Page 156 - DCOM509_ADVANCED_AUDITING

Unit 9: Audit of Limited Companies

Notes
The Act guides the auditor in respect of The auditor has to refer to the different
the principles and processes of accounting clauses of the Partnership Deed with
to be followed by the company and the regard to the responsibility for
form of reporting to be adopted by him. maintaining accounts, methods of
accounting, profit-sharing ratio of
partners, terms of borrowing and the
type of audit reporting relevant to the
nature of the assignment.

It is statutory responsibility of a specified The responsibility of the auditor is
and definite nature flexible; he gets clear instructions from
the firm with regard to the nature and
extent of his work.
The audit assignment is only for The audit assignment may include
verification of books of account and for preparing books of account as well.
and for auditor's report thereon

Self Assessment

State whether the following statements are True or False:

1. In a partnership audit it is necessary for a firm to get its accounts audited.
2. The audit fee for the year must be shown in the Profit and Loss Account of the company in
case of company audit.
3. Company audit is statutory responsibility of a specified and definite nature.

9.2 Commencement of Audit

Commencement of audit of a company involves two stages:
1. When a new company comes into existence and the first auditor is appointed; and

2. When the company is already established, but a new auditor is appointed (i.e. the old
auditor is substituted by a new auditor) for the subsequent audit of the company.

In the first case, the auditor of a new company has to be a little more careful in making himself
conversant with the accounting system and the rules and regulations affecting the company.

In the second case, the new auditor has to follow the professional ethics of obtaining consent of
the retiring auditor before accepting his appointment. Although the company is old, the auditor
is new to that company. He should, therefore, exercise the same care as would have been
necessary in the case of the first audit of the company.

Consideration required at the commencement of a new audit is:
1. to ensure that the company has followed the statutory provisions in regard to registration,
incorporation, allotment and commencement of business;
2. to refer to the relevant regulations of the company, contained in its articles, memorandum
or prospectus; and
3. to confirm that his appointment is in conformity with the Act and the Articles.

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