Audit on Behalf of Quasi Partner
A quasi partner is one who was once a partner of the business but left his share capital to be used in the business. Sometimes an outgoing partner may leave his money to the business in the term that a certain rate of interest will be charged on that amount. This is a partner that does not have any real or significant interest in the partnership. To know the safety of his investment, he may appoint an auditor on the basis of agreement. Such a partner acts as a creditor to the business, and he has to be paid interest on his share capital. So, in essence, he is only lending his name to the partnership. An auditor should conduct an audit considering the interest of his client and business. He will not make any capital contributions to the firm, and so he will not have a share in the profits either.
He should consider the following facts while conducting an audit:
- The auditor should receive instruction from the client in written form.
- The auditor should check whether the profit and loss are properly calculated or not.
- Depreciation on assets is properly deducted or not.
- Amount of drawing drawn by the partners is within the limit of agreement or not.
- Whether the capital expenditure is shown as revenue expenditure or vice-versa or not.
- Whether the transactions of the firm are performed with a personal interest or not.
- He or she is liable for all debts.
- He or she receives interests in the ratio of their capital.
- Acts like creditors to the business.
- Does not take part in the business’ decision-making process.
- Has a share in the business.