Ross PLC has an Authorised Capital of €800,000 divided into 600,000 Ordinary Shares at €1 each and 200,000 10% Preference Shares at €1 each - Leaving Cert Accounting - Question 4 - 2006

What is an Audit?

An audit is the independent examination of, and the expression of opinion on, the financial statements of an enterprise by an appointed auditor. The main objective of an audit is to enable the auditor, in keeping with the requirements of the Companies Acts, to report on the truth and fairness shown by:

1. The financial statements as presented in the profit and loss account.
2. Any other information that may be required or disclosed by the financial statements.
3. The Companies Acts do not require the auditor to certify that the accounting records are correct or accurate but that the accounts give a true and fair view of the financial position of the business.

Qualified Auditor’s Report

A qualified auditor’s report is given when an auditor in his/her opinion is not satisfied or is unable to conclude about any of the following points:

1. The financial statements give a true and fair view of the state of affairs of the company at the end of their accounting period and its profit and loss account.
2. The financial statements are prepared in accordance with the Companies Acts.
3. The financial records of the entities are available.
4. Any limitations imposed by the directors on the audit of the financial statements.
5. The net assets are more than 50% of the called up capital.

The report will state the elements of the accounts or the director’s report that are unsatisfactory.