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Hi Mike!
Which of the following is eligible to act as a company’s auditor?
A An employee of the company
B The partner of an employee of a company
C The accountancy firm responsible for producing the company’s accounts .1. The answer is C.
2. By elimination, I’ve got the answer but has not understand the logic.
How can the accountancy firm be be eligible for audit? Is there any lack of independence?This was an acceptable (and a frequent) scenario
When I had my own small firm, I would often be asked to prepare the financial statements of my clients and then audit those same financial statements
But it only is allowable fro private companies (and this was in the days before the exemption for private companies and their audits came into force). Nowadays, with private companies no longer required to have an audit, the likelihood of this situation arising again is remote
It was exceptionally (and a very, very, very rare circumstance) where the external auditor of a public company would be allowed to prepare those financial statements and now, under the principles of corporate governance, you can add another 2 ‘very’s into the brackets
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