auditors & board of directors

8/9/2019 Auditors & Board of Directors

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Presentation on

Board of Director &

Auditor

By

Vrushali Palodkar(31)

Date: 17-04-2010


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Meaning board of director Function of Board of director Types of board of director Board procedureMeaning of audit & auditor

Types of auditor Duties of auditor Responsibilities of auditor

Provisions contained in SOX Act regarding auditors are Indian Situation Audit committee References

Contents


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The Board of director of a company whichincludes all directors elected by shareholders torepresent their interest is vested with the

power of management . The board has extensive powers to manage a

company delegate its power and authority toexecutive and carry on all activities to promotethe interest of the company and itsshareholders, subject to certain restrictionimposed by public authorities.


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Directs the Company by formulating andreviewing the Companys policies.

Controls the Company and its management by

laying down the code ofconduct. Is accountable to the shareholders for creating,protecting and enhancing wealth and resourcesof the Company d.

The boar of directors should ensure that the

senior management implements policies thatprohibit activities &relationships whichthereby diminish the quality of corporategovernance.


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Board of Directors

Executive Directors Non-Executive Directors

Independent Directors Affiliated Directors

(Nominee Directors)

Types of Directors


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Executive director an executive of thecompany and also a member of the board

Non-Executive director no employment

relationship Independent non-executive directors freefrom any business or other relationship whichmay interfere with the exercise of independentjudgment

Affiliated director who has some kind ofindependence, yet may have links withsuppliers, customers, etc.


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Receive directors remuneration

Do not have any other material pecuniaryrelationship or transactions with the Company,its promoters, its management etc.,

Emphasis on the caliber of the non executivedirectors.


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Institutions should appoint nominees on theboard of companies only on a selective basiswhere such appointment is considered

necessary to protect the interest of theInstitution.


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The role of the Chairman is to ensure that theboard meetings are conducted in an effectivemanner.

The Chairmans role should in principle bedifferent from that of the Chief Executive.


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The Board meetings should be held at least 4times in a year with a maximum time gap of 4months between any two meetings.

A director should not be a member in morethan 10 committees or act as a Chairman ofmore than 5 committees across all companies inwhich he is a director.

Every director must inform the Companyabout the committee positions he occupies inother companies and notify changes as andwhen they take place.


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An auditor is defined as person appointed bycompany to perform an audit . An auditor is arepresentative of share holder , forming link

between government agencies , stock holders ,investor and creditors.


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Internal auditors: Internal auditors areemployed by the organisation for which theyperform audits.Their responsibilities vary and mayinclude financial statement audits,complianceaudits and operational audits

Independent auditors: The opinion ofindependent auditor are about financial statementmakes the statement more credible to such user asinvestors ,bankers, labour unions,governmentagencies and the general public.

Government auditors: Government auditorswork in local,state and federal or governmentagencies performing financial,compliance andoperational audits.


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The Duties of an auditor are defined under section 227(1A)of

the companies act 1956.It says that an auditor can enquire

Whether loans and advances made by the company on thebasis of security have been properly secured.

Whether transactions of the company which are represented

merely by book entries are not prejudicial to the interest ofcompany. Where the company is not an investment company within the

meaning of section 372 or a banking company ,whether somuch of the assets of the company as consist of shares,debentures and other securities have been sold at price lessthan that at which they were purchased by the company.

Whether loans and advances made by the company have beenshown as deposits.

Whether personal expenses have been charged to revenueaccount.


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As per the Institute of chartered Accountants ofIndia(ICAI) an auditor has the followingresponsibility of an Auditor.

He is responsible for forming and expressing hisopinion on the financial statements.

He determine whether the relevant information isproperly disclosed in the financial statements.

He has to ensure that his work involves exercise ofjudgment.

He is not expected to perform duties which falloutside the scope of his competence.


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Sarbanes Oxley Act (SOX) was passed by US Congress in2002with an aim to protect the investors from thefraudulent accounting practices of corporations.

Important provisions contained in SOX Act regarding

auditors are: Establishment of Public Company Accounting OversightBoard (PCAOB)

Audit Committee Conflict of interest

Audit Partner Rotation Prohibition of Non-audit services Responsibility for Financial Reports Improper Influences on conduct of Audits


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The audit committee according to them , shouldreview the following information :

Financial statements and draft audit report ,including quarterly / half yearly information .

Management discussion and analysis of financialconditions and the results of operations.

Report relating to compliance with laws and riskmanagement .

M

anagement letters / letters of internal controlweakness issued by statutory and internal auditors.

Records of related pay transactions .


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