Page 236 - DCOM204_AUDITING_THEORY

Auditing Theory

Notes 11. The independence of an internal auditor will most likely be assured if he reports to the
(a) President Finance

(b) President System
(c) Managing Director
(d) CEO
12. Proper segregation of duties reduces the opportunities in which a person would both

(a) establish controls and executes them
(b) records cash receipts and cash payments
(c) perpetuate errors and frauds and conceals them
(d) record the transaction in journal and ledger.

13. Life Insurance Corporation of India holds twenty five percent of subscribed capital of XYZ
Ltd. The appointment of statutory auditor in XYZ Ltd. Would be by......................
(a) Ordinary resolution

(b) Special resolution
(c) (a) or (b)
(d) None of the above
14. ICICI prudential, a life insurance company, holds thirty two percent of subscribed share
capital of Delta Ltd. The statutory auditor of Delta Ltd. would be appointed by.................
(a) Ordinary resolution
(b) Special resolution

(c) Either of the above
(d) None

11.8 Rights of Auditor

In order to carry out the duties as laid down with regard to the accounts presented to the
members, the Companies Act has also given the auditors certain rights. These rights, enshrined
in Sub-section (1) of Section 227 of the Companies Act, 1956, are primarily:
1. The right to call for information and explanations;

2. The right to have access to the books of accounts; and
3. The right to notices and to attend meetings.
The scope and ambit of these rights of the auditor are given below.

11.8.1 Right to Call for Information and Explanations

An auditor has the right to require from the officers of the company such information, as the
auditors may think necessary for the performance of their duties. The auditor can call for any
explanations or information that he considers necessary. It is obligatory on the part of the
officers of the Company to furnish the relevant information to the auditor. In the event of the
information not being furnished or explanation given, the auditor is required to report the same

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