partner in audit client is disclosed at the time of appointment, and
Share are disinvested within 90 days of appointment.
Examiners’ Comments:
Legal provisions regarding appointment of statutory auditor is a topic regularly asked and was attempted fairly by most
students. The general deficiencies noted in the answers were as follows:
• The time lapse after which an ex-employee can become an external auditor was not mentioned.
• There were many examinees who said that a private limited company having paid up capital less than rupees three million
can appoint, even a body corporate, as its auditors.
• There was a general misconception that an ex-employee of a director also needs a time lapse of three years for appointment
as an external auditor.
• Very few students knew that if shares are held by the minor son of a person, he cannot accept appointment as an external
auditor. There is no such restriction if the son has attained the age of majority.
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