Page 215 - DCOM204_AUDITING_THEORY

Unit 11: Appointment, Right, Duties and Liabilities of an Auditor

Objectives Notes

After studying this unit, you will be able to:
Discuss procedure for appointment of an auditor;
Know qualification of a person to become an auditor;
State disqualifications of an auditor;
Know about Rights, Duties and Liabilities of an Auditor;
Discuss about auditor's report.

Introduction

Unit explains the appointment of an auditor and basic qualifications of a person to become an
auditor and disqualifications of an auditor under Section 226 and 254. Rights, Duties and Liabilities
of an Auditor under Section 255 are also described with suitable examples and cases.

11.1 Appointment of an Auditor

Qualification of an Auditor [Section 226 (1) and (2)]

Following persons are qualified to be appointed as auditor of a company:

1. Practicing Chartered Accounts [Sec. 226(1)J]: A person shall not be qualified for
appointment as auditor of a company unless he is a Chartered Accountant within the
meaning of the Chartered Accountant Act 1949. A Chartered Accountant means a person
who is the member of the Institute of Chartered Accountant of Pakistan. He will be
deemed to be in practice. When individually or in partnership with other Chartered
Accountants in practice him for consideration received or to be received.

2. Practice of Accountancy: He engages himself in the practice of accountancy.
3. Verification: He offers to perform or performs the services involving the auditing or
verifications of the financial transactions, books of accounts or records or the preparation,
verification or certification of financial accounting and related statement or holds himself
out to the public as an accountant.
4. Professional Services: He renders the professional services or assistance in or about matters
of principal or detail relating to accounting procedure to the recording, presentation or
certification of financial facts or data.
5. Renders the Services: Renders the services as, in the opinion of the council are or may be
renders by a chartered accountant in practice.
6. Certified Auditor [Sec 226 (2)]: A part from practicing chartered accountants, a person
holding a certificate under the Restricted Auditor’s Certificate Rules, 1965 is also qualified
to be appointed as auditor of a company. Such certified auditors are subject to the rules
framed in this behalf by the Central Government. The object of the provisions as to
qualify is to ensure that only persons of proven worth and standing and under the discipline
of a statutory body are appointed as auditor.

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