- This topic has 4 replies, 2 voices, and was last updated 9 years ago by
.
- Posts
Lets say you are auditing a startup company for the fist time and its having their first audit done. The business license says: “Selling of gold mining equipment”, however, you notice that the sales carried out related to something different; like “providing security services” (nothing illegal of course).
What would be the implications of this and the responsibilities of the auditor in the audited financials.
Also, does that mean we qualify the accounts?
I meant to have said the sales carried out were actually providing security services; Not the sales allowed in their business licence.
From the information in your scenario, it actually could be illegal activities! If a business licence is granted to sell gold mining equipment, then the licence granter could well be quite upset to see something other than that being sold
Dependent upon the local legislative rules, the ultra vires activities could well lose the company its licence to continue as a company, directors and / or company could face punitive fines, the company could be ordered to be wound-up
So, not quite so simple as “nothing illegal of course”!
What to do? Advise the company to come clean, report themselves to the proper authority, change their constitution to allow the selling of security services, obtain a new licence for security service provision, start a new company to run in parallel with the first. That way the first can continue to sell mining equipment whilst the second provides security services
Are there local laws preventing activities that lie outside the constitution? Does the company face any penalties for non-compliance? Has appropriate provision been made?
Qualification of audit opinion will depend upon all these other matters so, in essence, I cannot give you a definitive answer!
OK?
- You must be logged in to reply to this topic.