AUDIT OF FIRM

Appointment of Auditor: –

The auditor to a firm is usually appointed by the partners either on the grounds of a decision taken by them or to comply with a condition in the partnership agreement. 

The remuneration is also fixed by the partners. It is important that the letter of appointment should simply state the

nature and scope of audit which is to be carried out and particulars of limitations, if any, under which he would have to function. In case, change of auditor, it is the duty of the incoming auditor to communicate with the previous auditor.

The auditor may, particularly, ensure the application of accounting standards prescribed by the Institute. 

In case the firm is required to get its accounts audited under the requirements of any law, the auditor will have to qualify the report in case of non-compliance with the accounting standards.

Matters to be considered before starting the audit:

Also, before starting the audit, he should review the partnership agreement and note the terms therein as regards the following matters:

  • The Name and manner under which the business shall be conducted.
  • The terms of the partnership, if any, that has been agreed upon.
  • The amount of capital shall be contributed by each partner—whether it will be fixed or vary from year to year.
  • at the end of the period which the accounts of the partnership will be closed periodically and the proportions in which the profit shall be divided among the partners or losses shall have to be contributed by them; whether the
  • losses shall be borne by the partners or whether any of the partners will not
  • be required to do so.
  • The terms as regards maintenance of BOA (books of account) and the matters which must be taken into account for determining the profits of the firm available for division between the partners.
  • The borrowing capacity of the partnership.
  • The ROI (the rate at which interest) will be allowed on the capitals and loans provided by partners and the rate at which it will be charged on their drawings and current accounts.
  • Whether any salaries are due to the partners or withdrawals are permitted
  • on shares of profits, and if so, to what extent?
  • Responsibilities of the partners as regards the management of the business of the firm.
  • Who shall manage the bank account of the firm? How will the surplus funds be invested?
  • Limitations and restrictions that have been agreed upon, the rights and powers of partners, and on their implied authority to pledge the firm’s credit or to render it liable.

Address
304 North Cardinal St.
Dorchester Center, MA 02124

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Weekend: 10AM - 5PM