Page 239 - DCOM204_AUDITING_THEORY

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

The person appointed as auditor shall sign the auditors’ report or other documents required Notes
under the law. The report should indicate the date and place, as per Section 257.

The liabilities of auditors of a company can be studied under following heads: (a) Civil
Liabilities, and (b) Criminal.

11.10 Keywords

Auditor: A qualified accountant who inspects the accounting records and practices of a business
or other organization. An auditor (audit) examine carefully for accuracy with the intent of
verification; “audit accounts and tax returns.”

Auditor’s Report: The Auditor’s report is a formal opinion, or disclaimer thereof, issued by
either an internal auditor or an independent external auditor as a result of an internal or external
audit or evaluation performed on a legal entity or sub-division thereof (called an “auditee”).
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.

11.11 Review Questions

1. What is the nature of negligence as one of the liability of an auditor?
2. Enumerate different rights of auditor.

3. Write short notes on:
(a) Liability to Third Parties
(b) Liability to the Company
(c) Civil Liabilities

4. Explain the procedure for appointment of an auditor.
5. What are the qualifications of a person to become an auditor? Who are disqualify to be an
auditor?

6. Explain different duties and powers of an auditor under different heads.
7. How auditors work as a watchdog?
8. What are mandatory components of an auditor’s report?

Answers: Self Assessment

1. Section 224(1-13)
2. Restricted auditor’s certificate rules, 1965

3. Sec 226 (3)(4)(5)
4. Shareholders; Annual General Meeting
5. (d)

6. (b)
7. (c)

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