Page 19 - Microsoft Word - 00 IWB ACCA F7.docx

Rules and regulation

Legal requirements

National law affects:

 which companies are required to have an audit

 who can and cannot carry out an audit

 auditor appointment, removal and resignation

 the rights and duties of an auditor.

1.1 Which companies require an audit

In most countries, companies are required by law to have an audit, although small or
owner-managed companies are often exempt. This is because there is less value in
an audit for these companies.

Note that these exemptions often do not apply to companies in certain regulated
sectors, e.g. financial services companies or companies listed on a stock exchange.

1.2 Who can and cannot carry out an audit

To be eligible to act as auditor, a person must be:

 a member of a Recognised Supervisory Body (RSB), e.g. ACCA, and allowed
by the rules of that body to be an auditor, or

 someone directly authorised by the state.

A person cannot be auditor of a company if they are:

 Excluded by law: Those who manage or work for the company and those who
have business or personal connections cannot audit the company.

 Excluded by the Code of Ethics: Auditors must also comply with a Code of
Ethics. The Code of Ethics requires the auditor to consider any factors that
would prevent them acting as auditor, such as independence, competence or
issues regarding confidentiality.

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