the university of greenwich 1 september 2009 l2a audit and assurance j. e. spencer-wood lecture 2a...
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theUNIVERSITYofGREENWICH
1September 2009
L2aAudit and assurance
J. E. Spencer-Wood
Lecture 2aThe basic rights and duties of auditors under
English LawHong Kong ABRS students may choose to study provisions under the HK Companies Ordinance (Refer to Tse Yiu Lau, P. and Chi Yuan Lam, N. (2006) Audit
and Assurance in Hong Kong Pilot or more recent texts)
Malaysia / Singapore – contact local administrators
Auditing and assurance
theUNIVERSITYofGREENWICH
2September 2009
L2aAudit and assurance
J. E. Spencer-Wood
Companies Act 2006 (CA 06)
• The longest ever act!• 1300 sections• Simplified language
• Not a great amount affects the auditor• Mainly a consolidation of accounting and
auditing provisions
theUNIVERSITYofGREENWICH
3September 2009
L2aAudit and assurance
J. E. Spencer-Wood
• CA 2006 s386 - Every company must keep ‘adequate’ accounting records
The term adequate means that the records must be sufficient…
– To show and explain the company’s transactions– To disclose with reasonable accuracy the financial position of the
company at that time and– To ensure that the accounts comply with the relevant requirements
of the law The records must contain, in particular…
– Day to day records of all sums of money received and spent and the matters to which they relate and
– Records of the company’s assets and liabilities
Company Law: Directors’ responsibilities
theUNIVERSITYofGREENWICH
4September 2009
L2aAudit and assurance
J. E. Spencer-Wood
• CA 2006 s394 - Directors are responsible for preparing
annual accounts for each of the financial years of their
company• They must not approve any set of annual accounts unless they are
satisfied that they give a ‘true and fair view’ of the assets, liabilities,
financial position and profit or loss of their company
Notes: ‘Accounts’ = Financial statements; profit and loss a/c = Income statement
Company Law Directors’ responsibilities (cont.)
theUNIVERSITYofGREENWICH
5September 2009
L2aAudit and assurance
J. E. Spencer-Wood
Main duties of Auditor CA 06 ss495-502
• To REPORT whether the accounts:• are properly prepared under CA 06 a/a
• show a TRUE & FAIR VIEW (t&f) of The balance sheet The profit and loss account
• that the DIRECTORS’ REPORT is consistent with the FS’s
theUNIVERSITYofGREENWICH
6September 2009
L2aAudit and assurance
J. E. Spencer-Wood
Main duties CA 85 s237
• To INVESTIGATE that:• Proper accounting records and returns have been kept
• The records agree with the FS’s
• To STATE in report if records, information received or compliance with CA 06 are unsatisfactory
Main duties CA 06 ss495-502
theUNIVERSITYofGREENWICH
7September 2009
L2aAudit and assurance
J. E. Spencer-Wood
Main duties CA 85 s237 (cont.)
• If not t&f then DUTY to report it• If information and explanations not received then
DUTY to report it• If non-compliance with CA06 (director’s
emoluments) then DUTY to report it
Main duties CA 06 ss495-502(cont.)
theUNIVERSITYofGREENWICH
8September 2009
L2aAudit and assurance
J. E. Spencer-Wood
Main rights CA 06 ss495-502
• ACCESS to records at ALL times
• INFORMATION & EXPLANATIONS as needed
• Notice of, and attendance at, general meetings (GM’s)
• To speak at GM’s
• There are also rights in respect of small companies’ audit elections; also rights upon removal or resignation (ss.510-526)