Nov 2019 Q5 c.
Explain the responsibilities of the directors and the external auditors towards the Financial Statements of a company. (5 marks)
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- The directors are appointed by the members to manage the entity and have responsibility for ensuring that the entity keeps proper accounting records and for presenting financial statements to the members. The directors normally delegate the everyday running of the company and the keeping of accounting records and the preparation of accounts to employees who are qualified to perform such functions (for example, persons with knowledge in accounting in respect of the keeping of accounting records and the preparation and presentation of the financial statements).
- It is the duty of the directors to safeguard the assets of the entity and to prevent fraud and errors. The members look to the directors to discharge this duty and not the auditor.
- The directors should institute controls and checks to ensure that the above responsibilities are carried out.
- The directors are responsible for making available to the auditor, as when required, all the entity’s accounting records, all other relevant records and related information, including minutes of all management and shareholders’ and all other information the auditor considers relevant for his audit. (Any 2)