Statutory auditor

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Statutory auditor (1762) Illiustratsiia k stat'e <<Auditory>> No. 1. Voennaia entsiklopediia Sytina (Sankt-Peterburg, 1911-1915).jpg
Statutory auditor (1762)

Statutory auditor is a title used in various countries to refer to a person or entity with an auditing role, whose appointment is mandated by the terms of a statute.

Audit Systematic and independent examination of books, accounts, documents and vouchers of an organization

An audit is a systematic and independent examination of books, accounts, statutory records, documents and vouchers of an organization to ascertain how far the financial statements as well as non-financial disclosures present a true and fair view of the concern. It also attempts to ensure that the books of accounts are properly maintained by the concern as required by law. Auditing has become such a ubiquitous phenomenon in the corporate and the public sector that academics started identifying an "Audit Society". The auditor perceives and recognizes the propositions before them for examination, obtains evidence, evaluates the same and formulates an opinion on the basis of his judgement which is communicated through their auditing report.

Statute Formal written document that creates law

A statute is a formal written enactment of a legislative authority that governs the legal entities of a city, state, or country by way of consent. Typically, statutes command or prohibit something, or declare policy. Statutes are rules made by legislative bodies; they are distinguished from case law or precedent, which is decided by courts, and regulations issued by government agencies.

Contents

World usage

In India, the term "statutory auditor" refers to an external auditor whose appointment is mandated by law. A "statutory audit" is a legally required review of the accuracy of a company's or government's financial records. The purpose of a statutory audit is the same as the purpose of any other audit - to determine whether an organization is providing a fair and accurate representation of its financial position by examining information such as bank balances, bookkeeping records and financial transactions. [1] The European Union has also made efforts to mandate statutory audits and statutory auditors on an EU-wide level. [2]

India Country in South Asia

India, officially the Republic of India, is a country in South Asia. It is the seventh-largest country by area, the second-most populous country, and the most populous democracy in the world. Bounded by the Indian Ocean on the south, the Arabian Sea on the southwest, and the Bay of Bengal on the southeast, it shares land borders with Pakistan to the west; China, Nepal, and Bhutan to the north; and Bangladesh and Myanmar to the east. In the Indian Ocean, India is in the vicinity of Sri Lanka and the Maldives; its Andaman and Nicobar Islands share a maritime border with Thailand and Indonesia.

External auditor

An external auditor performs an audit, in accordance with specific laws or rules, of the financial statements of a company, government entity, other legal entity, or organization, and is independent of the entity being audited. Users of these entities' financial information, such as investors, government agencies, and the general public, rely on the external auditor to present an unbiased and independent audit report.

European Union Economic and political union of European states

The European Union (EU) is a political and economic union of 28 member states that are located primarily in Europe. Its members have a combined area of 4,475,757 km2 (1,728,099 sq mi) and an estimated total population of about 513 million. The EU has developed an internal single market through a standardized system of laws that apply in all member states in those matters, and only those matters, where members have agreed to act as one. EU policies aim to ensure the free movement of people, goods, services and capital within the internal market, enact legislation in justice and home affairs and maintain common policies on trade, agriculture, fisheries and regional development. For travel within the Schengen Area, passport controls have been abolished. A monetary union was established in 1999 and came into full force in 2002 and is composed of 19 EU member states which use the euro currency.

Japanese usage

A statutory auditor(監査役,kansayaku) is an official found in Japanese kabushiki gaisha (business corporations). Similar roles are also found in Taiwan and South Korea, which use modified forms of Japanese corporate law, although the English translation most commonly employed for the role in these countries is supervisor or supervisory board . [3]

Japan Island country in East Asia

Japan is an island country in East Asia. Located in the Pacific Ocean, it lies off the eastern coast of the Asian continent and stretches from the Sea of Okhotsk in the north to the East China Sea and the Philippine Sea in the south.

Kabushiki gaisha company with limited liability established under Japanese law

A kabushiki gaisha or kabushiki kaisha, commonly abbreviated KK, is a type of company defined under the Companies Act of Japan. The term is often translated as "stock company", "joint-stock company" or "stock corporation".

Taiwan Country in East Asia

Taiwan, officially the Republic of China (ROC), is a state in East Asia. Neighbouring states include the People's Republic of China (PRC) to the west, Japan to the north-east, and the Philippines to the south. The island of Taiwan has an area of 35,808 square kilometres (13,826 sq mi), with mountain ranges dominating the eastern two-thirds and plains in the western third, where its highly urbanised population is concentrated. Taipei is the capital and largest metropolitan area. Other major cities include Kaohsiung, Taichung, Tainan and Taoyuan. With 23.7 million inhabitants, Taiwan is among the most densely populated states, and is the most populous state and largest economy that is not a member of the United Nations (UN).

Statutory auditors are elected by shareholders and hold a position in the hierarchy alongside the board of directors. A kabushiki kaisha must have at least one statutory auditor, unless the transfer of shares is restricted in the articles of incorporation. If the company is classified as a "large" company (i.e. with more than ¥500 million in paid-in capital or ¥20 billion in liabilities), it must have three statutory auditors, or an audit, compensation and nominating committee system similar to that used by public companies in the US.

An auditor is a person or a firm appointed by a company to execute an audit. To act as an auditor, a person should be certified by the regulatory authority of accounting and auditing or possess certain specified qualifications. Generally, to act as an external auditor of the company, a person should have a certificate of practice from the regulatory authority.

Board of directors Board composed of directors

A board of directors is a group of people who jointly supervise the activities of an organization, which can be either a for-profit business, nonprofit organization, or a government agency. Such a board's powers, duties, and responsibilities are determined by government regulations and the organization's own constitution and bylaws. These authorities may specify the number of members of the board, how they are to be chosen, and how often they are to meet.

Articles of incorporation charter that establishes the existence of a corporation

Articles of incorporation, also referred to as the certificate of incorporation or the corporate charter, are a document or charter that establishes the existence of a corporation in the United States and Canada. They generally are filed with the Secretary of State or other company registrar.

Statutory auditors have several functions:

  1. They initiate derivative suits against the board of directors on behalf of the shareholders, and represent the company in those suits. This right was once reserved for the auditor; however, following precedent from a recent lawsuit against Daiwa Bank, groups of shareholders can now file suits themselves without going through the auditor.
  2. In "mid-size" and "large" companies (i.e. with more than ¥100 million of paid-in capital), they have the right to attend board meetings to monitor the directors' actions.
  3. In "mid-size" companies, they audit the financial reports submitted by the company.
  4. In "large" companies, they oversee auditing performed by external certified public accountants, i.e. external auditors.

Statutory auditors are often selected from among the senior management of the company, or are former directors of related companies (such as suppliers or keiretsu partners).

<i>Keiretsu</i> set of companies with interlocking business relationships and shareholdings

A keiretsu is a set of companies with interlocking business relationships and shareholdings. In the legal sense, it is a type of informal business group that are loosely organized alliances within the social world of Japan's business community. The keiretsu maintained dominance over the Japanese economy for the second half of the 20th century, and to a lesser extent, the early 21st century.

The role of the statutory auditor in Japan is distinct from the role of an external auditor or internal auditor as understood in English-speaking countries, which has led to some confusion when discussing their role in internationally prominent cases such as the Olympus scandal. [4] The Japanese association of statutory auditors has recommended adopting the English title "audit & supervisory board member" to avoid such confusion. [3]

An internal auditor is an auditor who is appointed by the management of the company in order to carry out the internal audit function. Generally an employee of the company acts as an internal auditor, whereas some companies appoint an external expert as an internal auditor.

The Olympus scandal was precipitated on 14 October 2011 when British-born Michael Woodford was suddenly ousted as chief executive of international optical equipment manufacturer Olympus Corporation. He had been company president for six months, and two weeks prior had been promoted to chief executive officer, when he exposed "one of the biggest and longest-running loss-hiding arrangements in Japanese corporate history", according to The Wall Street Journal. Tsuyoshi Kikukawa, the board chairman, who had appointed Woodford to these positions, again assumed the title of CEO and president. The incident raised concern about the endurance of tobashi schemes, and the strength of corporate governance in Japan.

Related Research Articles

Corporate titles or business titles are given to company and organization officials to show what duties and responsibilities they have in the organization. Such titles are used by publicly and privately held for-profit corporations. In addition, many non-profit organizations, educational institutions, partnerships, and sole proprietorships also confer corporate titles.

Olympus Corporation is a Japanese manufacturer of optics and reprography products. Olympus was established on 12 October 1919, initially specializing in microscopes and thermometers. Olympus holds roughly a 70-percent share of the global endoscope market, estimated to be worth approximately US$2.5 billion. Its global headquarters are located in Shinjuku, Tokyo, Japan.

Financial statement formal record of the financial activities and position of a business, person, or other entity

Financial statements are formal records of the financial activities and position of a business, person, or other entity.

Financial audit

A financial audit is conducted to provide an opinion whether "financial statements" are stated in accordance with specified criteria. Normally, the criteria are international accounting standards, although auditors may conduct audits of financial statements prepared using the cash basis or some other basis of accounting appropriate for the organisation. In providing an opinion whether financial statements are fairly stated in accordance with accounting standards, the auditor gathers evidence to determine whether the statements contain material errors or other misstatements.

In a U.S. publicly traded company, an audit committee is an operating committee of the board of directors charged with oversight of financial reporting and disclosure. Committee members are drawn from members of the company's board of directors, with a Chairperson selected from among the committee members. A qualifying audit committee is required for a U.S. publicly traded company to be listed on a stock exchange. Audit committees are typically empowered to acquire the consulting resources and expertise deemed necessary to perform their responsibilities.

Auditors report

The auditor's report is a disclaimer thereof, issued by either an internal auditor or an independent external auditor as a result of an internal or external audit, as an assurance service in order for the user to make decisions based on the results of the audit.

International Standards on Auditing

International Standards on Auditing (ISA) are professional standards for the performance of financial audit of financial information. These standards are issued by International Federation of Accountants (IFAC) through the International Auditing and Assurance Standards Board (IAASB). According to Olung M ISA guides the auditor to add value to the assignment hence building confidence of investors.

Auditor independence Auditor independence

Auditor independence refers to the independence of the internal auditor or of the external auditor from parties that may have a financial interest in the business being audited. Independence requires integrity and an objective approach to the audit process. The concept requires the auditor to carry out his or her work freely and in an objective manner.

Vinod Rai Retired Indian Administrative Service officer and former Comptroller and Auditor General of India

Vinod Rai is a former Indian IAS officer who served as the 11th Comptroller and Auditor General of India. He assumed office on 7 January 2008 till 22 May 2013. He is the current chairman of UN Panel of External Auditors and Honorary Advisor to the Railways and a member of the Railway Kaya Kalp Council. He holds a master's degree in Economics from the University of Delhi, and Masters in Public Administration from Harvard University. He is widely considered as symbol of the anti-corruption movement and is credited with having turned the office of CAG into a powerful force for accountability and transparency in contemporary India.

German company law field of law that deals with companies and enterprises

German company law (Gesellschaftsrecht) is an influential legal regime for companies in Germany. The primary form of company is the public company or Aktiengesellschaft (AG). A private company with limited liability is known as a Gesellschaft mit beschränkter Haftung (GmbH). A partnership is called a Kommanditgesellschaft (KG).

The chief audit executive (CAE), director of audit, director of internal audit, auditor general, or controller general is a high level independent corporate executive with overall responsibility for internal audit.

Spółka z ograniczoną odpowiedzialnością, abbreviated Sp. z o.o., is the legal title of a limited liability company in Poland.

The Model Audit Rule 205, Model Audit Rule, or MAR 205 are the commonly applied terms for the Annual Financial Reporting Model Regulation. Model Audit Rule is a financial reporting regulation applicable to insurance companies, and borrows significantly from the Sarbanes Oxley Act of 2002. The Model Audit Rule is co-developed by the American Institute of Certified Public Accountants (“AICPA”) and National Association of Insurance Commissioners (“NAIC”) and issued by NAIC with revisions in 2006 and has taken effect in 2010.

Elke König is a German MBA in Business and auditor. From January 2012, she was president of the Federal Financial Supervisory Authority (BaFin); in December 2014, she became the first Chair of the newly established Single Resolution Board (SRB) of the Single Resolution Mechanism headquartered in Brussels.

References

  1. ↑ "Register of Statutory Auditors" . Retrieved 21 August 2013.
  2. ↑ "Green Paper: The Role, The Position and the Liability of the Statutory Auditor Within the European Union" (PDF). European Union. Retrieved 21 August 2013.
  3. 1 2 "Background and Goals: New Recommended English translation of "Kansayaku" and "Kansayaku-kai"" (PDF). Japan Audit & Supervisory Board Members Association. Retrieved 21 August 2013.
  4. ↑ Chambers, Richard. "Setting the Record Straight: The Real Internal Auditors at Olympus Have Not Been Implicated" . Retrieved 21 August 2013.
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