Auditing and assurance revision question and answer

Auditing and Assurance Revision Questions and Answers

Discuss the validity of appointment of auditors in the under mentioned case:

a. Mr. Y Chartered Accountant was appointed on the auditor of X Ltd. at the general meeting. Mr. Y declined to accept the appointment since the remuneration fixed the general meeting was less than the proposed Mr. Y. On Y declining to accept appointment, Board of Directors of X Ltd. appointed Z & Co. as its auditor. (4 Marks, December 2003)

b. The shareholding pattern of R Ltd. was as follows:

Central Government 10%
Financial Institution in which state Government
holds 20% of the subscribed capital 25%
Y Ltd. (Government Company) 10%

The Annual General Meeting Appointed M/S S & Co. Chartered Accountants on the auditor for the year 2003-04 passing ordinary resolution. (4 Marks, December 2003)

c. Mr. Y a Chartered Accountant mentioned that he is holding the office of statutory auditor in 12 public companies, 6 Corporations and 2 foreign companies. X Ltd. a public company having paid up share capital of Rs. 26 lacs, appointed Mr. Y as its statutory auditor as the limit specified the Company Act does not exceed. (4 Marks, December 2003)
a) Answer

As per Sec 113 of Companies Act 2063,
Where the annual general meeting of a company fails to appoint an auditor for any reason or where the annual general meeting itself cannot be held or where the auditor appointed pursuant to this Act ceases to continue his/her office for any reason, the Office may, at the request of the board of directors of the company, appoint another auditor. Therefore, the direct appointment Board of Directors in not valid.
b) Answer

The answer is given in context of Audit Act 2075. As per Sec 10 of Audit Act 2075, the audit of entity fully owned Government of Nepal, State Government or Local Government is to be conducted Auditor General and the auditor of entity substantially controlled central, state or local government is to be appointed after consultation with Auditor General. Therefore, In the given case the provision substantial control does not apply (being less than 50% control) and the company may itself appoint the auditor complying with the provisions of Companies Act 2063.

c) Answer

As per the notice of ICAN , the ceiling for an auditor is 100 Audits, out of which the public companies should not exceed 10 but the smaller entities such as proprietorship firm, partnership firm, religious and social institutions etc., which have turnover of less than 20 lakhs does not fall in the ceiling of 100 audits.

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