Authorized Auditor
Definition
An authorized auditor is a person who received special authorization to audit company accounts under the Companies Act 1967 due to their experience and expertise. This privilege allowed individuals who were not otherwise eligible to serve as auditors to conduct audits. The system of granting these special authorizations ceased in 1978, and the status was further restricted in 1989, preventing authorized auditors from auditing listed companies.
Examples
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Special Experience-Based Authorization: Consider John Doe, who had extensive experience in accounting but did not meet the typical qualifications to be a statutory auditor. In 1975, due to his proven track record, he was granted special authorization under the Companies Act 1967 to audit companies. John could perform audit tasks legally due to this authorization.
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Ceased Authorizations: By 1980, Jane Smith, who was granted special authorization in 1970 under the Companies Act 1967, found that her authorized auditor status no longer applied to new audits since the authorization process ended in 1978.
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Restriction in Listed Companies: Peter Brown, an authorized auditor since 1976, aspired to audit a multinational listed corporation in 1990. However, since the rules changed in 1989, he was deemed ineligible to audit any listed companies because of his status as an authorized auditor.
Frequently Asked Questions (FAQs)
1. What was the main purpose of appointing authorized auditors under the Companies Act 1967?
The main purpose was to leverage the experience of seasoned professionals who did not meet standard auditing qualifications but had substantial expertise, enabling them to conduct company audits.
2. When did the practice of granting special authorizations to auditors end?
The practice ended in 1978. No new authorizations have been granted since then.
3. Can authorized auditors audit listed companies today?
No, since a rule change in 1989, individuals with the status of authorized auditor are not eligible to audit listed companies.
4. Are previously authorized auditors still allowed to operate as auditors?
While they can no longer audit listed companies, they may continue to audit other types of companies if permitted by current standards and regulations.
5. Under what conditions were special authorizations granted to auditors?
Special authorizations were granted based on the individual’s experience and expertise in accounting and auditing, judged sufficient even if they did not meet the standard qualifications.
Related Terms
- Statutory Auditor: An auditor legally appointed to audit the financial statements of a company.
- Companies Act 1967: A legislative act that regulated company operations, including the appointment and duties of auditors.
- Listed Company: A company whose shares are traded on a stock exchange.
- Audit: An official inspection of an organization’s accounts, typically by an independent body.
Online Resources
- Institute of Chartered Accountants in England and Wales (ICAEW)
- Association of Chartered Certified Accountants (ACCA)
- Financial Reporting Council (FRC)
Suggested Books for Further Studies
- Auditing and Assurance Services by Alvin A. Arens and Mark S. Beasley
- The Essentials of Auditing by Claire Marston
- Principles of External Auditing by Brenda Porter, Jon Simon, and David Hatherly
Accounting Basics: “Authorized Auditor” Fundamentals Quiz
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