Why audit is important to the shareholders?

An audit is important as it provides credibility to a set of financial statements and gives the shareholders confidence that the accounts are true and fair. It can also help to improve a company’s internal controls and systems.

Can shareholders require an audit?

If shareholders ask for an audit

Even if your company is usually exempt from an audit, you must get your accounts audited if shareholders who own at least 10% of shares (by number or value) ask you to. … They must make the request in writing and send it to the company’s registered office address.

What is the relationship between auditor and shareholder?

They act as watchdogs to ensure that the financial statements prepared by the management reflect the true and fair view of the position and financial performance of the firm. As auditors act on behalf of shareholders they turn into agents whereas shareholders are the principal.

What is auditing and its purpose?

The purpose of an audit is for an independent third party to examine the financial statements of an entity. … Based on this opinion, users of the financial statements are more likely to provide credit and funding to a business, possibly resulting in a reduced cost of capital for the entity.

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What information is a shareholder entitled to?

As a shareholder you have the right to have your name properly inserted in the company’s register of members. You also have the right to inspect and obtain copies of various company documents, records and registers: Provided reasonable notice has been given: Members can inspect these documents free of charge.

What are the rights of shareholders?


  • Legal Action Against Directors. …
  • Right to Call for General Meetings. …
  • Right to The Dividend. …
  • Right to Dispose of Shares. …
  • Right to Inspect Registers, Books, And Financial Records. …
  • Pre-emptive Right. …
  • Winding Up of The Company.

What company information are shareholders entitled to?

The main documents of interest to shareholders will be the company’s annual report and accounts. Each shareholder has the right to receive these when they’re issued generally and on request. Shareholders also have the right to receive a copy of any written resolution proposed by either the directors or shareholders.

Who appoints the first auditor?

Application for 1st Auditor post Incorporation

Appointed by Board Of Directors. This has to be done within 30 days from the date of Registration. Appointment can also be done by Members at Extraordinary General Meeting within 90 days of the information. Appointed by the Comptroller and Auditor General of India.

Is auditor an agent of shareholder?

An auditor acts as an agent of the shareholders. He is expected to safeguard their interests. In Spackman v. Evans[xii], Cranworth LJ, held that the auditors may be agents of the shareholders, so far as relates to the audit of the accounts.

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