Janet Helmsley is auditor of Skiplam Ltd for the year ended 30 September 2018. She and her staff are examining the inventory figure in the accounts and have become concerned that the inventory count sheets are inaccurate because the test counts they had made at the year end did not agree with the quantities on the inventory sheets prepared by the company. Also, as the inventory sheets had not been numbered, there was no way that they or the company officials could be certain that all sheets had been accounted for.

Required:

(a) State whether you think that this would be a reason for believing that the company had not kept proper accounting records (refer to CA 2006 s386).

Apart from the above matter, Janet also concluded that the valuation of inventories could not be proved because the cost records were not complete.

She duly informed the directors of Skiplam Ltd that she would have to inform the shareholders in her auditor’s report that proper accounting records had not been kept and that, in consequence, she had not been able to determine if the accounts had been properly prepared. The directors were very annoyed about this and told her they would not be willing to put her name forward at the next annual general meeting for reappointment as auditor.

Required:

(b) Explain by reference to CA 2006 sections what Janet Helmsley’s rights are as an auditor in the light of the directors’ wish to dismiss her.

(c) State what Janet’s rights are should the directors refuse to pay her fee for her work in connection with the audit for the year ended 30 September 2018.

(d) If you were a member of a professional body of accountants and were asked by the directors if you would be prepared to act as auditor of Skiplam Ltd, state what action you would take and why.