VShrees Compilations In association with SAI Education Academy

B.Com II AUDITING
CHAPTER 3 THE AUDITOR
S. No. 1. 2. 3. 4. 5. 6. 7. Topics Brief Introduction Professional Qualification Disqualifications of an auditor Personal attributes of an auditor Auditor: Sole Proprietorship Auditor: Partnership Concern Auditor: Limited Company

1. Brief Introduction: - The person conducting audit is known as the auditor Auditor is a qualified & trained professional Auditor holds an independent status Auditor makes a report to the person appointing him Reporting is done after xhaustive examination of the accounting records/ Reporting is done in the form of an opinion drawn by him on the financial Auditors opinion: To what xtent the financial statements reflect a true and fair Auditors appointment: By law, by board of directors, by members or by other In general: Chartered Accountants (members of the ICAI holding CP) and C&AG Remuneration and removal of an auditor is governed by the code

statements statements view modes are popularly known to be a non govt. and government auditors

2. Professional Qualification: (VShrees Copy) Must have the technical qualification: CA holding CP Must be an xpert of: accounts, laws and technology Must have substantial knowledge of: the organization Must have the knowledge of: its working/ operational approaches Notes compiled by Vikas Singh e-mail: vshree.research@gmaill.com contact 09839943452/ 05323295306 1

VShrees Compilations In association with SAI Education Academy

B.Com II AUDITING
Must be xpertise in: employing various auditing techniques Must possess: personal attributes for fair xecution (mentioned in point no 4)

NOTES ARE TO BE TAKEN EXHAUSTIVE ONLY ALONG WITH LIVE LECTURES.

3. Disqualifications of an auditor: (VShrees Copy) - Auditor of a company: disqualifications as mentioned u/s 226(3) of the Co.s Act - Other organizations: statute remains silent beyond their professional qualifications - In general: to maintain independency he should not be indebt to the organization, should not be directly or indirectly connected to the organization, should not have his investments in it. 4. Personal attributes of an Auditor: (VShrees Copy) a) Integrity: Should be honest, sincere and straight forward b) Objectivity: Should be unbiased and impersonal c) Independence: Should not subordinate his judgments to the will of others d) Communication Skills: Should be interactive to blue-white collars & even outsiders e) Tact: Should be capable of dealing differently in different situations f) Judgment: Should be capable of taking firm judgment as to which samples checked g) Logical Skill: Should be able to analyze and interpret problems and root causes h) Confidentiality: Should not disclose details of a client to any other i) Caution: Should be done with proper modus operandi and due care, Whatsoever done j) Moral Courage: Should be able of solving intricate problems patiently k) Ethical Approach: Should be just in his deeds 5. Auditor: Sole Proprietorship: (VShrees Copy) - Nature of the audit: Recommendatory - Appointment: a. no legal provisions regarding this b. always a contractual appointment c. engagement letter is desirable, deciding auditors scope of work d. mandatory where annual turnover/ gross receipt of a concern xceeds the limit Notes compiled by Vikas Singh e-mail: vshree.research@gmaill.com contact 09839943452/ 05323295306 2

VShrees Compilations In association with SAI Education Academy

B.Com II AUDITING
Remuneration: a. no legal provisions regarding this b. depends upon the conditions of engagement Rights: not statutory but customary to access books and relevant documents to seek xplanation and secure relevant informations to report without being influenced to get remuneration Duties: not statutory but customary to draw his opinion to be unbiased to render necessary information Removal: no legal provisions particularly for this only when disqualification occurs or on violation of law not in the hands of the proprietor

a. b. c. d. e. a. b. c. d. a. b. c.

6. Auditor: Partnership Concern: (VShrees Copy) - Nature of the audit: Recommendatory - Appointment: a.no legal provisions regarding this munificent b. always a contractual appointment c. engagement letter is desirable, deciding auditors scope of work - Remuneration: a. no legal provisions regarding this b. depends upon the conditions of engagement - Rights: a. not statutory but customary b. to see partnership deed c. to access books and relevant documents d. to seek xplanation and secure relevant informations e. to report without being influenced f. to get remuneration - Duties: a. not statutory but customary Notes compiled by Vikas Singh e-mail: vshree.research@gmaill.com contact 09839943452/ 05323295306 3

VShrees Compilations In association with SAI Education Academy

B.Com II AUDITING
b. c. d. e. a. b. c. to draw his opinion to be unbiased to xamine application of deed to render necessary information Removal: no legal provisions particularly for this only when disqualification occurs or on violation of law not in the hands of partners

NOTES ARE TO BE TAKEN EXHAUSTIVE ONLY ALONG WITH LIVE LECTURES.

7. Auditor: Limited Company: (VShrees Copy) - Nature of the audit: Compulsory (made by the Companies Act 1956) - Types of Appointments: a. First Auditor: by the BOD b. Subsequent Auditors: At every AGM by the shareholders c. Reappointment of a Retiring Auditor: At every AGM by the shareholders d. Auditors appointed by the CG: Co. to give notice of non appointment at AGM e. Special Auditor: May be appointed by the CG in special cases f. Appointment on Casual Vacancy: Shall be filled by the shareholders at GM g. Appointment of Auditor by Special Resolution: if 25% or more of the subscribed capital is held by the CG/SG/Govt. Co., any Nationalized Bank and any General Insurance Co. - Remuneration: To be fixed by the body appointing (BOD/members/CG/) - Rights: a. to attend general meeting b. to be heard at general meeting c. to visit branches d. to xercise right of lien e. to see deeds and contracts f. to access books and relevant documents g. to seek xplanation and secure relevant informations h. to report without being influenced i. to get remuneration j. to receive notice of removal - Duties: Notes compiled by Vikas Singh 4 e-mail: vshree.research@gmaill.com contact 09839943452/ 05323295306

VShrees Compilations In association with SAI Education Academy

B.Com II AUDITING
a. b. c. d. a. b. to draw his opinion and to report to make adequate disclosures to give qualified report along with the reasons to be unbiased Removal: strict legal provisions only by passing resolutions and approval from the CG, in specific cases

XHAUSTIVE COVERAGE OF COMPANYS AUDITOR TO BE DONE AT COMPANY AUDIT

NOTES ARE TO BE TAKEN EXHAUSTIVE ONLY ALONG WITH LIVE LECTURES.

Notes compiled by Vikas Singh e-mail: vshree.research@gmaill.com contact 09839943452/ 05323295306