The auditors of PQR Ltd. accepted the Certificate of the Manager, a person of knowledge, competence...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
The auditors of PQR Ltd. accepted the Certificate of the Manager, a person of knowledge, competence and high reputation, as to the value of the stock in trade. The stock was grossly overstated for several years in the balance sheets of the company. As a result of this over valuation dividends were paid out of capital. The Auditors did not examine the books of account very minutely. If they had done so and compared the amount of stock at the beginning of the year, with the purchases and sales during the year, they would have noticed the over valuation. The company subsequently went into liquidation and the auditors were sued to make good the loss caused by the wrongful payment of dividends relying on the balance sheets figures. Based on the above facts, you are required to decide, with reference to the provisions of the Companies Act, 2013 and the decided case laws, the following issues: (i) Whether auditors of the company will be liable for the loss caused to the company by the wrong payment of dividends based on the Balance Sheets duly audited by the Auditors. (ii) What are statutory duties of the Auditors in this regard? The auditors of PQR Ltd. accepted the Certificate of the Manager, a person of knowledge, competence and high reputation, as to the value of the stock in trade. The stock was grossly overstated for several years in the balance sheets of the company. As a result of this over valuation dividends were paid out of capital. The Auditors did not examine the books of account very minutely. If they had done so and compared the amount of stock at the beginning of the year, with the purchases and sales during the year, they would have noticed the over valuation. The company subsequently went into liquidation and the auditors were sued to make good the loss caused by the wrongful payment of dividends relying on the balance sheets figures. Based on the above facts, you are required to decide, with reference to the provisions of the Companies Act, 2013 and the decided case laws, the following issues: (i) Whether auditors of the company will be liable for the loss caused to the company by the wrong payment of dividends based on the Balance Sheets duly audited by the Auditors. (ii) What are statutory duties of the Auditors in this regard?
Expert Answer:
Answer rating: 100% (QA)
i Yes the auditors of the company will be liable for the loss caused to the company by the wrongful ... View the full answer
Related Book For
Auditing a business risk appraoch
ISBN: 978-0324375589
6th Edition
Authors: larry e. rittenberg, bradley j. schwieger, karla m. johnston
Posted Date:
Students also viewed these accounting questions
-
The Crazy Eddie fraud may appear smaller and gentler than the massive billion-dollar frauds exposed in recent times, such as Bernie Madoffs Ponzi scheme, frauds in the subprime mortgage market, the...
-
Planning is one of the most important management functions in any business. A front office managers first step in planning should involve determine the departments goals. Planning also includes...
-
Read the case study "Southwest Airlines," found in Part 2 of your textbook. Review the "Guide to Case Analysis" found on pp. CA1 - CA11 of your textbook. (This guide follows the last case in the...
-
The local bank manager has found that one out of every 400 bank loans end up in default. Last year the bank made 400 loans. What is the probability that two bank loans will end up in default?
-
Consider two identical 80-kg men who are eating identical meals and doing identical things except that one of them jogs for 30 min every day while the other watches TV. Determine the weight...
-
Why is the materiality decision one of the first decisions made in the audit?
-
Why does this chapter provide an explanation of the development of mutual funds?
-
Garys Gears is a production facility that produces metal gears. The first step is stamping, which happens at a press. There are two identical presses that operate simultaneously (gears can be stamped...
-
Write the function in the form f(x) = (x-k)q(x) + r(x) for the given value of k. Use a graphing utility to demonstrate that f(k) = r Function: Rx) 15x+10x3 - 15x2 +9 Value of k k = - 3 Rx)
-
The Durham Insurance Company sells a five-year term insurance policy with face value of $100,000 to a 47-year-old man for a monthly premium of $63. The mortality table is given below. d. What is the...
-
Convert the following lines of C to MIPS assembly: if (a < b) ( d = else { d = c; + C; Presume the value a is stored in $50, b is stored in $s1, and c is stored in $s2. At the end, store the output...
-
Identify the areas that you have power, due to dominant group membership Pick any ONE component of the ADDRESSING model where you have membership in the dominant group and answer the following...
-
Describe one static priority and one dynamic priority real-time scheduling algorithm. You can use these data in answering the question . You should discuss the issue of admission control, and comment...
-
Evidence that participating in the discussion board deepened your understanding of the course material. How do you think your posted messages brought in new material, ideas, or personal experiences...
-
Let S(t) be the time-t price of a nondividend-paying stock. The expected appreciation rate is 10%, and the volatility is 30%. The current stock price is 20. (a) Find the equal-tailed 90% lognormal...
-
1. Highlight three (3) key personal learnings from the information you reviewed. 2. How will you use this information/tips/strategy to help you increase your employability, either in your job search...
-
What must you specify when creating an invoice? Answer: A. Vendor B. Transaction C. Customer D. Service What happens behind the scenes if you don't use the Receive Payments window to...
-
Explain the circumstances that could result in a long-term bank loan being shown in a statement of financial position as a current liability.
-
This is the first-year audit of a company that wants to register with the SEC in the near future. The company has been very successful and uses a fixed-assets database to manage its fixed assets. The...
-
One component of good corporate governance is a code of ethics that has been developed for a company. For example, Enron had one of the most complete codes of ethics in corporate America. Required a....
-
What is an operational audit?
-
What does a low average reserves per well ratio indicate?
-
Lomax Company reported the following costs on its financial statements (in thousands): REQUIRED: Using the reserve disclosure for Lomax Company in problem 13 and the data presented in this problem,...
-
Lomax Companys Statement No. 69 disclosures included the following information: REQUIRED: Using the information for Lomax Company in problems 13, 14, and 15 and in this problem: a. Compute the value...
Study smarter with the SolutionInn App