Company Auditor: Qualification, Qualities and Duties

25/07/2020 1 By indiafreenotes

Cost accounting is the accounting method for ensuring cost-effectiveness by accumulating, organising, recording, calculating, analysing and assessing the overall expenses incurred on a product, process or project, etc. It is mostly used in industrial units or factories where the goods are manufactured.

Unlike financial accounting, cost accounting is a broader perspective to review and control the performance of the industries by the management. To know more about the different types of expenses incurred in operating a business, one must be aware of the cost classification.

Qualification of an Auditor

According to law, no specific qualification is recommended for the auditor in case of the proprietary concern, but in the case of the companies, the following qualification is must:

  • A chartered accountant, having a certificate of practice from the institute of chartered accountants of India.
  • A person, having an authentication in “Part B” stating that he designated to act as an auditor.

Qualities of a Company Auditor

  1. Sovereignty

He should not aide his intuition to the will of his clients or any other person and should keep himself free from any sympathy allegedly and prepare financial statement of the management in an impartial way.

  1. Honesty

He should always maintain sincerity while operating his duties.

  1. Conversation skills

In the course of managing an audit, the auditor has to collaborate with numerous officers and parties; thus, he should have excellent communication skill.

  1. Maintain confidentiality

The auditor should maintain the privacy of the accounts unless authorized by the client or enforced by the law.

  1. Expertise

The auditor must have an awareness about the client’s business and the current economic direction, etc. Consciousness about the laws like taxation laws, companies act, partnership act.

  1. Sensitivity

The auditor has to deal with different persons while performing his duties; he has to handle his sub-ordinates as well as clients; thus, he should have the tact to handle them in any situations.

  1. Coherent skills

The auditor must have the ability to analyze and illustrate the problems so that he can appropriately handle them when faced.

Responsibilities of an Auditor

  • Examination: Interrogation of the accounting system and internal control is must to safeguard their suitability.
  • Checking of books: The books of accounts should be checked thoroughly to ensure its arithmetical accuracy.
  • Documentation: Investigating documentary pieces of evidence to reinforce the books of accounts.
  • Full incorporation: Analyzing whether all entries have been recorded in the books of accounts or not while preparing the financial statement.
  • Conventionality: Examining that the books of accounts or financial statement should not contain any fraudulent or faulty entry.
  • Authentication of assets and liabilities: Verification of assets and liabilities for checking their existence, valuation, completeness and disclosure in financial statements.
  • Statutory Consent: In case of audit of general insurance companies, bank the auditor, secure compliance of financial statements with the compatible decree.
  • Disclosure: Auditor examines whether the data in the financial statement acknowledged adequately or not.
  • Facts and integrity: Auditor ensure whether financial statement as a whole serves accurate and fair view of profit/loss, assets and liabilities in the appropriate forms.

Duties of an Auditor

Duties of Company Auditor

Duty under Section 227: It is otherwise known as the duty to give report. After completion of audit work, the auditor should give a report expressing his opinion. The report may be long or summarized. It may be in the form of a letter or statement. Whatever the form may be, it must be addressed to shareholders. And its report may be with condition or without condition. An unconditional report is called a clean report and a conditional report is called a qualified report.

The audit report should include the following:

  • Whether the company is maintaining proper books and records or not.
  • Whether financial explanations from company staff are received or not.
  • Whether financial statements are prepared in accordance with the requirements of companies act or not.
  • Whether the balance sheet is giving a true and fair view or not.
  • Whether profit and loss account is giving a true and fair view or not.
  • If there are branches, whether statements from branch auditors under Sec. 228 are properly received or not.

Duties of Company Auditor: The Companies Act, 1956

  • Section 227: Duty to give report.
  • Section 165: Duty to certify statutory report.
  • Section 240: Duty to assist government inspector.
  • Section 58 (A) and 58 (B): Duty with regard to public deposits.
  • Section 62 and 63: Duty to certify prospectus.
  • Section 227 (1A): Duty to conduct an inquiry with regard to matters mention in the section.