NAME AUDREY R MUGUMBA

REG NUMBER C16127687M

LEVEL 2.1
MODULE AUDITING PRINCEPLES
COURSE CODE CUAC 202
QUESTION EXPLAIN HOW THE PROVISIONS OF THE COMPANY’S ACT
(24:03) ATTEMPT TO PROTECT AUDITOR’S INDEPENDECNY.
Auditor’s independency is the freedom of the internal or external auditor from parties that may
have a financial interest in the business being audited. An auditor’s objectivity and integrity must
be beyond reproach. An auditor should be free from any interest, which may impair his
independence. In an attempt to protect the auditor’s independency the company’s act chapter
(24:03) has outlined a few provisions from section one hundred and forty six to one hundred and
fifty four.
Section 146: Accounts and auditor’s report to be annexed to signed balance sheet. This means
that all the profit and loss accounts and so far as not incorporated in the balance sheet or profit
and loss account ,any group of accounts laid before a company in General meeting shall be
annexed to the balance sheet and approved by the board of directors before the balance sheet is
signed on its behalf and the auditor’s report shall be attached there too, except in the case of a
private company which in terms of sub section seven of section one hundred and fifty is not
required to appoint an auditor. This section protects auditor’s independency by letting him
express his opinions in his report and then attach it to the financial statements which will be
presented to the directors of the company.
Section 149: Right to receive copy of balance sheet and auditor’s report. Any member and any
debenture holder of the company shall be entitled to be furnished on demand without charge with
a copy of the last balance sheet of the company including every document required by law to be
annexed thereto , together with a copy of the auditor’s report on the balance sheet unless he shall
previously have been supplied there. This section makes all the members to have access with the
reports of the auditor and also the auditor to have full access to the books of the company at any
time he wants and gives him much time to audit the books without the interference of the the
members of the company.
Section 150: Appointment and remuneration of an auditor. It states that the an auditor is
appointed by the members of the company at the Annual General Meeting and this protects the
auditor’s independency by providing the ordinary resolution with special notice and also the
remuneration of an auditor is fixed by those who appoint him and the task of deciding the
remuneration is usually delegated to the audit committee or the directors. This also protects the
auditor in the sense that he knows by all means his remuneration will be there and it will not
change since it is fixed.
Section 151: Special notice is required of resolution to appoint or remove and auditor .the auditor
has the right to make written representations of a reasonable length which must be circulated to
all members or must be read to out at the meeting at which the ordinary resolution is passed. This
protects an auditor from fear of losing his job as the directors must notify him and with a valid
reason upon the removal. Whenever an auditor ceases to hold office he must typically deposit at
the registered office of the company either a statement that there are no circumstances with his
ceasing to hold office which he considers should be brought to the attention of the members or
creditors or a statement of any such circumstances he will be able to express his opinions on
whether the financial statements show a true and fair value of the company.
Section 152: Disqualifications for appointment as an auditor. This section attempts to protect an
auditor’s independency from independence threats which includes familiarity, advocacy and
intimidation threats as it states that any member who is related to the company by any means will
not be appointed as an auditor of that company as will make an auditor become so sympathetic to
the client’s interest and hence the auditor will not be able to express his opinion on whether the
financial statements of a company show a true and fair view of the company.
Section 153: Statutory duties of auditors. The auditor shall make a report to members on the
accounts examined by him and on every balance sheet, profit and loss account and all group
accounts laid before the company in a general meeting during his tenure of office. This protect
an auditor by that in the event that the auditor fails to make such a report as stated by this section
he shall inscribe upon or attach to the balance sheet a statement of the fact that , or the nature of
the qualification and the circumstances ,which prevented him from making the report without
qualification.
Section 154: Auditors rights of access to books and to attend AGMs. Every auditor of a company
shall have a right of access at all times to the books , vouchers and securities of the company and
shall be entitled to request from the officers of the company any such information and
explanations as he thinks necessary.

REFERENCES
Auditing module acct303, W D Mapani (ZOU)
S Fearnley 2005,Auditor independence and audit risk
Chapter (24:03) Companies Act