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Auditing and assurance

Auditing and assurance. Lecture 2a The basic rights and duties of auditors under English Law

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Auditing and assurance

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  1. Auditing and assurance Lecture 2a The basic rights and duties of auditors under English Law Hong Kong ABRS students may choose to study provisions under the HK Companies Ordinance (Refer to Tse Yiu Lau, P. and Chi Yuan Lam, N. (2006) Audit and Assurance in Hong Kong Pilot or more recent texts) Malaysia/ Singapore – contact local administrators

  2. Companies Act 2006 (CA 06) • The longest ever act! • 1300 sections • Simplified language • Not a great amount affects the auditor • Mainly a consolidation of accounting and auditing provisions

  3. Company Law: Directors’ responsibilities • CA 2006 s386 - Every company must keep ‘adequate’ accounting records • The term adequate means that the records must be sufficient… • To show and explain the company’s transactions • To disclose with reasonable accuracy the financial position of the company at that time and • To ensure that the accounts comply with the relevant requirements of the law • The records must contain, in particular… • Day to day records of all sums of money received and spent and the matters to which they relate and • Records of the company’s assets and liabilities

  4. Company LawDirectors’ responsibilities (cont.) • CA 2006 s394 - Directors are responsible for preparing annual accounts for each of the financial years of their company • They must not approve any set of annual accounts unless they are satisfied that they give a ‘true and fair view’ of the assets, liabilities, financial position and profit or loss of their company Notes: ‘Accounts’ = Financial statements; profit and loss a/c = Income statement

  5. Main duties of AuditorCA 06 ss495-502 • To REPORTwhether the accounts: • are properly prepared under CA 06 a/a • show a TRUE & FAIR VIEW (t&f) of • The balance sheet • The profit and loss account • that the DIRECTORS’ REPORT is consistent with the FS’s

  6. Main duties CA 06 ss495-502 Main dutiesCA 85 s237 • To INVESTIGATE that: • Proper accounting records and returns have been kept • The records agree with the FS’s • To STATE in report if records, information received or compliance with CA 06 are unsatisfactory

  7. Main dutiesCA 85 s237 (cont.) Main dutiesCA 06 ss495-502(cont.) • If not t&f then DUTY to report it • If information and explanations not received then DUTY to report it • If non-compliance with CA06 (director’s emoluments) then DUTY to report it

  8. Main rightsCA 06 ss495-502 • ACCESS to records at ALL times • INFORMATION & EXPLANATIONS as needed • Notice of, and attendance at, general meetings (GM’s) • To speak at GM’s • There are also rights in respect of small companies’ audit elections; also rights upon removal or resignation (ss.510-526)

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