Auditors’ Rights, Appointment, Removal, Resignation and Regulation - ACCA Audit and Assurance (AA)

Summary

This Open Tuition lecture covers the rights and duties of auditors, including access to all company records and the ability to attend and speak at general meetings. Auditors have the right to resign if they encounter issues with information access or cooperation. Their primary duty is to issue an audit report expressing an opinion on the financial statements' accuracy. The lecture also touches on the regulatory framework, including ACCA, FRC, IFAC, and other bodies, ensuring auditors maintain professional standards and independence.

Takeaways

• 🔑 Auditors have extensive rights, including access to all records of the audit client, the entitlement to all necessary information, and the ability to attend and speak at general meetings.
• 🗣️ Auditors can resign from their position, particularly if they encounter issues such as lack of cooperation or access to information, which could hinder their ability to perform a proper audit.
• 📊 The primary duty of auditors is to issue an audit report that provides opinions on whether the financial statements present a true and fair view and are properly prepared.
• 🔍 Upon resignation or dismissal, auditors are required to issue a statement of circumstances explaining why they resigned or were removed, which is crucial for shareholders and other stakeholders.
• 🔄 Auditors must be reappointed annually at general meetings, and their resignation can occur for various reasons, including the company outgrowing the audit firm's capacity or the auditor nearing retirement.
• 🚫 There is a concern that auditors might be removed by directors if they are too effective, which is why the outgoing auditors are allowed to file a statement and speak at general meetings to clarify the reasons for their removal.
• 🌐 The regulatory framework for auditors includes organizations like ACCA, FRC, IFAC, and the PIOB, which oversee qualifications, ethical standards, and the alignment of financial reporting and auditing practices internationally.
• 🏛️ The International Federation of Accountants (IFAC) works towards harmonizing financial statement preparation and auditing standards globally to ensure consistency regardless of the company's nationality.
• 🏅 To be an auditor in the UK, one must be a member of a recognized qualifying body like ACCA and a recognized supervisory body, ensuring qualifications and ongoing professional development.
• 🚫 Auditors must maintain independence and cannot be directors, employees, or business partners of a director or employee of the client company to ensure objectivity and integrity in the auditing process.

Q & A

What are the rights of auditors according to the lecture?

Auditors have the right to access all records of the audit client, which can include Board minutes, payroll records, employee appraisals, contracts, and any other documentation. They are also entitled to all information and explanations required for sufficient appropriate audit evidence.

Are auditors allowed to attend and speak at general meetings?

Yes, auditors are allowed to attend general meetings and they can also speak at these meetings on relevant matters.

Under what circumstances might an auditor resign during an audit?

An auditor might resign if they are not given the right information or access to certain records, and they believe they won't be able to complete the audit properly, possibly due to attempts to hide fraud or confusion.

What is the auditor's prime duty?

The prime duty of the auditor is to issue an audit report giving opinions on whether the financial statements show a true and fair view and whether they have been properly prepared.

What happens if an auditor resigns or is removed?

If an auditor resigns or is removed, they must issue a statement of circumstances explaining why they resigned or were removed. This statement goes to the company's members.

Why might auditors be reappointed every year?

Auditors have to be reappointed at every annual general meeting, where they are put up for appointment again and members vote on it.

What are some innocent reasons for an auditor's resignation?

Innocent reasons for an auditor's resignation might include the client becoming too large or complex for the auditor's firm, or the auditor approaching retirement and wanting to reduce their workload.

What is the concern when auditors are removed?

The concern is that auditors might be removed by the directors because they are too effective, and the directors may replace them with new ones who are more compliant.

What is the role of the ACCA in regulating auditors?

The ACCA regulates its members by overseeing qualifications, ensuring continuing professional development, and maintaining behavioral standards. It can discipline members, including expelling them or fining them, and ensures they stay updated with current developments.

What is the purpose of the International Federation of Accountants (IFAC)?

IFAC aims to bring the preparation of financial statements and the auditing of those statements into line internationally, so that financial statements are drawn up according to the same accounting standards worldwide.

Who can be an auditor and what are the requirements?

In the UK, an auditor must be a member of a recognized qualifying body like the ACCA and a member of a recognized supervisory body. They cannot be directors or employees of the company and must be independent from the client.