Question 1:
1. What are the main Auditors duties to the Company they are Auditing-
by accepting an appointment, an auditor enters into a contractual relationship with the company. There are express or implied terms in such contracts that the auditor will: carry out an audit;
report to members an opinion, based on the audit, whether the financial statements are properly drawn up in accordance with the Corporation Act- including their compliance with accounting standards and whether they present a true and fair view; be independent of the company; and exercise a reasonable degree of care and skill (Lipton & Herzberg).
In addition, the Corporations Act imposes specific statutory duties:
Reporting to members;
Auditors and AGMs;
Auditors of debenture issuers;
and Reporting to ASIC(Lipton & Herzberg).
2. Explaining important legislation and cases?
Firstly, an audit must be carried out in accordance with auditing standards before an auditor can form an opinion on whether or not the financial report are properly drawn up in the manner required by S308(1)
In carrying out an audit, particularly where the company’s accounts are complex, an auditor is required to devise procedures and a program to assist in the detection of errors or fraud: Pacific Acceptance Corp Ltd v Forsyth (1970) 92 WN (NSW) 29.
Auditors are entitled to seek assistance from the company’s directors, accountants and other employees in carrying out their functions. According to Dominion Freeholders Ltd v Aird (1966) 2 NSWR 293, the auditor could not shed responsibility by holding the accountant liable. Auditors, however, breach their duty if they rely on them for information on which they are required to form their own independent opinion.
Secondly, auditors must detect and report fraud and irregularities. An auditor is appointed to safeguard the interests.
Auditing Standard AUS 210, The Auditor’s responsibility to Consider Fraud and Error in Audit of a Financial Report, states that the...