Role of an Auditor in Corporate Sector (PPT)
- 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.