Audit of Limited Companies: Appointment, Rights, Duties and Liabilities of Company Auditor Questions

Question 1

State one right of company auditor.

Accepted Answer

One right is **access to books of accounts and vouchers**.

Question 2

State one duty of company auditor.

Accepted Answer

One duty is to **express audit opinion** on financial statements.

Question 3

What is civil liability of auditor?

Accepted Answer

**Civil liability** means auditor may have to pay **damages** for negligence causing loss.

Question 4

What is criminal liability of auditor?

Accepted Answer

**Criminal liability** arises for **fraud/willful misstatement** or knowingly false reporting.

Question 5

State one ethical requirement for auditor.

Accepted Answer

Auditor must maintain **independence**.

Question 6

Explain appointment of company auditor (overview).

Accepted Answer

Appointment of **company auditor** is generally a **statutory requirement**. The auditor is appointed by the company through prescribed procedure (commonly by shareholders in general meeting), and must be eligible and independent.

Auditor holds office for the prescribed term and can be re-appointed as per applicable rules.

(Exact section numbers are written only if required by syllabus.)

Question 7

Explain rights of company auditor (any five).

Accepted Answer

Rights of company auditor (any five):
- **Access** to books, accounts and vouchers.
- **Information and explanations** from officers.
- **Receive notice** of general meetings.
- **Attend and speak** at general meetings on audit matters.
- **Sign and issue audit report**.

These rights enable proper evidence collection and reporting.

Question 8

Explain duties of company auditor (any five).

Accepted Answer

Duties (any five):
- Plan audit and follow **auditing standards**.
- Obtain **sufficient appropriate evidence**.
- Check whether statements give **true and fair view**.
- Report material misstatements and compliance issues.
- Maintain **working papers**, independence and confidentiality.

Thus auditor must exercise due care and skepticism.

Question 9

Explain civil, criminal and professional liabilities of auditor (brief).

Accepted Answer

**Civil liability**: damages for negligence causing loss.
**Criminal liability**: punishment for fraud/willful misstatement or knowingly false report.
**Professional liability**: disciplinary action by professional body for misconduct or lack of due care.

Hence auditor must act independently and carefully.

Question 10

Explain importance of auditor’s independence.

Accepted Answer

**Independence** means auditor is free from bias and conflict of interest. It is important because it increases **credibility** of audit opinion and trust of shareholders, creditors and regulators.

Without independence, the audit report loses value and users cannot rely on it.

Question 11

Write basic contents of auditor’s report (any five).

Accepted Answer

Basic contents (any five):
- Scope of audit.
- Auditor’s **opinion** (unmodified/modified).
- Basis for opinion.
- Responsibilities of management and auditor.
- Signature, date and place.

The report communicates the audit conclusion to users.

Question 12

Explain rights/powers of company auditor. Add a simple flowchart.

Accepted Answer

A **company auditor** is an independent auditor appointed under law to audit a company and give an opinion on whether financial statements show a **true and fair view**.

### **Rights/Powers of company auditor**
- **Right of access** to books, accounts and vouchers.
- **Right to obtain information and explanations** from officers.
- **Right to receive notice** of general meetings.
- **Right to attend and speak** at general meetings (on audit matters).
- **Right to sign and report** (issue audit report).

```text
Rights → enable auditor to collect evidence → form opinion → report
```

These rights ensure the auditor can perform duties effectively.

Question 13

Explain duties of company auditor and basic contents of auditor’s report with a table.

Accepted Answer

### **Duties of company auditor**
The company auditor must:
- plan audit and follow **auditing standards**
- obtain **sufficient appropriate evidence**
- verify books and check compliance with applicable rules
- report whether statements show **true and fair view**
- maintain **working papers**, **confidentiality**, and **independence**

### **Auditor’s report (basic contents)**
| Element | Meaning |
|---|---|
| Scope | what was audited |
| Opinion | unmodified/modified |
| Basis for opinion | key reasons/evidence |
| Responsibilities | management vs auditor |
| Signature/date/place | authentication |

Thus, auditor’s duty ends with a well-supported and clearly communicated audit opinion.

Question 14

Who is a company auditor?

Accepted Answer

A **company auditor** is an independent auditor appointed to audit a company and report on **true and fair view**.

Question 15

Explain liabilities of company auditor. Differentiate civil, criminal and professional liabilities with a table and a flow.

Accepted Answer

### **Liabilities of company auditor**
Auditor can be liable if duties are not performed with due care.

| Type of liability | Meaning | Example |
|---|---|---|
| **Civil** | damages for **negligence** | careless audit causes loss |
| **Criminal** | punishment for **fraud/willful misstatement** | knowingly false report |
| **Professional** | disciplinary action for misconduct | lack of due care/ethics |

```text
Negligence/Fraud → Loss/Misstatement → Legal action/penalty → Liability
```

### How auditor reduces liability
- proper **planning**, **evidence**, and **documentation**
- maintain **independence** and **professional skepticism**
- comply with standards and legal requirements

Thus, auditor’s liabilities depend on negligence or intentional wrongdoing.

Audit of Limited Companies: Appointment, Rights, Duties and Liabilities of Company Auditor

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