The Roles Of Auditors

*Explaining On The Various Processes Of Auditing And Company Reporting And Showing The Preliminary Announcement*. This material contains information about the various roles of the auditors, company reporting and preliminary announcement plus showing the accounts of profit and loss.

With the accounts will come an auditors’ report. Auditors are firms of accountants who hold a watching brief on behalf of the owners of the company (the shareholders). The directors of the company prepare and sign the accounts. It is the auditors’ job to certify that these accounts present a true and fair view of the company’s profits and financial position, or to point out any failings where they do not.

The auditors are meant to be independent of the company’s management, though obviously need to work quite closely with the managers in agreeing the form of the accounts. The managers appoint them, though the shareholders approve their fees. There is normally a certain amount of give and take when opinions vary on the presentation of different items. An auditors’ report which says the accounts do not give a ‘true and fair view’ or that they do so only with important qualifications will normally be picked up by the press as a strong warning bell.

Companies which are quoted on the Stock Exchange need, we have seen, to provide their shareholders with more frequent information than that supplied by the legally required annual accounts. Some weeks after the end of the first half of the company’s year it will normally produce an interim profit statement (or interim) giving unaudited first half profit figures. The statement also normally gives the size of the interim dividend and includes some comment on trading and prospects from the company. Some time after the end of the full year a preliminary announcement (prelim) will usually be published, giving the profits for the year and often a lot of background information. This appears some weeks before the full report and accounts are posted to shareholders. Most daily press comment on the company’s figures is based on the interim and preliminary statements which have greater news value though less depth of information than the full accounts. A profit and loss account shows the results of a company’s trading over the last financial period. Usually this means a year, though the year can run to whatever date the company chooses. December 31 and March 31 year ends are popular, though it could be April 1 or November 5. The profit and loss account thus shows the effect on the company’s revenue account of all the transactions over the past year. If a company made profits of £20m in the first ten months of its year and losses of £22m in the last two months, the profit and loss account would show a loss of £2m: the final outcome. It would not by itself reveal that the company had been trading profitably for much of the period.