The main role of an auditor in the corporate sector is to determine if a company's financial statements comply with accounting principles and to protect shareholder interests. An auditor is appointed by a company to audit its financial records and reports. The auditor's duties include verifying financial reports, assisting with investigations, and reporting on matters of concern to shareholders. The auditor must also follow the Companies Act, consider judicial decisions, and adhere to ethical standards regarding auditor independence and responsibilities.

1. ROLE OF AN AUDITOR IN
CORPORATE SECTOR

2. ! Have you ever
thought !
What would be the
role of an Auditor in
a Corporate World ?
The main role of an Auditor is to
determine whether financial
statements follow Generally
Accepted Accounting Principles
(GAAP).
An Auditor is a person or a firm
appointed by a company to execute
an audit.
! IN OUR KNOWLEDGE !

3. The main role of an auditor in the Corporate sector
is to protect the interests of the members of the
company.
The discussion on the role of an auditor in the
corporate sector can be divided into three parts :
(A) Duties under the
Companies Act
(B) Duties as laid down in
Judicial Decisions
(C) Duties under the Code of
Conduct

4. (A) Duties under the Companies Act
• Making a Report to Members :
Under Section 227(2), the auditor shall make a report to
the members of the company on the accounts examined
by him, and on every balance sheet and profit and loss
account and on every other document, which are laid
before the company in general meeting during his
tenure of office.

5. • Certificate as to Statutory Report :
Under Sec.56 (i) of the Companies Act the Statutory
report prepared by the directors has to be certified
by the auditor of the company in
following respects :
- shares allotted by the company
- cash received in respect of such shares and
- receipts and payments of the company.

6. • Duty to assist the Inspector :
Under Sec. 240, when an inspector is appointed to investigate
the affairs of the company, the auditor is required to give to the
inspector, all assistance in connection with the investigation.
• Report when the Managing Agent Resigns :
Under Sec.342 of the Act, when managing agent or secretaries
resign, the balance sheet and profit and loss account are to be
verified by the auditor of the company prepared by the Board
till the date of resignation.

7. (B) Duties in accordance with Judicial Decisions
• To be Acquainted with the Articles :
It is the role of the auditor to get himself acquainted with his duties
under the Companies Act and also under the Articles of Association.
• To Clearly Mention the Deficiency in Report :
If an auditor comes across something to which, in his opinion, attention
of the shareholder should be drawn, he should state it in his report in
very clear terms.

8. • To Verify the Substantial Accuracy of
Accounts :
It is the role of the auditor not only to see that accounts
are correct as they are written, i.e. he has not merely to
satisfy himself with the arithmetical accuracy of the
balance sheet, but he has to inquire into the transactions
and satisfy himself with substantial accuracy of the
accounts.

9. (C) Duties under Code of Conduct
• He cannot accept a position as an auditor which was
previously held by another chartered accountant, without first
communicating with him in writing.
• Similarly, he cannot accept an appointment as auditor of a
company without ascertaining from it whether the
requirements of Section 224 and 225 of the Companies
Act have been duly complied with.

10. • He cannot accept a position as an auditor previously
held by some other chartered accountant by under
cutting i.e. by accepting lower fees.
• He should not allow a person, who is a member
of the Institute or a member not being his partner, to
sign on his behalf or on behalf of his firm, any balance
sheet, profit and loss account , report or
financial statements.