Solution

Test 01

A.1

Procedures to be followed and formalities to be complied with for removal of existing auditors
and appointment of new auditors:
ABDL shall give a notice at least 14 days before the annual general meeting to the company,
for a resolution for appointment of your firm as an auditor at a Company’s annual general
meeting.
HGM shall forthwith send a copy of such notice to the retiring auditor and shall also give
notice thereof to its members not less than seven days before the date fixed for the general
meeting
HGM shall, within fourteen days from the date of appointment of our firm, send to the registrar
intimation thereof, together with our consent in writing.
HGM shall, within fourteen days from the date of removal of the existing auditor, send
intimation thereof to the registrar.
Rights of the existing auditors:
Where a notice is given of such a resolution and the retiring auditor makes with respect
thereto a representation in writing to the company not exceeding a reasonable length and
requests its communication to the members of the company, the company shall:
— in any notice of the resolution given to members of the company, state the fact of the
representation having been made; and
— send a copy of the representation to every member of the company to whom notice of the
meeting is sent.
and if a copy of the representation is not sent as aforesaid because it was received too lateor
because of the company’s default, the auditor may, without prejudice to his right to be heard in
person, require that the representation shall be read out at the meeting:

A.2

Assurance engagement :
An engagement in which a practitioner aims to obtain sufficient appropriate evidence in order to
express a conclusion designed to enhance the degree of confidence of the intended users other
than the responsible party about the subject matter information (that is, the outcome of the
measurement or evaluation of an underlying subject matter against criteria).

Components:

• A three party relationship:

• Subject matter:

• Suitable criteria:

• Evidence:

• Assurance Report:
A.3

(a)

Reasonable Assurance – A high (but not absolute) level of assurance provided by the
practitioner’s conclusion expressed in a positive form. E.g. “In our opinion the accounts are
true and fair”. The objective of a statutory audit is to provide reasonable assurance.
Limited Assurance – A moderate level of assurance provided by the practitioner’s conclusion
expressed in a negative form. E.g. “Based on our review, nothing has come to our attention
that causes us to believe that the accompanying financial statements do not give a true and fair
view”. The objective of a review engagement is often to provide limited assurance.

(b)

- IAASB: The International Auditing and Assurance Standards Board

- IAESB: The International Accounting Education Standards Board
- IESBA: The International Ethics Standards Board for Accountants
- IPSASB: The International Public Sector Accounting Standards Board

A.4

(a) Since Mateen presently is not a partner in the firm, his firm can be the auditor of the
company. However, the firm at the time of admitting him as a partner, would need
to ensure that:
— the period of three years has lapsed from the date when Mateen resigned from the
directorship of SL.
— The shareholding of Mateen in SL is disposed off.

(b) Appointment of Khawar’s firm is valid because he is not an employee of Financial Press
Limited, and writes as a free lancer in the newspaper published by the company.

(c) There is no restriction in the Companies Act, 2017 on holding the Term Finance Certificates
issued by the audit client. Therefore, the appointment of Hamid’s firm as an auditor of SFL is
valid.

A.5

 Where any company is required under the Act to include in its books of accounts the
particulars of cost accounts.
 The Commission may direct that an audit of cost accounts of the company should be
conducted in the order subject to recommendation of the regulatory authority supervising the
business of relevant sector.
 The audit of cost accounts will be conducted by Chartered Accountant or Cost and
Management Accountant and will have same powers, duties and liabilities as an auditor of the
company.
A.6

Salman and Company is eligible to be appointed as the auditor of ABC Limited because,
Naveen
(a) is in the employment of DEF which is an associated company and such employment has
no
relevance in the context of appointment of an auditor.
Kashif Associates can be appointed as the auditor of NPL as for a private company having
paid up capital of less than Rs. 3 million the auditor can be a chartered accountant or cost
(b) and
management accountant.
Holding of 30% shares of NPL by a public company is of no relevance
(c)
Since kamal has joined ABCL as their Manager Finance prior to the commencement of the
current year’s audit so he is currently the employee of ABCL and is ineligible to act as auditors
of ABCL.