Company Auditor: Role and Responsibilities

INTRODUCTION

In the past years, business organisations have grown enormously in size and operations. Many of them employ thousands of persons and conduct various operations from various locations. Thus, it becomes necessary for the management of such organisations to have a team of specialists to review the procedures and operations of various units and report cases of non compliance, inefficiency and lack of control so that necessary actions can be taken. This task has been assigned to the auditors who verify the correctness, accuracy and authenticity of the accounts of the companies.

LITERATURE REVIEW

Diamond (2002) explained the role of internal audit in government financial management. He also discussed the main issues to be addressed in developing the internal audit in the various countries and also reviewed the standards from the international perspective. Dewing and Russell (2005) explored the role of auditor and skilled persons in UK. They also explained about the auditors responsibility regarding their work. Stirbu et al (2009) explored the financial report users' perceptions on the extent of fraud in Romania and their perceptions of auditors' responsibilities in detecting fraud and the related audit procedures. Schilder (2013) discussed about the evolving role and responsibilities of the auditor.

The present paper explores the role and responsibilities of the company auditor. This will provide valuable information to the companies and the auditors. The audit is also of value to people doing business with the company because it helps them to assess the reliability of the company's stated financial position.

ROLE AND RESPONSIBILITIES OF COMPANY AUDITOR

Today, the auditor mulls over all of the issues raised during the audit and then chooses those that are pertinent for communicating with individuals in charge of an entity's governance in light of their roles. The auditor must carry out all of his obligations in order to finish his work.

RIGHTS OF COMPANY AUDITOR

1. Right to receive the notices: The auditor has right to receive all the notices of the company which relate to the meetings of the company. The auditor has the right to attend the meetings and give any information regarding the accounts audited by him. (sec 231)
2. Right to be indemnified: The auditor has the right to be indemnified, if he is not guilty under law, from the assets of the company against any liability incurred by him in defending himself against any civil or criminal proceedings.
3. Right to inspect the branch accounts: The company auditor shall visit the branch office in case the accounts of that branch are audited by the person other than the company auditor. He can also check the books, vouchers and accounts of the company maintained at the branch office (sec 228 (2). In case of banking companies whose branch is outside india, it is better for the company auditor to check the accounts of the branch which have been given at the principal office.
4. Right to sign the audit report: The individual hired as an auditor has the authority to sign the company's audit report (sec 209). The auditor will subsequently issue a report to all of the company's shareholders, not just the board of directors. If necessary, the auditor has the ability to include any recommendations in the report.
5. Right to obtain information and explanation: The Company is authorised to obtain any information from the officers of the company which the auditor thinks it is important for the performance of his duties regarding auditing.
6. Right to view the books of accounts: The Company's auditor has the right to access the company's books, vouchers, and accounts at any time, provided that it is not a business day. The books contain many others as well as those on finance, accounting, and statistics. All of the papers used in the financial statement and helpful to the auditor are included in the vouchers.
7. Right to seek legal and technical advice: The auditor of the company has the right to seek the legal and technical advice which is needed for the performance of his duty.
8. Right to remuneration: The auditor has the right to remuneration on completing his work. The auditor must receive the amount which is already fixed by the company for the work done by him.

DUTIES OF COMPANY AUDITOR

• Contractual duties: The professional accountant is appointed in the cases for performing the duties other than the statutory duties. The duties of the auditor in this case must be fixed on the terms and conditions of his appointment.
• Duty to know the duties: The auditor must know the other duties under the companies act. The auditor must also now his duty under Article of association. Their ignorance of his knowledge must not be an excuse otherwise it will lead to the liability of auditor.
• Duty of care: The auditor must exercise his reasonable care and skill. It is the duty of an auditor to bring on the work that he has to perform that skill, care and caution. The auditor must not certify what he does not believe to be true and he must take reasonable care and skill before he believe that what he certifies to be true.
• Duty to explain reasons for resigning: When auditors resign before the end of their term or state that they do not wish to be reappointed, they must explain this in a notice to the CRO. The notice should state if they consider that any circumstances connected with their resignation should be brought to the attention of the company's members or creditors. This notice is made public.
• Professional duties: The auditor must meet the previous auditor before accepting the duties of the auditor. The members of the profession are expected to observe ethics given to them by the institute of chartered accountants of India.
• Duties of auditor in relation to mandatory accounting standards: It is the duty of the members to ensure the accounting statements are implemented in the presentation of financial statements covered by their audit reports. in any deviation it is the duty of the auditor to make disclosures in their reports so that the users of the accounting statements must be aware of the deviations.
• Statutory duties: For each balance sheet and profit and loss account presented to the business's general meeting, the auditor is required to report to the members of the company on the accounts he has reviewed. Additionally, he must say if, in his opinion, the accounts provide the information mandated by the legislation. Additionally, he must say whether the balance sheet provides a truthful and fair picture of the state of the business at the conclusion of the fiscal year. The audit report and the company's balance sheet and profit and loss account must match with the books of accounts, and he must also declare any conflicts of interest.
• Duties under sec 227 (1A): An auditor must enquire whether the loans and advances made by the company are properly secured on the basis of security, whether the transactions of the company are represented are not against the interest of the company, whether the personal expenses have been charged to the revenue account, whether the shares which have been allotted in cash have been actually received are stated in the books of the company.
• Duties under sec 227 (4A): The auditor's report must include statement as specified in the orders and also include the matters in the audit report of companies as specified in the government orders in case of specific companies. The order applies to manufacturing, mining, supplying services, trading, financial, investment, chit funds or mutual benefit societies.
• Other duties under the companies act: It is the duty of the auditor to sign the audit report, has the duty to report on the matters included in the prospectus of the company. He has also the duty to report on the certain matters which relate to the accounts and allotment of shares.

QUALITIES OF AN AUDITOR

• Only the chartered accountant of the company is appointed as the auditor of the limited company. He must have adequate qualities to perform his duties.
• The auditor must have knowledge of principles and practice of the aspects of accounting. He must know all the systems and methods of accountancy.
• The auditor must be honest and he must not certify what he believes not to be true and must take reasonable care before he certify to be true.
• The auditor must be hardworking, methodical and systematic in his work. He must have adequate common sense. He must have capacity to hear the arguments of the others.
• The auditor must not disclose any secrets of his clients. He must have adequate skill to write the audit report correctly and concisely and clearly.
• The auditor must have up-to-date knowledge of the mercantile law and companies act. He must have knowledge of the principles of economics and the principles and practice of cost accounting.
• The auditor must gather information from time to time and must seek clarification on the matters which he does not understand. He must act impartial and should not be influenced by others.
• The auditor must be tactful so that to take the information which is useful for his work and extract only the information needed and ignore all the irrelevant information.
• The auditor must have thorough knowledge of the audit laws, financial management, business organisation and industrial administration.
• The auditor must have moral standards and should not accept any report or sign any report which he believes not to be true and correct.

Thus, from the above discussion it is clear that the auditors must know his duties and responsibilities well in order to perform his work. He must be aware of all the things which are relevant to his work. Auditors enjoy a distinctive professional status in the society because of the specialised function of auditing. These days the independent firms of the professional accountant have come into existence to audit the accounts of mercantile firms but still the government accounts and audit are with separate government departments.

CONCLUSION

Auditing is the verification of the financial position as disclosed by the balance sheet and the profit and loss account in order to determine the accuracy of the data. The auditor must perform his role well according to his work and detect the frauds and prevent it. The auditor must approve the true and fair view of the financial statements of the organisations. The audit is also of value to people doing business with the company because it helps them to assess the reliability of the company's stated financial position.