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02 November,2022 | By Brainwonders
An auditor examines a company's financial records to check if they are honest by analysing the level of precision and clarity that has been accounted for.
An audit is important because it provides a set of financial statements and ensures that the accounts are accurate and fair. Auditing can also assist in enhancing a company's internal controls and processes.
An auditor is a qualified professional who can conduct a company audit. This person assesses the financial statements of the company for accuracy. This is done to see if the company follows the stated policies and procedures. An auditor is employed to review a company's books of accounts and the accuracy and legitimacy of the transactions recorded therein. Auditor also provides an opinion on the financial statements' overall view, i.e., if the reports present an accurate and fair picture of the entity's financial situation. Auditors are required in both the private and government sector. There are many opportunities available as an auditor. They function as either personal financial advisors, internal auditors or external auditors. Specific skills like good communication skills, time management, good business sense, decision-making ability and healthy scepticism are essential for being an auditor.
Brainwonders career counsellors have experienced career guides who assist students in understanding their intrinsic abilities and skills through various career advice tests such as aptitude and interest tests and supporting them in determining the best career route for them. Proper career counselling can help individuals choose the right career path. Careers like company auditors can be selected based on the appropriate career counselling.
A company auditor's job is full of responsibility. The auditor has a lot of power under the Companies Act. He has all of the rights that other business owners should have because he is the shareholders' agent. Because the Act contains specific provisions, no one can prevent the auditor from exercising these rights.
According to section 227 (1) of the Companies Act, 1956, below, we have explained the auditors' rights.
Every auditor of a company has unrestricted access to the firm's books of accounts and vouchers, whether held at the company's headquarters or elsewhere. As a result, the auditor has access to all readers, coupons, and documentation. This is a legal right of the auditor. He may pay a surprise visit without telling the Board of Directors in advance, but auditors notify the Board of Directors before their trips. This is one of the primary rights of a company editor. Access to all the accounts data is crucial to be accessible to the company auditor.
Every company auditor has a right to gain information from the company. An auditor of a firm has the right to demand from the company's officers whatever information and explanation he deems relevant to fulfil his obligations as an auditor. In his report, the auditor must state if he got all of the information and answers essential for the audit to the best of his knowledge and belief. This is another vital tool in the auditor's arsenal. He will, however, determine which information or explanations he believes are required. He has the right to include the fact in his report if the company's directors or officers refuse to provide certain information because they think it is unnecessary.
During the company auditor's tenure as an auditor, the auditor must make a report to the company's members on the accounts he has examined. The Board of Directors is responsible for preparing and presenting any reports or balance sheets to the auditor. The auditor also can recommend appropriate changes to the management's accounting method. They have the power to correct the statements or anything mentioned in the reports that are not correct according to them. If a recommendation is offered, the directors should follow it. If this is not the case, the auditor should inform the members. However, he does not have the authority to make any changes to the company's accounts on his own. But the suggestions need to be taken seriously.
The auditor is also permitted to visit the company's branches. If a qualified auditor audits the branch's accounts, he can obtain copies of the reports that have been certified by the branch auditor, and he will always have access to such records. Suppose a duly qualified auditor does not audit the Branch Accounts. In that case, the auditor has unrestricted access to the company's books, accounts, and vouchers and may visit the branch if deemed necessary. The company auditor does not have the legal authority to see international units.
During his tenure, the company auditor has the right to receive all notices and communications relevant to all general meetings. Even if the auditor's audited accounts aren't discussed, the corporation should send him a note. The auditor has the right to attend the sessions as well. He is also welcome to speak at the meeting if any clarification is required. On the other hand, the auditor is under no obligation to attend such sessions. This right also does not apply to board meetings. An auditor of a corporation has the same right as a member of the company to receive notices and other communications relevant to the General Meeting under section 231.
Only the person chosen as the company's auditor, or, in the case of a partnership, only a partner in the firm practising in India, may sign the auditor's report or sign or authenticate any other document required by law by the company under section 299. If appointed, any partner also has the right to do the same. The first auditor shall sign and authenticate a specific section of the Statutory Report. He also has the authority to sign and establish any other document that the Act requires. Auditor has full power to sign the papers and make the report.
The auditor's pay shall be established in the company's general meeting or in a manner that may be determined therein. It must include any expenses made by the company auditor in connection with the company's audit and any facilities provided to him. Still, it does not have any payment paid to him for any other services performed at the company's request. This right to remuneration also comes under the rights of the company auditor as one of the fundamental rights.
In case of any civil and criminal actions by the company against the auditor, and If it is proven that the auditor acted honestly or the judgement given is in his favour, he has a right to be indemnified out of the assets of the company against any liability incurred by him defending himself against any civil and criminal procedures brought by the company under section 633. This can protect him against any criminal proceedings by the corporation. Aside from this fact, many other factors are considered.
Auditor also has a right to take any legal advice if they need it. If necessary to take action on his report, the auditor may seek advice from experts. If the report needs legal action or the auditor feels the need, only the auditor has a right to take legal or any technical advice. Sometimes the technical advice can depend on the needs and complexity of the report. Auditor has the full authority to ask for such kind of advice. This is necessary considering the reports. In the case of any unique technical issues, the auditor has the right to contact and seek the advice of an expert. He has the right to seek legal assistance to carry out his responsibilities effectively.
The duties of an auditor include the following tasks, which are considered the significant duties of a company auditor. Out of the major ones, these are a few major ones
A company auditor's primary duty is to provide reports of all the accounts and financial statements audited by them and presented to the company. Such audits give credibility to the financial information. This provides a fair idea of the company's accounts. The auditor's opinion enhances the reliability of the financial statements. The assurance from the auditor is the fundamental reason for its credibility. The audit report also ensures that accounting and auditing rules are followed. According to accounting standards, he must make sure that the financial statements adhere to the relevant provisions of the Companies Act 2013.
Every company auditor is responsible for requesting access to the company's books of accounts, vouchers, and other documents and explanations. Furthermore, an auditor can contact the company at any time to obtain information on the following topics:
When a corporation maintains a branch office, the accounts of that branch office must be audited either by the company's auditor or by any other person qualified to serve as an auditor for the company. The branch auditor will create a report on the accounts of the branch he is auditing and transmit it to the company's auditor, who will address it in his essay in whatever way he sees fit.
All auditors must follow the auditing standards. In cooperation with the National Financial Reporting Authority, the Central Government will announce these requirements. These standards assist the auditor in carrying out his auditing responsibilities with relative simplicity and precision. The government may also specify that the auditors' report contains a statement on the notified matters.
In general, the auditor may develop suspicions about fraud within the organisation while executing his job. This could be related to any financial statement that cannot be added up. While performing his duties as auditor, if an auditor of a company has reason to believe that an offence involving fraud is being or has been committed against the company by officers or employees of the company, he must immediately report the matter to the Central Government within the time and in the manner prescribed.
The auditor must assist the officers if the company is under investigation. The auditor's responsibilities are diverse, as can be seen, and they have a wide-ranging and far-reaching impact. This job is full of guilt, and fulfilling those can be difficult. The level of assurance provided by a set of audited financial statements is much higher than that offered by regular unaudited financial statements. The term "investigation" refers to the systematic and rigorous examination of certain business records. When a company's issue has already been identified, this type of inquiry is carried out to determine the cause and who was involved in the activity. As a result, an auditor's responsibility is to help officers conduct such an investigation.
Confidentiality is one of the fundamental principles that govern an audit. As a result, the auditor must keep the information he obtains while executing his obligations as an auditor confidential. Without his permission, he should not share the client's details. In addition, the auditor must be truthful, sincere, objective, and free of bias. As a result, he should examine the company's books of accounts with a high level of objectivity and integrity. The auditor's principal responsibility is to provide his opinion on whether the balance sheet presents an accurate and fair picture of the company's financial situation after the fiscal year. Schedule VI refers to the minimum disclosure obligation; however, if specific information significantly influences the representations made in the financial statements, it must be reported.
A Company auditor may have suspicions about fraud within the organisation. If he finds himself in this situation, he must notify the Central Government as quickly as possible and by the Act's requirements. The role of a financial statement auditor in detecting fraud is undeniable. The auditor can get reasonable but not complete assurance that significant misstatements are found due to the nature of audit evidence and the features of fraud.
The auditor's report has a high level of certainty and trustworthiness because it contains the auditor's view on the financial accounts. The auditor has the right to provide an unfavourable opinion if he considers the financial statements do not present an accurate and fair picture of the company's financial status. He will also issue an opinion disclaimer if he is displeased with the material supplied and cannot offer a qualified opinion on the statements. A waiver of thought states that the organisation's financial position cannot be ascertained due to a lack of information. If he finds himself in this situation, he must notify the Central Government as quickly as possible and by the Act's requirements.
A Company auditor must follow the code of ethics and the code of professional conduct. Two parts of this are confidentiality and proper care in fulfilling his tasks. Professional scepticism is another crucial requirement. The auditor must have a critical mind and be on the watch for any financial disasters, blunders, or frauds.
The auditor must assist the officers if the company is under investigation. The auditor's responsibilities are diverse, as can be seen, and they have a wide-ranging and far-reaching impact. The level of assurance provided by a set of audited financial statements is much higher than that offered by regular unaudited financial statements.
Hence with the proper career counselling, the right career, like a company auditor, is selected with the help of proper guidance.
Frequently asked questions on Company Auditor
1. What qualifications do I need to become a company auditor?
Ans: To become a company auditor, you must have at least a bachelor's degree in accounting or finance and several years of experience working in the industry. Additionally, many states require auditors to pass a certification exam before they can practice.
2. What is the role of a company auditor?
Ans: A company auditor is responsible for providing an independent assessment of the accuracy of a company's financial statements. The auditor reviews documents, such as balance sheets and income statements, to ensure that the company is accurately reporting its financial status to shareholders and other stakeholders.
3. How often does an audit need to be conducted?
Ans: Generally speaking, most companies are required by law to conduct an audit every year. For publicly traded companies, the frequency may be more frequent.
4. How long does an audit typically take?
Ans: The duration of an audit depends on the size and complexity of the organization being audited; however, on average, the process can take anywhere from 1-6 months.
5. Are there any risks associated with an audit?
Ans: There are some risks involved in conducting a company audit. These include exposing the organization to legal liabilities, potential negative publicity, and reputational damage if discrepancies are discovered in an audit.
Worry not, because the Brainwonders test and guidance will not only help you know it, but also follow it!