. a) The need for an audit
• These are the requirements of the Companies Act Cap 486.
• To prove the true and fair view of the companies state of affairs as at a given date.
• To find out whether the company has kept proper books of account.
• To write a report to be used by stakeholders.
• To provide advice to management on areas of internal weaknesses.
• Detection of errors and frauds.
b) Procedures for the appointment of an auditor
• Upon registration of a company (30 days after) the Board of Directors or the Registrar of Companies appoints an auditor.
• He can also be appointed at the AGM. If this approach is used the outgoing auditor must be given a 28 days notice.
• Automatic reappointment. This occurs if:
o There is no resolution to remove the existing auditor.
o He has not given in writing a notice to resign.
o He has not committed any act to disqualify automatic re-appointment.
• Casual vacancies may arise and should be filled by the directors of the company except if he resigned in which case it is filled by shareholders. Casual vacancies arise if:
o The auditor dies.
o He is incapacitated.
o He resigns.
• Directors duties with regard to accounting function:
o They should ensure that proper books of accounts are kept to aid in the decision making process.
o They should also oversee that it is continuous i.e. done through-out the financial period.
• These are outlined in s.162 of Cap 486.
o Auditor should make a report to members on accounts examined by them and laid before company in AGM. It must contain statements as to matters mentioned in the 7th schedule. They include:
o Whether or not they have obtained all information and explanations which to the best of their knowledge and belief were necessary for the audit.
o Whether in their opinion proper books of account have been kept and proper returns adequate for the purpose of the audit have been received from branches not visited.
o Whether the P & L Account and Balance Sheet are in agreement with the books of account and returns.
o Whether in their opinion and to the best of their knowledge and according to explanations given to them financial statements give information required by companies act in the manner so required and give the true and fair view.
? In the balance sheet, the state of affairs at the end of its financial year.
? In the P & L a/c the profit or loss for the year.
o In case of a holding company submitting group financial statements, whether in their opinion group financial statements have been properly prepared in accordance with the provisions of the Act so as to give a true and fair view of the state of affair and profit and loss of its subsidiaries.
Musyoxx answered the question on March 14, 2018 at 16:16
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