Auditor: Appointment, Qualifications, Powers, Duties, Liabilities; Audit Report and Audit Evidence
Auditor: Appointment, Qualifications, Powers, Duties, Liabilities; Audit Report and Audit Evidence tests the legal and professional framework.
Core rules
- Appointment: first auditor by the Board within 30 days of incorporation; later auditors by members at the AGM for five years. Casual vacancy by resignation is filled by the Board within 30 days and approved by members within three months. Rotation applies to listed and prescribed large companies.
- Qualifications: a chartered accountant holding a certificate of practice; disqualifications include indebtedness, business relationship, relative holding securities, and full-time employment.
- Powers and duties: right of access to books and information; duty to report on accounts, compliance and fraud (Section 143(12)).
- Audit report: unmodified, qualified, adverse or disclaimer. Audit evidence must be sufficient and appropriate; external evidence is generally more reliable than internal.
Worked example
A bank confirmation is stronger evidence of a bank balance than a cashier's note, because it comes from an independent external source. If the auditor cannot obtain evidence about a material receivable, the report may be qualified; if the possible effect is pervasive, a disclaimer is appropriate.
Traps
Do not appoint the first auditor by members at the AGM; do not confuse a qualified report with a qualified auditor; fraud reporting has a monetary threshold; internal evidence can be relevant but is weaker; an adverse opinion means misstatement is material and pervasive.