Rights and duties of an independent auditor
This stems out from the statutes (Section 162 (1) -(4)) as well as from case law based on decisions made by the courts on auditors duties and rights.
Rights of an auditor
1) Right of access to books of accounts and vouchers of a business at all times. This includes:-
a. Right of access to statutory books of accounts.
b. Right of access to returns from branches
c. Right of access to documents, books and vouchers kept by third parties on behalf of the company.
2. Right to call for information and explanations which the auditor considers necessary for the purpose of forming an opinion. It includes: –
a. Right to obtain all information from the company‘s books and vouchers.
b. Right to obtain all information in form of management representations contained in a letter of representation which contains matters for which an auditor could not readily get documentary evidence
c. The right to obtain information from third parties which have had previous dealing with the company
3. Right to receive notices of and attend the general meetings.
4. Right to attend the Annual General Meeting (AGM) regardless of whether accounts are subject to discussion or not this includes:-
a. Right to read his representation at an AGM if these were received too late for the company to send them to each shareholder to whom notice of the AGM is sent or if the company is in default.
b. Right to answer questions at the AGM if they have been channelled through the chairman of the AGM.
c. Right to make presentations or to add to his report any material information which has come to his knowledge after his report has been dispatched but before the AGM. However, an auditor does not have a right to make up for any negligent omission on his Report during an AGM.
5. Right to make a statement at an AGM:-
a) To correct a wrong impression given to the shareholders by the board of directors.
b) Right to make a statement on the condition of the company‘s internal control system, particularly if it has been persistently weak.
6) Right to indemnity:- An auditor has a right to be indemnified out of the company‘s assets if he has been injured during the course of his audit in so far as such injuries may have occasioned the auditor loss to his name as a professional or to his person as an individual.
7. Right to visit branches: –
a) Right to information and explanations relating to activities of branches so far as they affect the company‘s affairs.
b) Right to examine branch accounts and to request for returns submitted to the headquarters.
c) Right to communicate and receive information from third parties to such branches.
d) Right to receive representations from those branches over those matters where the auditor could not have sufficient documentary evidence.
8. Right to remuneration:-
a) To be paid his fees as and when they fall due.
b) To have his expenses re-imbursed by the client
c) To withhold his report until his fees have been paid (right to lien)
9. Right to legal and technical advice.
Duties – Section 161
1. To make a statement or report arising from his examination of books of accounts which is a requirement of the Company‘s Act and such a report is essential before an AGM can be convened.
2. Duty to state the following in his report:
a) Whether the auditor has received all information and explanation which to the best of his knowledge is necessary for his audit.
b) Whether the accounts portray the true and fair view of the company‘s state of affairs and of the company‘s assets and liability.
c) Whether the auditor has received adequate returns submitted from branches and whether the company has kept proper books of accounts.
3) Duty to prepare working papers i.e. permanent audit file and current audit file. An auditor has a duty to provide working papers to assist investigators on the company‘s affairs
4) Duty to certify the profit and loss account and the balance sheets in the prospectus where a company issues new shares to the public, such a company must prepare a prospectus that must contain audited financial statements for not less than 5 years preceding the public issue.
