BL – May 2017 – L1 – SB – Q6e – Company Law

Highlights three critical areas that an auditor must focus on while auditing a company.

Question

The firm of Hazeem is being considered as the Auditor of Kunte Plc. The company has approached you for advice on his duties as an auditor.

Required:
State three matters that Hazeem’s audit must cover.

Answer

Verification of Financial Statements:
- The auditor must ensure that the financial statements present a true and fair view of the company’s financial position. This includes verifying the accuracy of the balance sheet, income statement, cash flow statement, and notes to the accounts.
Assessment of Internal Controls:
- The auditor must evaluate the effectiveness of the company’s internal control systems. This involves checking whether the company’s processes and procedures are adequate for safeguarding assets, preventing fraud, and ensuring the reliability of financial reporting.
Compliance with Regulatory Requirements:
The auditor must review the company’s compliance with relevant laws and regulations. This includes checking adherence to corporate governance practices, tax laws, and industry-specific regulations, and ensuring that all legal disclosures have been made in the financial statements.