Chapter 2
Regulation
Audit of S.M.E’S : As per U.K law S.M.E ( small medium sized enterprises ) are those
companies that have :
. Turnover of less than 6.5 million pounds
. Balance sheet of 2.6 million or less
. Employees must be 50 or less
Other characteristics of S.M.E:
. Fewer product lines
. Less complex operations
. Fewer controls
NOTE: Audit is exempt for S.M.E because:
. Cost benefit analysis is unfavourable
. Owners and directors are usually same so there is no agency problem
Rights of auditors Duties of auditors
Right to have access to all records. Duty to maintain confidentiality.
Right to attend A.G.M of the company. Duty to report al findings at the end of
audit in the form of a written report.
Right to speak and be heard at the A.G.M. Duty to maintain consistency between
accounting records and financial
statements.
Right to receive all notices which members Duty to maintain consistency between
of the company (shareholders) receive. other info and financial statements.
Right to seek explanation from
management on any matter.
IT IS AN OFFENCE TO MAKE FALSE OR MISLEADING STATEMENTS TO AN AUDITOR.
Appointment of auditor:
Auditor are appointed by shareholder vote in AGM but:
. First time appointment is done by directors
. Subsequent appointment is made by shareholder vote in AGM
. If shareholders fail to reach a vote and appoint directors will make the appointment
. If directors also fail to appoint, the right to appoint will be given to secretary of state
Regulation
Audit of S.M.E’S : As per U.K law S.M.E ( small medium sized enterprises ) are those
companies that have :
. Turnover of less than 6.5 million pounds
. Balance sheet of 2.6 million or less
. Employees must be 50 or less
Other characteristics of S.M.E:
. Fewer product lines
. Less complex operations
. Fewer controls
NOTE: Audit is exempt for S.M.E because:
. Cost benefit analysis is unfavourable
. Owners and directors are usually same so there is no agency problem
Rights of auditors Duties of auditors
Right to have access to all records. Duty to maintain confidentiality.
Right to attend A.G.M of the company. Duty to report al findings at the end of
audit in the form of a written report.
Right to speak and be heard at the A.G.M. Duty to maintain consistency between
accounting records and financial
statements.
Right to receive all notices which members Duty to maintain consistency between
of the company (shareholders) receive. other info and financial statements.
Right to seek explanation from
management on any matter.
IT IS AN OFFENCE TO MAKE FALSE OR MISLEADING STATEMENTS TO AN AUDITOR.
Appointment of auditor:
Auditor are appointed by shareholder vote in AGM but:
. First time appointment is done by directors
. Subsequent appointment is made by shareholder vote in AGM
. If shareholders fail to reach a vote and appoint directors will make the appointment
. If directors also fail to appoint, the right to appoint will be given to secretary of state
