Updated: Aug 20, 2021

A person appointed by the members of an organization to inspect accounting, and other, records, and report on the manthat organization on behalf of the members that organization on behalf of the members have accounted for their stewardship. Particular legal requirements apply to the auditor of certain businesses under the protection of various statutes. The most important in this context is the Companies Act 1985. Every company registered under the Companies Act is obliged to appoint an official auditor.

The company auditor is essentially independent and is employed by, and must report to, the shareholders. He must belong to one of certain named professional bodies specified by the Department of Trade and Industry. At present these bodies are the Institute of Chartered Accountants in England and Wales; the Institute of Chartered Accountants of Scotland; the Institute of Chartered Accountants in Ireland; the Chartered Association of Certified Accountants. Prior to the coming into effect of the Companies Act 1976, the Department of Trade and Industry could approve the appointment of other suitable but unqualified persons if they were satisfied that such persons had the requisite knowledge and skill. At one time it was possible for any person to be appointed as auditor of what was known as an ‘exempt private company’. Such companies were abolished by the Companies Act 1967, which decided that limited companies would be divided into two categories only: public companies and private companies, categories redefined by the Companies Act 985.

Reference: The Penguin Business Dictionary, 3rd edt.

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James Knight
Editor of Education
James is the Editor of Education for Invezz, where he covers topics from across the financial world, from the stock market, to cryptocurrency, to macroeconomic markets.... read more.