Auditors’ responsibilities

The auditors’
responsibilities are:

·
To audit the financial statements. The auditors will
give a ‘true and fair’ report on these

·
If it is a listed company-to review the company’s compliance
with the relevant parts of the combined code. The auditors will report
negatively on this-i.e. they will only report if the company has not complied
with the provisions of the code

·
To read all the rest of the annually report, which
they are not auditing, in order to ensure that it is consistent with the
audited parts and does not give a misleading impression. The auditors, again,
will report negatively, i.e. only if it is not consistent with the financial
accounts.

Auditors’ duties in respect
of compliance with the combined code

Here we will look specifically at the auditors’ duties
in considering whether or not the company has complied with the provisions of
the combined code.

The requirement of the code which is relevant to the
auditors can be summarized as:

Requirement for UK listed companies	Auditor requirements
Principles of good governance
The directors have to disclose in a narrative	Read only
Statement in the annual report how they have
Applied the principles of good corporate governance
Statement of compliance with code provisions
The directors must include in the annual report a	Review certain specific
Statement as to whether or not they have complied	Matters, specially the
Throughout the period with the combined code	Internal control report
Provisions and if not, why not	And read the rest
Directors’ remuneration
Inclusion in the annual report of a statement of	Audit and include in the
Directors’ remuneration including details of the	Audit report as if this was in
Remuneration, pension contributions and	The financial statements
Benefits etc. for each named director
Going concern
The directors must include in the annual report a
Statement that the business is a going concern with
Supporting assumptions or qualifications as necessary

The auditors duties are covered by ISA 720 (revised)
section A-other information in documents contains audited financial statements;
section-the auditors’ statutory reporting responsibility in relation to
directors’ reports.

These can be summarized as follows.

The ‘read only’ requirement
for other information

Any apparent inconsistencies or any apparent
misstatement in the corporate governance statements should be resolved and the
directors should amend the inconsistency.

If
this does not happen then the auditors should:

·
If the financial statements are incorrect, qualify
their report.

·
If the financial statements are correct and the other
information is incorrect or inadequate, make a statement in the auditors’
report. This statement is however not a qualification.

Reviewing the statement of
compliance with the provisions of the code

The review should take the following form:

The auditors should obtain sufficient appropriate
evidence to support the compliance statement made by the company.

Appropriate
evidence can be gained by the following procedures:

·
Reviewing the minutes of the meetings of the board and
of relevant board committees (audit, nomination, remuneration, risk management
etc.)

·
Reviewing relevant supporting documents prepared for
the board or board committees.

·
Making enquiries of the directors and the company
secretary.

·
Attending meetings of the audit committee (or other
committee) when the annual report and accounts and statements of compliance are
considered and approved for submission to the board.

·
The auditors may ask for a letter of representation of
any written or oral representations made in the course of the review

If the auditors are not
satisfied with the directors’ compliance statement they will include an
explanatory comment in their auditors’ report .