What are the Duties of an Auditor in a Company?

Introduction

Auditing is an important part of the financial reporting process. An auditor’s role is to provide an independent and objective assessment of a company’s financial statements, ensuring that they provide a true and fair view of the company’s financial position. The duties of an auditor are essential to maintain the integrity of financial reporting and ensure that investors and other stakeholders can rely on the information presented in financial statements. In this blog, we will discuss the duties of an auditor of a Company under the Companies Act, 2013 and the eligibility of an auditor.

Who is an Auditor?

An auditor is a professional who is responsible for examining a company’s financial records and providing an opinion on whether the financial statements are accurate and reliable. Auditors are generally independent of the company being audited and are appointed by the company’s shareholders.

What are the eligibility criteria for an auditor?

Here are some of the key eligibility requirements for auditors:

• Auditors are generally required to hold a professional accounting or auditing qualification such as Certified Public Accountant (CPA), Chartered Accountant (CA), or Certified Internal Auditor (CIA).

• In addition to educational qualifications, auditors must have significant experience in accounting or auditing. It involves several years of work in public accounting firms or corporate accounting departments.

• Auditors must have a deep understanding of accounting principles, including Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS).

• Auditors must maintain independence and objectivity throughout the audit process. This means avoiding any conflicts of interest that could compromise their independence or objectivity and being impartial in their assessment of the company’s financial statements.

• Auditors must comply with regulatory requirements, including licensing and registration requirements, and ethical standards such as those set out by the International Ethics Standards Board for Accountants (IESBA).

What are the Duties of an Auditor?

The Companies Act, 2013, in Section 143, outlines the duties of an auditor in a simplified manner. Here are some of the key duties of an auditor:

1. Preparing an Audit Report

An audit report is a review of a business’s financial position. The auditor is responsible for creating an audit report based on the company’s financial statements. The books of accounts under examination must adhere to the applicable laws. Additionally, the auditor must ensure that the financial statements comply with relevant laws such as the Companies Act, 2013 and Accounting Standards.

Moreover, the auditor must guarantee that the financial statements present a precise and fair view of the company’s financial position. A well-written audit report can help businesses make informed decisions based on accurate financial information.

2. Conducting Inquiries

One of the primary duties of an auditor is to make inquiries as needed. This includes investigating whether loans and advances made based on security are properly secured, whether any personal expenses are charged to the Revenue Account, whether loans and advances are properly shown as deposits, and whether financial statements comply with relevant accounting standards.

3. Assisting with branch audits

If an auditor is a branch auditor rather than the auditor of an entire company, they will provide assistance in the completion of the branch audit. They will prepare a report based on the accounts of the branch and send it to the company auditor for inclusion in the main audit report.

4. Complying with auditing standards

The auditor must comply with Auditing Standards issued by the Central Government in consultation with the National Financial Reporting Authority to perform audit duties with relevant ease and accuracy.

5. Reporting fraud

If the auditor suspects fraud or discrepancies in financial statements, they must report the matter to the Central Government immediately and in the manner prescribed by the Companies Act, 2013.

6. Adhering to the code of ethics and conduct

The auditor is obligated to adhere to both the Code of Ethics and the Code of Professional Conduct. These codes encompass various principles and guidelines that govern the auditor’s behavior and actions. They include fundamental principles such as confidentiality, due care, and professional skepticism.

7. Investigation Assistance

If a company is being investigated, the auditor must help the officers with their needs. This shows that an auditor’s job is quite varied and has a wide-reaching effect. Audited financial statements offer a much higher level of assurance compared to unaudited ones.

Conclusion

In conclusion, the duty of an auditor is to ensure the accuracy and reliability of a company’s financial statements. Auditors play an important role in maintaining the integrity of financial reporting, and their work is essential in helping investors and stakeholders make informed decisions about the company’s financial health. The duties of an auditor require a high level of expertise, independence, and objectivity, and it is important that auditors maintain these qualities throughout the audit process.

Suggested Read: What is Cost Audit? And Cost Audit Applicability