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DUE DATE: 23RD MAY, 2014





Read carefully the following independent cases and give answers accordingly.


Case: 1

Annual general meeting of ABC Limited is going to be held on May 20, 2014 at the company’s head office. Secretary of the company has disseminated notices of the meeting well before 21 days of the date fixed for the meeting to directors, managers and shareholders of the company except Mr. Hassan – auditor of the company. Mr. Hassan believes his right to receive the notice to attend meeting.


Give your opinion on Mr. Hassan’s believe while stating the related provisions of the Companies Ordinance 1984.        (2.5 Marks)




Case: 2

Mr. Ali has recently been appointed as auditor of XYZ Limited at its recent annual general meeting. Upon completion of his first audit of the company, he issues an un-qualified report to the company’s shareholders. On the basis of this audit report, the company successfully raised a loan of Rs. 500 million from a local bank.

Unfortunately, after 5 months of the loan obtained, the company announced its plan for going into liquidation stating a chance for bankruptcy. During the liquidation process, it revealed by the company’s liquidator that shares worth Rs. 500 million shown in the company’s balance sheet are not original in nature. Upon initial investigations, it was found that the transaction was fake but dully certified by the auditor knowingly on mere presentation of the associated documents.

The bank has filed a suit against the auditor of XYZ on the plea that the auditor should verify the originality of the transaction documents. But, the auditor argues that he was not supposed to verify originality of the documents, rather he was responsible to verify availability of the documents only.


                        a) Do you think that the auditor’s argument is valid regarding his duties? Support your answer with the related provisions of the Companies Ordinance 1984.  (2.5 Marks)


                        b) What type of liability can be imposed upon the auditor in the above case? Mention other situations in which such type of liabilities can be imposed? (2.5 Marks)





Case: 3

In a recent annual audit of Model Manufacturing Company by Mr. Ahmad, he found the company’s fixed assets overvalued at abnormally higher values. But, owing to the years’ old relations with the company CEO, he gave an un-qualified opinion in his audit report and concluded that the financial statements give true and fair view of the states of affairs of the company. Later, one of the company’s shareholders sued against the auditor for not performing his duty according to the related provisions and issued false statement to deceive the shareholders. 


Describe the type of liability arises on the auditor in the above situation and narrate the possible consequences of the auditor’s action.  (2.5 Marks)


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