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RIGHTS, DUTIES AND LIABILITIES OF AUDITOR

Powers/Rights of an Auditor (255)
CA Online Coaching
Change the way you learn i) Right of access to books of account and vouchers 255(1).
with Online Coaching for ii) Right to receive information and explanations.
CA student iii) Right of access to books and papers of branch 255(2).
www.CAclubindia.com/coaching iv) Right to receive notices of general meetings and to attend those meetings. (255(6)).
v) Right to make representation where another person is being appointed as auditor. (253(3)).
Duties of an Auditor
Teach Classes Online
Upload Your PowerPoint a) Duties of auditor under section. (255(3)) are:
Slides. Record a Video of i) To give a report to the members on the accounts, books of account, balance sheet and
You Teaching. profit and loss account examined by him. (255(3)).
present.me ii) Where any matter reported upon is answered in the negative or with a qualification the
report shall include reasons for such qualification with factual position.
iii) To include in the report of the company such matters as directed by the Federal
Accounting Distance Government.
Learning iv) To attend those general meetings of a listed company, either himself or through authorized
Recognized UG & PG person, in which the balance sheet, profit and loss account and the auditors' report are to
Distance Courses be considered.
DEC,UGC Apprvd. Join b) To make report for inclusion in prospectus. (Section 53 read with Part I of Schedule II).
Sikkim Manipal c) To certify receipts and payments account in the statutory report (Section 157).
Smude.edu.in/2012_Admission_6 d) To make report on declaration of solvency in case of voluntary winding up.
e) To exercise reasonable care and skill in carrying out his duties and make such inquiries as
considered necessary.
Accounts Assistant
Note:
Accounts Assistant Jobs
(IN) Get Online. Get Students should know the contents of report from examination point of view. Please see section 255(3) of the
Found. Get Jobs! Companies Ordinance, 1984
SkillPages.com/Jobs Reading and Inspection of Auditors' Report (Section-256)

Auditor’s report shall be read in general meeting and shall be open to inspection by the members.
Signature & Date On Auditors' Report (Section-257)
Corporate Governance .
Access best practices, (a) The person appointed as auditor shall sign the auditors' report or other documents required under
training, publications, and the law.
toolkits (b) The report should indicate the date and place.
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Audit of Cost Accounts

Accounting Distance Where a company is required to maintain any records relating to its costs of production etc., it will also get
Learning these accounts audited. The auditor, in this case, shall be a Chartered Accountant or a Cost and
Recognized UG & PG Management Accountant.
Distance Courses Auditors’ Liabilities
DEC,UGC Apprvd. Join
Sikkim Manipal The liabilities of auditors of a company can be studied under following heads:
Smude.edu.in/2012_Admission_6
a) Civil Liabilities.

Accounts Assistant Civil liabilities mean the disputes over losses caused to one party by acts of another. The civil liabilities of an
Accounts Assistant Jobs auditor can be for:-
(US) Get Online. Get i) Negligence ii) Misfeasance
Found. Get Jobs!
SkillPages.com/Jobs i) Liability for Negligence (under law of agency)

Auditor being agent of the Shareholders is required to carry out his duties with reasonable care and skill. If
he fails to do so, he is liable to make good any loss caused to the third party.
No interviews, no job?
Major legal decision
1 to 1 consultation to get
you the business analyst
job. 1)
theAnalystFastTrack.com Arthur E. Green & Company Vs Central Advance & Discount Corporation Ltd.
(1920).

Jobs It America It was held that auditor is guilty of negligence. Auditor accepted the schedule of bad debts furnished by the
Everyday 100,000 new client, though it was apparent that debts were not recoverable.
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us.jobrapido.com/USA 2) Lesson Plan
The London Oil Storage Co. Ltd. Vs Sear Hasluck & Co. Topics
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RIGHTS DUTIES AND LIABILITIES OF AUDITOR*Fundamentals ... http://www.zainbooks.com/books/acounting-and-Finance/fundamental...

In this case, auditors were held liable for negligence. Auditors failed to verify the physical
existence of cash in hand. Cash balance as per books did not agree with the physical
balance, the difference was misappropriated by the cashier.
3)
Irish Woolen Co. Ltd. Vs Tyson and Others.

In this case auditors were held liable for negligence. Profits were overstated by not
recording purchase invoices. He was held liable for having failed to exercise reasonable
care and skill.
4)
Kingston Cotton Mills Co. Ltd.

In this case auditors were not held liable for negligence. It was held that it is not the duty
of auditors to take stock, if they accept certificate in the absence of any suspicion, he has
carried out reasonable care and skill.
5)
In Mckesson V Robbins (American case).

It was held that it was duty of auditors to test check the physical stock.
Conclusion:

Auditors should inspect securities, test check stock wherever it is practicable and where it is not he should
state in his report that he has accepted a certificate. In the light of Part-A of Addendum to ISA-8,
“Attendance at Physical Inventory Counting” and SAP - 3 “Verification of Inventories”, the position of
auditors as held in Kingston Cotton Mills Co. Ltd. is no longer valid.
ii) Liability for Misfeasance

The term misfeasance means breach of duty. If auditor does something wrong in the performance of his
duties resulting in a financial loss to the company, he is guilty of misfeasance.
For example auditor’s duties are laid down in section 255 of the Companies Ordinance, 1984. If auditor
does not perform his duties properly and the company suffers loss he is liable for misfeasance.
Major Case Laws

1)
London and General Bank Ltd.

In this case auditors were held liable for misfeasance. The auditors failed to report that Balance Sheet was
not properly drawn:-
Large sums were advanced to the customers and interest thereon was accrued, in fact neither advance nor
accrued interest was receivable. No provision for bad debts was made and the company paid dividend.
2) Under section 260 of the Companies Ordinance, 1984 if the auditors fail to report to the members
material misstatement of facts or give untrue picture to the members, and the default is willful, auditors
shall be punishable with fine which may extend to two thousand rupees.
b) Criminal Liabilities.
Section
260

If auditor fails to comply with the requirements of Sections 157, 255 or 257, he shall be punishable with fine
up to Rs. 100,000/-. If he knowingly makes a false report for profit to himself or to put another person to a
disadvantage or loss for a material consideration, he shall also be punishable with imprisonment for a period
of one year.
417

If charges of forgery are brought against an auditor, he may be liable to imprisonment for a term which may
be extended to 2 years or fine up to Rs. 20,000 or both.
492

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