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Chapter 2: Statutory audit and regulations (What happens on an audit…
Chapter 2: Statutory audit and regulations
Objective of statutory audits and the audit opinion
The purpose of an audit is for the auditor to express an opinion on the financial statements
What happens on an audit
Audit firm find a client who needs auditing
Tender (offer) for the audit
Agree a fee and scope of work to be done
Select audit team
Interim Audit
(short audit before year end)
Final Audit
(look at P&L and SFP)
Discuss findings with management and issue audit report
Audit report implies that following true unless report mentions issues
Obtained info needed for T and F opnion
Distant sites sent adequate returns
Accounts agree with a/c records & returns
All information and explanations received
Obtained information on the directors
Emoluments & benefits all disclosed
Loans & transactions represented fairly
Auditor Appointment
Directors
can appoint auditor
Members
can appoint auditor by ordinary solution
Secretary of state
can appoint auditors if no auditors are appointed
Rights of an auditor
Access to records
(right at all times to the books, accounts and vouchers)
Information and explanation
(a right to require from the company's office such information and explanations they think necessary)
Attendance at/notice of AGM
Right to be heard at AGM
(A right to be heard at general meetings which they attend on any part of the business that concerns them as auditors)
Right in relation to written resolutions
(A right to receive a copy of any written resolution proposed)
International regulation
Regulated by nationally using international rules (ISA numbers)
Need to be the same so that if things are being compared across international borders they can be.
Regulators ensure that...
ISA is understood
Work conducted properly