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Growfast, a large limited company, was formed on 1 August in order to manufacture minicomputers. The directors are unsure as to their responsibilities, and the nature of their relationship with the external auditors. The audit partner has asked you to visit the client and explain to the directors the more fundamental aspects of accountability.
You are required to explain to the directors of Growfast:
a) why there is a need for an auditb) how the auditor of a company may be appointed under legislation
c) what the auditor’s rights typically are under legislation
d) the responsibilities of the directors in relation to the accounting function of the company
This is the sort of topic that the 10 mark question in the F8 paper might address. It’s completely knowledge-based with no scenario/application (despite info about making mini-computers). Tha answers should be easily found in tutorial organisations’ study material. Very roughly and briefly:
a) Stewardship/agency: directors should act in shareholders’ interests; FS report performance and audit reports on whether the FS are true and fair.
b) members/directors on casual vacancy/ secretary of state/
c) they have the right to see all documents they want to, and to receive all explanations they require. Upon resignation or removal they have rights to circularise members and speak at general meeting on relevant matters.
d) Directors are responsible for preparing the accounts and for ensuring that there is an adequate system of internal control.
HTH
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