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Auditor's Power

In: Social Issues

Submitted By WinterSpear
Words 436
Pages 2
Auditor’s Powers
According to S.174(4) Company Act 1965, an auditor is entitled to obtain information and explanation as he desires for the purpose of audit from related company at all reasonable time through any officer, auditor and secretary and such information and explanations as he desires for the purposes of audit 1.
Auditors are given a broad power to detect fraud by the management. According to Newton v Birmingham Small Arms Co Ltd2, the court observed that obtaining all information that required for audit report cannot be prevented by a company’s Articles of Association. In this case, the directors should have powers to form an internal reserve fund, which was not to be disclosed in the balance sheet and which should be utilized in whatever way the directors though fit was mentioned in the Articles of Association. Moreover, auditors should not disclose any information with regard thereto to the shareholder if the auditor having the right to access to the accounts relating to such reserve. For the legal view, since they limit the statutory duty of the auditors, it was held that these provisions were ultra vires. The justice Buckley said that any regulations which prohibited the auditors from obtaining of all information that according to the Act they are entitled, is inconsistent with the Act3.
The weakness in this Act is that only the officer and the secretary is able to provide information to an auditor. However, the works are done by the employee, such as accountant, and that employee is clearer about the whole process and the procedures. Thus, auditors may not obtain the information and explanation as the auditor desires regarding to the meaning of the Act. Besides that, it will become easier to conduct fraud as the higher management, the officer; can modify the information that provides to the auditors. Thus, the auditor only provides the

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