Page 238 - DCOM204_AUDITING_THEORY

Auditing Theory

Notes The auditors of a company are entitled to attend any general meeting of the company and to
receive notice of, and communications relating to, any general meeting which any member of
the company is entitled to receive. Thus, the Auditor has the right to receive notices and other
communications relating to the general meetings. The auditors also have the right to attend the
meeting and speak on any part of the business of such meetings which concerns them as auditors.
Where a company is proposing a resolution as a written resolution, they are entitled to receive
copies of all communications supplied to members. However, the mere fact that the Auditor has
said something in the meeting does not mean that he is absolved of all responsibilities to say
material facts in the Report. In Woolworth v. Conroy, the Court of Appeal held that ‘accountants in
the course of doing the in ordinary professional work of producing and auditing accounts, advising on
financial problems and carrying on negotiations in relation to taxation have at least a particular lien over any
books of accounts, files and papers which their clients have delivered to them, and also over documents which
have come into their possession in the course of acting as their clients’ agents in the course of their ordinary
professional work.’

Self Assessment

State whether the following statements are true or false:
15. It is not obligatory on the part of the officers of the Company to furnish the relevant
information to the auditor.
16. The Right of an auditor to have access to the books of accounts is not extinguished by the
winding up of the company.
17. The term “at all times” enables the auditor to check the records without waiting for
financial year to end or office business hours.

11.9 Summary

Qualification of an Auditor [Section 226 (1) and (2)]: Practicing Chartered Accounts (Sec
226 (1) J): Verification: He offers to perform or performs the services involving the auditing
or verifications of the financial transactions, books of accounts or Professional Services;
Renders the Services: Renders the services as, in the opinion of the council are or may be
renders by a chartered accountant in practice or Certified Auditor [Sec. 226 (2)]

Person cannot become the auditor of the company according section 254 is a body corporate;
an officer or employee of the company; person who is the employment of an officer or
employee of the company; person who is indebted to the company for an amount exceeding
` 1000; the spouse of a director of the company; a person who was a director other officer
or employee of the company at any time during the preceding three years; a person who
is a partner of a director, officer or employee of a company.

Disqualification of an auditor are as per {Sec 226 (3)(4)(5).
As per section 224(5), the first auditor or auditors of a company shall be appointed by the
Board of directors by passing a board resolution within one month of the date of registration
of the company.
Section 224 governs the appointment of auditors. The auditors are to be appointed by the
shareholders of the company in an annual general meeting by passing an ordinary
resolution

Powers/Rights, Duties and Liabilities of an Auditor are described under Section 255.

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