Auditing and assurance revision question and answer

Auditing and Assurance Revision Questions and Answers

a) Write down the functions, duties and powers of audit committee Company Act, 2063.
b) Write down the disqualifications of the auditor as per Company Act, 2063.
a) Answer
Section 165 of the company act 2063 has prescribed the functions, duties and powers of audit committee: The functions, duties and powers of the audit committee formed pursuant to subsection (1) of Section 164 shall be as follows:

i. To review the accounts and financial statements of the company and ascertain the truth of the facts mentioned in such statements;

ii. To review the internal financial control system and the risk management system of the company;

iii. To supervise and review the internal auditing activity or the company;

iv. To recommend the names of potential auditors for the appointment of the auditor of the company, fix the remuneration and terms and conditions of appointment of the auditor and present the same in the general meeting for the ratification thereof;

v. To review and supervise as to whether the auditor of the company has observed such conduct, standards and directives determined the competent body pursuant to the prevailing law as required to be observed in the course of doing auditing work;

vi. Based on the conduct, standard and directives determined the competent body pursuant to the prevailing law, to formulate the polices required to be observed the company in respect of the appointment and selection of the auditor;

vii. To prepare the accounts related policy of the company and enforce, or cause to be enforced, the same;

viii. Where any regulatory body has provided for the long-term audit report to be set out in the audit report of the company, to comply with the terms required preparing such report;

ix. To perform such other terms as prescribed the board of directors in respect of the accounts, financial management and audit of the company.

b) Answer
Section 112 (1) of the company act 2063 stated the disqualification of auditor. Accordingly, none of the following persons or the firms or companies in which such persons are partners shall be qualified for appointment as auditor and shall, despite appointment as auditor, continue to hold office:

 A director, advisor appointed with entitlement to regular remuneration or cash benefit, a person or employee or worker involved in the management of the company or a partner of any of them or an employee of any of such partners or a close relative of a director or partner, out of them, or an employee of such relative;

 A debtor who has borrowed moneys from the company in any manner, or a person who has failed to pay any dues payable to the company within the time limit and is in such arrears or close relative of such person;

 A person who has been sentenced to punishment for an offense pertaining to audit and a period of five years has not elapsed thereafter;

 A person who has been declared insolvent;

 A substantial shareholder of the company or a shareholder holding one percent or more of the paid-up capital of the company or his close relative;

 A person who has been sentenced to punishment for an offense of corruption, fraud or a criminal offense involving moral turpitude and a period of five years has not elapsed thereafter;

 A person referred to in Sub-section (3) of Section 111;

 In the case of a public company, any person who works, whether full time or part time, for any governmental body or anybody owned fully or partly the Government of Nepal or any other company or a partner of such person or a person who is working as an employee of such partner or a person who is authorized to sign any documents or reports to be prepared the management of the company;

 A company or corporate body with limited liability;

 A person having interest in any transaction with the company or his/her close relative or a director, officer or substantial shareholder of another company having any interest in any transaction with the company.



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