...ROLE OF AUDITORS Sections 138 to 148 of the Companies Act deal with accounts, audit and auditors. These provisions will have far reaching implications for the audit profession. In this article some important provisions contained in the companies act, 2013 are discussed. Understanding the definition of auditor An auditor is an independent professional person qualified to perform an audit. In accounting, an auditor is someone who is responsible for evaluating the validity and reliability of a company or organization’s financial statements. The term is sometimes synonymous with “comptroller”. Appointment of auditor As per section 139, it is a prime requirement that every company shall at the first annual general meeting appoint an auditor who can either be an individual or a firm. Appointment includes reappointment. The manner and procedure of selection of auditors by the members of the company will be such as may be prescribed. It is a mandatory condition that before such appointment is made, the written consent of the auditor to such appointment, and a certificate from him stating that the appointment, if made, shall be in accordance with the conditions as may be prescribed, shall be obtained from the auditor. Tenure Company can appoint an individual as an auditor for more than one term of five consecutive years and an audit firm as an auditor for more than two terms of five consecutive years. Government Company In a Government company, the Comptroller...
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...------------------------------------------------- MCCG : 2007 Part II. Best Practices in Corporate Governance This entry was posted on May 16, 2012. Bookmark the permalink. Leave a comment The principles are divided into 4 parts as shown below: 1. Directors 2. Directors’ Remuneration 3. Shareholders 4. Accountability and Audit Below are the guideline set for Directors. 1. DIRECTORS I The Board Every listed company should be headed by an effective board which should lead and control the company. II Board Balance The board should include a balance of executive directors and non-executive directors (including independent non-executives) such that no individual or small group of individuals can dominate the board’s decision making. III Supply of Information The board should be supplied in a timely fashion with information in a form and of a quality appropriate to enable it to discharge its duties. IV Appointments to the Board There should be a formal and transparent procedure for the appointment of new directors to the board. V Re-election All directors should be required to submit themselves for re-election at regular interval and at least every three years. 2. DIRECTORS’ REMUNERATION I The Level and Make-up of Remuneration Levels of remuneration should be sufficient to attract and retain the directors needed to run the company successfully. The component parts of remuneration should be structured so as to link rewards to corporate and individual...
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...INVIGILATOR OR SUPERVISOR. SPECIAL REQUIREMENTS: COMPANIES ACT EXTRACT Page 2 of 4 Case study Croppers Swaziland is a member of Croppers, a multinational professional services firm headquartered in Sidney, Australia. Chelsea limited has appointed Croppers Swaziland as their auditors. The company was incorporated in Swaziland on 01 March 2012. The authorised and issued share capital of the company is 55 000: El shares. Sandile Khumalo, popularly known as 'SK' amongst his peers is the audit senior in the Chelsea engagement. He is a very competent clerk and his audit work has been credited as one of the best in the history of the firm. Sandile has prepared the following working paper in relation to the Chelsea engagement for the attention of the Team Manager and Engagement Leader (partner): Working paper 1: Prepared by: Date: Client acceptance: Background information) Sandile Khumalo 01 October 2012 Chelsea Limited appointed Croppers Swaziland on 01 May 2012. This was the first audit appointment for...
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...Audit – a long-term investor position paper on proposed EU reforms 22 November 2012 Context The signatories to this paper are large institutional investors and investor associations. The institutions manage approximately EUR 1.66 trillion on behalf of their members / investors. We are all long term investors who take our ownership responsibilities seriously, investing significant resources and time in securing, monitoring and voting our assets. Financial reports provide vital information for us to be able to monitor executives’ use of our capital, and the audit of annual statements offers an essential assurance that information in company accounts is ‘true and fair’ (as required by the 4th and 7th Accounting Directives of the EC). The quality of the audit is, therefore, of utmost importance. We believe there are a number of worrying features of the audit market. At a very fundamental level, we are concerned about auditor independence and professional scepticism. Potential conflicts of interest have always been present in the system of auditing, so the challenge is how these are managed. We believe the current system is not delivering, as evidenced by: The failure of auditors to provide adequate warnings prior to the collapse of a number of banks and insurers in the financial crisis. In the EU alone, between September 2008 and the end of 2010, 182 banks received liquidity aid and/or debt guarantees, and 114 banks received either capital injections or asset relief aid1. None of...
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...THE AUDIT FIRM GOVERNANCE CODE A PROJECT FOR THE FINANCIAL REPORTING COUNCIL Audit Firm Governance Working Group Chairman: Norman Murray January 2010 The ICAEW operates under a Royal Charter, working in the public interest. Its regulation of members, in particular in respect of auditors, is overseen by the Financial Reporting Council. As a world leading professional accountancy body, the ICAEW provides leadership and practical support to over 132,000 members in more than 165 countries, working with governments, regulators and industry in order to ensure that the highest standards are maintained. The ICAEW is a founding member of the Global Accounting Alliance with over 775,000 members worldwide. © ICAEW 2010 All rights reserved. Laws and regulations referred to in this document are stated as of December 2009. No responsibility for any persons acting or refraining to act as a result of any material in this document can be accepted by the ICAEW or the Audit Firm Governance Working Group. January 2010 ISBN 978-1-84152-863-2 THE AUDIT FIRM GOVERNANCE CODE A PROJECT FOR THE FINANCIAL REPORTING COUNCIL Audit Firm Governance Working Group Chairman: Norman Murray January 2010 Contents Page Introduction A B C D E F Leadership Values Independent non-executives Operations Reporting Dialogue 2 5 5 6 7 9 10 Appendix 1: Involvement of independent non-executives Appendix 2: Independence considerations Appendix 3: Working Group members and terms of reference 11...
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...Class Website: A class website will be established and maintained throughout the course on Blackboard (go to http://www.unt.edu/ and click the link at the top for “Blackboard”). Course materials such as notes will be available on Blackboard. You are responsible for anything that I note through Blackboard emails and announcements. Course Description: Introduction to auditing and the professional responsibilities of a career in any specialty of the accounting profession. Topics include the legal and ethical responsibilities of accountants; professional auditing standards; the audit risk model; the acquisition, evaluation and documentation of audit evidence; reports on the results of the audit engagement. Learning Objectives: When you complete this course, you should: Understand the audit process, including audit procedures, and audit reports Understand the professional responsibilities of CPAs Understand audit risk assessments and planning Be able to research auditing standards Be able to identify fraud red flags Methods of Instruction: Lecture, discussion, and application. Course...
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...Guidance for audit committees Reviewing auditor independence November 2003 The Combined Code on Corporate Governance – July 2003 C.3 Audit Committee and Auditors Main Principle: The board should establish formal and transparent arrangements for considering how they should apply the financial reporting and internal control principles and for maintaining an appropriate relationship with the company’s auditors. Code provisions C.3.1 The board should establish an audit committee of at least three, or in the case of smaller companies two, members, who should all be independent non-executive directors. The board should satisfy itself that at least one member of the audit committee has recent and relevant financial experience. C.3.2 The main role and responsibilities of the audit committee should be set out in written terms of reference and should include: • to monitor the integrity of the financial statements of the company, and any formal announcements relating to the company’s financial performance, reviewing significant financial reporting judgements contained in them; • to review the company’s internal financial controls and, unless expressly addressed by a separate board risk committee composed of independent directors, or by the board itself, to review the company’s internal control and risk management systems; • to monitor and review the effectiveness of the company’s internal audit function; • to make recommendations to the board, for it to put to the shareholders...
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...Biltrite Organizational Structure Strengths and Weaknesses Strengths: –The Board of Directors meets 4 times throughout the year. –The Audit Committee is made up exclusively of external members. –In June and December, the Audit Committee holds a joint meeting with the external auditor partner, director of internal audit, and controller to be briefed on audit findings and approve the scope of planned audit activities. Also, significant changes in internal control over financial reporting are presented and explained. –The Audit Committee and compensation committee approves the recommendations of the controller regarding the annual appointment of the external auditor, and the compensation and retention of the director of internal audit .–Biltrite's internal audit staff of three members plus the director is viewed by our external audit firm as competent. The internal audit group conducts evaluations of important process on a recurring basis, usually once every ten to fourteen months. In addition the Weaknesses There is not a great deal of separation of duties for upper management and independence can be impaired. –The external members and Lawton's siblings have limited financial expertise in the bicycle industry. The Board members do not really question or challenge the upcoming budget. –Managers of Marketing and Controlling have high demands on performance targets and high financial rewards for reaching their benchmarks. Because of this, many marketing and production...
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...How to improve and maintain the independence of external auditors Auditor's responsibility is to give advice based on the company's annual financial statements. A company will work with the auditor's annual report of the decision. So this is an important auditor to provide accurate reports. (Dr Jill, Professor Robin)[online] An independent auditor to give the opinion that is no other factors. It includes human, economic, monetary, and so on. Their view is that there is no limit, and give them the freedom to express their views based on their expertise. Besides, they must be clear and to ensure no errors in the opinion. As they say is a company in important business decisions. Although this is the advice given by person, but as a professional auditor should reduce accidents. Professional auditor must be independent of its work. When problems occur, they must be the cooling time and the time taken to solve the problem, without any confusion. An independent auditor must be a smart, intelligent person. Because they know how to handle and solve their own problems without people help. Code of ethics Code of ethics is formed to help the auditors aware to the areas where ethical pressure may exist and be in dependent all the time. Independent auditors are not only responsible to their client but also the public interest. Therefore, they should follow the code of ethics. (Sagar, Mead, Bampton, 2008) There are some fundamental principles in code of ethics which must followed by them...
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...The primary purpose of auditor is provided audit service to audit client. Auditor main duty is to offer independence verification of a company's record to make sure that all the information matches up to what was provided. The audit is an important part of the capital market framework as it not only reduces the cost of information exchange between managers and shareholders but also provides a signaling mechanism to the markets that the information which management is providing is reliable. Independence of auditor is important to external auditor’s role. An analysis of various parliamentary reports, statutes such as case law, journals and annual reports will provide a basis for considering the claim that audit independence is a central element to the external auditor's role. It can be seen through APB ethical standards govern issues relating to the integrity, objectivity and independence of auditor. The vital of auditors’ independence can be seen through in the case of Enron. The auditors who were Arthur Andersen received fees for audit and non audit services. Other than that, there were regular exchanges of employees within Enron and Arthur Andersen. Arthur Andersen did not report the fraud to the shareholder although they have made a report on the company’s account. It is because the fraud is committed by management, the auditor need to make sure that they were in management’s good books in order to obtain the contract of non audit service. However, the case of Enron has caused...
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...compliance, for the Act emphasizes on information transparency and accountability. Senator Paul Sarbanes and Representative Michael Oxley are the main architects, thus the name. The Act is organized into eleven titles and sections 302, 404, 401, 409, 802 and 906 are the most significant with respect to compliance and section 404 seen is most of important for internal control; the laws deal on corporate board responsibilities to criminal penalties. The Security and Exchange Commission (SEC) is required to implement rulings on requirements to comply with the Act. The section 404 is cause of concern within corporate audit committees and internal audit departments, largely due to deadlines for compliance as the Act is new. Some companies have yet completed a Section 404 assessment of internal control. Internal auditors, external auditors, financial management, audit committees – are learning, developing software tools, methodologies and procedures for the first time to understand and adapt the Act. From the year...
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...academicjournals.org/JAT Journal of Accounting and Taxation Full Length Research Paper Auditors’ perceptions on impact of mandatory audit firm rotation on auditor independence –Evidence from Bahrain Kousay Said* and Hussein Khasharmeh Department of Accounting, College of Business Administration, University of Bahrain, P.O. Box: 32038, Kingdom of Bahrain. st th Received 21 November 2013; Accepted 13 February 2014; Published April 2014 The current study examined several issues regarding auditor independence from the perspective of an emerging market such as Bahrain. Factors affecting the ability of auditors to remain independent include long audit tenure, financial dependence on a single audit client, non-audit services provided to audit clients, ex-auditor employment with an audit client and the existence of audit committees. It is therefore timely to examine the importance of auditor independence in the provision of reliable and credible financial information. The current study uses a questionnaire survey to examine auditors’ perceptions of the impact of mandatory audit firm rotation on auditor independence. The results of the study revealed that the majority of auditors agreed that MAR could safeguard auditor independence. The results also reveal that there is a significant relationship between mandatory audit firm rotation and auditor independence. Analyses of variance (ANOVA) were also conducted to test for the possibility of confounding effects...
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...Cut Off: Cutoff relates to whether transactions and events have been recorded in the correct accounting period. Audit procedures must ensure that transactions occurring near year-end are recorded in the financial statements in the proper period. For example, the auditor may want to test proper cutoff of revenue transactions at December 31. This can be done by examining a sample of shipping documents and sales invoices for a few days before and after year-end. Audit evidence: Audit Evidence is evidence obtained during a financial audit and recorded in the audit working papers. In the audit engagement acceptance or reappointment stage, audit evidence is the information that the auditor is to consider for the appointment. For examples, change in the entity control environment, inherent risk and nature of the entity business, and scope of audit work. Subsequent Event: Subsequent event is the accounting term for a financial transaction that occurs after completion of the balance sheet for a specified period but before the company’s full set of financial statements is prepared. Subsequent events clarify information about a business’ financial picture as reflected by the balance sheet, a financial report that includes all transactions through the report date. The Financial Accounting Standards Board, the authority entrusted with establishing generally accepted accounting principles, publishes detailed requirements for defining and recording subsequent events in financial records...
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...profit at the expense of the others * Another critical assumption made by agency theory is that for the owners to believe the report prepared by the managers of the business, they will demand to have this report verified by a third independent party. * Agency theory goes on to suggest that the appointment of professional external auditors is the most preferred cost effective way of monitoring the agents. * Under strict agency theory, financial reports are thus regarded as reports to owners of the business who are the principals and the external auditor is seen to act for and on behalf of the owners. DEFINITION OF AUDIT STATEMENT OF AUDITING STANDARDS-GLOSSARY OF TERMS issued by the Auditing Practices Board defines an Audit as; “ An exercise whose objective is to enable auditors to express an opinion whether the financial statements give a true and fair view of the entity`s affairs at the end of a period and its profit or loss for the period then ended and have been properly prepared in accordance with the applicable reporting framework” PARTIES TO THE AUDIT PROCES The American Accounting Association suggests that there are four parties to the accountability/audit process; The Preparer/Source- This refers to those individuals who have control of the resources that have been provided by other parties and have the responsibility for preparing the accounting reports that show the position and results of the activities controlled by them. Users of accounting...
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...BUSINESS ADMINISTRATION DEPARTMENT OF FINANCE AND ACCOUNTING ACCT 432: AUDITING 1 COURSE OUTLINE GENERAL OBJECTIVE To introduce students to the concept of the audit of financial statements and the issues surrounding the audit of such statements EXPECTED LEARNING OUTCOMES By the end of the course, the student is expected to be able to; a) b) c) d) e) f) Explain what is an audit and the qualifications and duties of an auditor Understand the legal and professional rules governing the audit and the auditor Able to design an adequate internal control system Able to design an audit plan and an audit program to conduct an audit Able to audit a computerized client Able to design an audit report Week Topics Content Time (Hours) Definition of auditing 3 Distinction between auditing and accounting Objectives of an audit Types of audits Appointment of an auditor Qualifications of auditors 6 1 GENERAL ENVIRONMENT AUDIT 2-3 THE LEGAL PROFFESIONAL AND Week Topics Content Time (Hours) Rights of auditors Dismissal and duties of auditors REQUIREMENTS AUDITOR 4 OF AN CONDUCTING AN AUDIT 5-6 ERRORS, FRAUD AND OTHER IRREGULARITIES 7 INTERNAL SYSTEMS CONTROL 8 9-10 CAT AUDIT EVIDENCE General audit steps 3 Accepting an audit engagement Letter of engagement Planning an audit Types of errors 6 Fraud Detection, correction and prevention of errors and fraud Role of the auditor in respect of detection and prevention of errors and fraud...
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