The company’s auditors under Section 142 of Act 992 are to be guided by the following functions, rights, powers, and restrictions:

• Before one accepts an appointment to be an auditor, the prospective auditor shall communicate with the retiring auditor of that company, if any, to invite representations and information about the company.
• Right of access at all times to the books, accounts, and documents of the company and to require the officers of the company such information and explanation that the auditor thinks necessary for the performance of the functions of the auditor.
• Pursuant to any contract with the company, the auditor may expressly or impliedly undertake obligations to the company in relation to the detection of defalcation, and advise on accounting, costing, taxation, raising of finance, and other matters.
• Right to attend any general meeting of the company and to receive notices of other communications relating to any general meeting.
• Right to be heard at any general meeting on any business of the meeting which concerns auditors.
• Right to apply to the court for directions in relation to any matters arising in connection with the performance of his functions. Unless the court otherwise directs, the costs of any such application brought by the auditor shall be paid by the company.
• An auditor of a company while acting in the performance of his/her functions, is not an officer or agent of the company, but he or she stands in a fiduciary relationship to the members of the company as a whole, and shall act in a manner that a faithful, diligent, careful, and ordinarily skilful auditor would act in the circumstances.
• An auditor of a company shall ensure that in carrying out the duties of an auditor under this Part, the personal judgment of the auditor is not impaired by reason of any relationship with or interest in the company or any of the subsidiaries of the company.
• A person or firm that carries out the duties of an auditor shall not engage in any relationship with a client that will result in a conflict of interest between that person or firm and that client. Such relationships with a client that are debarred by law include situations where:
  • The person or firm is in the position of auditing work of that person or firm;
  • Result in that person or firm acting as management or an employee of the client; or
  • Place that person or firm in a position of being an advocate for the client.           (Any 5 points @ 2 marks each = 10 marks)