THE ROLE of the external auditor has been thrown into focus by the various crises that have engulfed the banking sector. The main duties and requirements of auditors are outlined in two pieces of legislation – the Companies Act 1990; and the Companies (Auditing and Accounting) Act 2003 , which was enacted following concerns arising from the Dirt enquiry.
The Companies Act 1990 states that the role of the auditor is to provide an independent assessment of whether proper books of account have been kept by a company.
Among the main provisions contained in the legislation is that the auditor is required to state whether they have obtained all the information and explanations which, to the best of their knowledge and belief, are necessary for the purposes of their audit.
The legislation states that every auditor of a company “shall have a right of access at all reasonable times to the books, accounts and vouchers of the company and shall be entitled to require from the officers . . . of the company such information and explanations that are within their knowledge or can be procured by them as he thinks necessary for the performance of the duties of the auditor”.
The legislation also defines what is meant by “keeping proper books of account”. The accounts should “correctly record and explain the transactions of the company” in such a way that, at any time, the financial position of the company can be determined with reasonable accuracy”.
If an auditor finds that proper books of account are not being kept, he/she has a duty to serve notice on the company and notify the registrar of companies within seven days. Failure to do so means that the auditor will be guilty of an offence.
The legislation states that an auditor must be a member of a professional accountancy body, listed on the registrar of auditors, and hold the required qualifications and licences.
All auditors and firm of auditors are regulated by the various approved professional accountancy bodies such as ACCA and ICAI, while auditing rules and standards are derived from the British Auditing Practices Board.
The 2003 Act added a further layer of regulation, establishing the Irish Auditing and Accounting Supervisory Authority (IAASA), which supervises how accountancy bodies regulate and monitor their members. The statutory body has the power to impose sanctions on accountancy bodies if a member has breached standards.
It also has the right to apply to the High Court for an order compelling a prescribed accountancy body to comply with a rule or guideline issued or to comply with a term or condition attached to its audit recognition.
SUZANNE LYNCH
