Question

. Three types of legal documents and records that auditors examine in the planning phase of an audit are the corporate charter and bylaws, corporate minutes of meetings of the board of directors and stockholders, and contracts. Discuss the audit-relevant information contained in each of these three types of documents that an auditor should be aware of early in the audit.

Answer 1

Audit relevant information contained in Corporate charter and bylaws:

1. Corporate charter contains the detais of objectives, structure and its planned operations. Hence it gives an insight of the purpose with which the company was formed and its intended area of operation.

2. Corporate charter contains the information about the stock which the company is authorised to issue and the par value of each stock.

3. It also contains information of the incorporator and the initial directors of the company.

4. Bylaws contain the internal rules and procedures as to how the business is set to operate. It might contain information about the number of members in board of directors, the term of directors, important positions/offices in the organisation, quorum, manner of conducting and holding board meeting or shareholders meeting.

With the help of all of these first hand information, the audit can set up his audit plan in place and see if these were met dilignetly over the period of audit.

Audit relevant information contained in corporate minutes of board meeting or shareholders meeting are:-

1. Official written record of discussions at formal meetings, including any decisions made or actions taken.

2. Minutes of meeting are legal documents. They are to be kept sectretly and safely and in a manner as prescribed by law. This information is confidential and contains useful information which needs to be available at the intitation phase of audit.

3. It details in the members present and absent in each meeting and this information needs to be audited.

Audit relevant infiormation conatined in contracts:

1. Contracts are the legal documents signed with enternal parties and it contains the terms of contract.

2. Legal obligations and risks if the terms of contract are not met.

3. Claims which the organisation is entitiled to if the terms of contract are violated by the other party.

4. Other entitlements, liabilities, risks or any other information which has a financial or legal impact.