Functions, duties and liabilities of auditors

Abstract

The thesis introduces the reader to the auditor both in his traditional role of company audits and in the European Union Court of Auditors. It then passes on to a comparative study of how the auditor is appointed under both English and Maltese Law in Chapter two, which is concluded by a similar study on the qualifications required. Next in Chapter three, the thesis deals with the functions of the auditor and the types of audit, dwelling on the new roles such as the environmental audit with only a short mention of each of the traditional functions. Again the auditors' duties are analysed from both the local and United Kingdom viewpoint. The significance of the letter of engagement is stressed, especially for private audits/accountancy work and its importance in minimising or avoiding the auditors' liability. The thesis also deals with the letter of representation and the letter of weakness as audit tools again in regard to the auditors' liability. The delicate duties of the auditor with regard to related parties and questionable payments are tackled in some detail as is the auditors' role in the issue of prospectuses and share valuations. The matter of confidentiality is also discussed with reference to the new Professional Secrecy Act of 1994. The Rights of Auditors are discussed in. Chapter four. Basically these fall into two cateogries: (1) Powers enabling them to conclude their work with the least possible interference and to resist unlawful removal and (2) Rights to enable them to obtain payment for their work. The first category which is the most relevant is further subdivided into four sub-divisions: (I) Access to accounts/documents; (ii) Right to information and explanations; (iii) Right to attend meetings; (iv) Defences against removal. Chapter five deals with liability of the Auditor generally. Liability is categorised into three sub-headings, two of which - Civil Actions and Criminal Actions, are discussed in this chapter. After giving an outline of each category, the subject is dealt with through English case law ending with an extensive but not exhaustive list of the auditors' position in statutory audits. This is followed by a discussion on the Malta position by analogy with local cases in respect of other professions. In Chapter six an attempt is made to state when and how the auditor is or may be liable to third parties for negiligent mis-statements both under United Kingdom and local Law, this is followed by a brief discussion on the Minimisation of Liability and whether the Auditors' liability should be extended.