Appntmnt Rmvl Aditr Tz

8/2/2019 Appntmnt Rmvl Aditr Tz

1/20

Auditors Appointment, Re-appointment, Removal, Rights

& DutiesMwl. Helena Thomas

University of Dar es Salaam Business School

1


2/20

Company Audit

Table of Content

Appointment of Auditor

Re-Appointment of Auditor

Ceiling on Number of Audit Qualifications and Disqualifications of Auditor

Removal Of Auditor

Rights of Auditor Duties of Auditor

2


3/20

LEGALITY OF AUDITORS APPOINTMENT,

REMOVAL, RIGHTS AND DUTIES OF AUDITORS

These matters are given under Company Act, 2002, and it iscovered under sect. 170 179; the act provide different types

of appointment situations & appointing authority. Three

different types of appointment are identified by Companies

Act, 2002:

(1) Appointment of Auditor by AGM using Resolutions

Sect. 170[1] which talk about appointment and

remuneration of auditors The words used to explain include

Every company shall at each AGM at which accounts are laid,

appoint an auditor/auditors to hold office from the conclusion

of that general meeting until the conclusion of the next

general meeting at which accounts are laid.

3


4/20

Appointment of auditorNotwithstanding the provisions of subsection (1), at any

AGM at which accounts are laid, a retiring auditor, howeverappointed, shall be deemed to be re-appointed without anyspecial resolution being passed unless:

[a] He is not qualified for re-appointment or

[b] A resolution has been passed at that meeting to appoint

somebody instead of him or providing expressly that heshall not be re-appointed; or

[c] He has given the company notice in writing of hisunwillingness to be re-appointed:

These reasons may lead to the need of passing special

notice or resolution [sec. 174.-(1)] Shareholders using AGM may also be responsible to fill in

any Casual Vacancy[definition given in slide No. 8]in caseof resignation.

4


5/20

Appointment of auditor

Resolutiondefined:

A legal term meaning a formal decision or

statement agreed on by a group of people,

especially after a vote. In the case of company

this means group of shareholders usually

during the AGM while voting in appoint new

auditor or other things

5


6/20


(2) Appointment of Auditor by the Power of Registrar

If the company fail to appoint the auditor for anyreasons at its AGM - sect. 170 [3] of companies act2002 - provide the power for registrar [of company] toappoint the auditor to fill the vacancy:

Where at a general meeting at which accounts arelaid no auditors are appointed or re-appointed, theRegistrar may appoint a person to fill the vacancy

Following this the company is supposed to accept theregistrar decision otherwise it will be subjected intopunishment in terms of fine.

6


7/20

Appointment of auditor(3) Appointment by Auditor by BOD or simply directors before 1st

AGM date

Following registration of coy but before 1

st

AGM, BOD/directors mayappoint the 1st Auditor/auditors. This will carry out importantauditing work in order to enable the company present its FSs beforemembers of shareholders for its 1st AGM. This auditor shall holdoffice until the conclusion of that 1st AGM - provided that:

(i) The company may at a general meeting remove any such auditors

and appoint in their place any other persons who have beennominated for appointment by any member of the company and ofwhose nomination notice has been given to the members of thecompany not less than 14 days before the date of the meeting and

(ii) If the directors fail to exercise their powers of appointing newauditor before 1st AGM as specified in subsection 4 - the company

in AGM may appoint the first auditor/auditors and thereupon thesaid powers of the directors shall cease.

BOD may also be responsible to fill in any Casual Vacancy otherthan resignation [definition of casual vacancy given in slide No. 8]

7


8/20


The category of appointment as given in subsection 4means the company has just started operations but theAGM need to be presented with audited FSs thedirector are empowered to appoint the auditor to

effect proper presentation of FSs

Important concept - Casual vacancy [Mentioned atCompany Act, 2002; sect. 170(6)] Is a situationwhere once the auditor is appointed but subsequently

fails to occupy the office due to death, disqualification,resignation, insolvency etc.

8


9/20

Auditor appointment summarised

9

Appointment

of an

Auditor

BOD

(a) First Auditor

(b) Casual Vacancy

other than

resignation

SHARE

HOLDERS - AGM

(a) SubsequentAuditor

(b) Casual Vacancy

by resignation

(c) First Auditor not

appointed by BOD

Registrar

Auditor not

appointed by SH


10/20

Auditors remuneration Matters for auditors remuneration are given under sect. 170 [8]

Meaning of remunerationcompensation or payment given to

auditor for services rendered this is not limited to audit fees

but any sums paid by the company in respect of the Auditors

expenses.

Remuneration may be fixed either by [1] The directors or by the

Registrar in the case of an Auditor being appointed by the

directors or by the Registrar - as the case may be;

OR

[2] Fixed by the company in general meeting or in such manner as

the company in general meeting may determine.

Either case this shall be stated in a note to the company's

annual accounts.

10


11/20

Disqualification from appointment

as auditor

A person or firm shall not be qualified forappointment as Auditor of a company unlesshe/she or in the case of a firm - every partner inthe firm is a CPA holder

None of the following persons shall be qualifiedfor appointment as Auditor of a company

An officer or employee of the company;

A person who is a partner of or in theemployment of an officer or employee of thecompany.

11


12/20

Disqualification from appointment

as auditor

Disqualified for auditor appointment extendsto include other body corporate which is thatcompanys subsidiary or holding company or asubsidiary of that companys holding

company.

If any person who is not qualified so to act isappointed as Auditor of a company, the

company and every officer in default andevery such person who acts as Auditor shalleach be liable to a fine.

12


13/20

Rights of auditor(i) Right to information

Every Auditor of a company shall have a right of access at all times to

the books and accounts and vouchers of the company, and shall beentitled to require from the officers of the company such informationand explanation as he thinks necessary for the performance of theduties of the Auditors.

An officer of a company commits an offence if, he knowingly orrecklessly, makes to the company's Auditors a statement whether

written or oral which conveys or purports to convey any information orexplanations which the Auditors require, or are entitled to require, asAuditors of the company, and is misleading, false or deceptive in amaterial particular. A person guilty of an offence under this subsectionis liable to imprisonment or a fine or both.

The Auditors of a company shall be entitled to attend any general

meeting of the company and to receive all notices of and othercommunication relating to any general meeting which any member ofthe company is entitled to receive and to be heard at any generalmeeting which they attend on any part of the business of the meetingwhich concerns them as auditors.

13


14/20

Resignations & rights associated with resignations

An Auditor of a company may resign his office by depositing anotice in writing to that effect at the company's registered office.

The notice is not effective unless it is accompanied by thestatement required by section 179. In this it is stated that Wherean Auditor ceases for any reason, to hold office, he shall deposit atthe company's registered office a statement of any circumstancesconnected with his ceasing to hold office which he considers shouldbe brought to the attention of the members or creditors of the

company or, if he considers that there are no such circumstances, astatement that there are none.

An effective notice of resignation operates to bring the Auditorsterm of office to an end as of the date on which the notice isdeposited or on such later date as may be specified in it.

The company shall within 14 days of the deposit of a notice of

resignation send a copy of the notice to the Registrar of companiesand if default is made in complying with this subsection, thecompany and every officer of it who is in default is guilty of anoffence and liable to a fine and, for continued contravention, adefault fine.

14


15/20

Rights of auditors on resignation In case that auditor think that there are circumstances which he

considers should be brought to the attention of members orcreditors of the coy then:

Right to be heard - the Auditor may deposit with the notice asigned requisition calling on the directors of the companyimmediately duly to convene an extraordinary general meetingof the company for the purpose of receiving and consideringsuch explanation of the circumstances connected with hisresignation as he/she may wish to place before the meeting.

The Auditor may request the company to circulate to itsmembers- before the meeting convened on his requisition, orbefore any general meeting at which his term of office wouldotherwise have expired or at which it is proposed to fill thevacancy caused by his resignation, a statement in writing (notexceeding a reasonable length) of the circumstances connectedwith his resignation.

15


16/20

Rights of auditor on resignation Coys obligation - The company shall [unless the statement is received

too late for it to comply or unless the coy applies to the court not to do

so]:- In any notice of the meeting given to members of the company, state

the fact of the statement has been made, and

Send a copy of such a statement to every member of the coy to whomnotice of the meeting is or has been sent.

If the directors do not within twenty one days from the date of thedeposit of a requisition under this section proceed duly to convene ameeting for a day not more than twenty eight days after the date onwhich the notice convening the meeting is given, every director whofailed to take all reasonable steps to secure that a meeting wasconvened as mentioned above, is guilty of an offence and liable to a

fine. If a copy of the statement mentioned above is not sent out as required

because it was received too late or because of the companys default,the Auditor may (without prejudice to his right to be heard orally)require that the statement be read out at a meeting.

16


17/20

Rights of auditor on resignationCopies of a statement need not be sent out and

the statement need not be read out at themeeting if, on the application either of thecompany or of any other person who claims to beaggrieved, the court is satisfied that the rights

conferred by this section are being abused tosecure needless publicity for defamatory oroffensive matter. In this respect the court mayorder the company's costs on such an application

to be paid in whole or in part by the auditor,notwithstanding that he is not a party to theapplication.

17


18/20

Auditors Removal A company may also pass an ordinary resolution at any time to

remove auditor from office, notwithstanding anything in anyagreement between it and him may be due to passage of time orany problems: in that case;

The company must give the existing auditor special notice of themeeting for resolution removing auditor from office.

If the existing auditor wants to make representations the companymust send these to every member of the company (unless the

company applies to the court not to do so). Where a resolution removing auditor from office is passed, the

company must give notice of that fact to the registrar within 14days [sec. 174]. Failing of which the company and every officer of itwho is in default shall be guilty of an offence and liable to a fineand, in the case of continued contravention, to a default fine.

The auditor who has been removed from office has the right toattend, make representations to and be heard at the generalmeeting of the company at which his term of office wouldotherwise have expired or at which it is proposed to fill the vacancycaused by his removal as already described in his resignation andassociated rights

18


19/20

Removal of Auditor

19

Removal ofAuditor

1st Auditor

After Term

Noreappointment

In BetweenTerm

In GM

Subsequent

Auditor

After Term

No

reappointment

In BetweenTerm

In GM with

approval ofC. Govt.


20/20

Rights of an Auditor summarized

To access books of accounts of the company.[227(1)]To seek information and explanation from the officers of the company

To visit branches where he is not satisfied with the details given by thebranch auditor[228]

To receive notice of AGM[231]

To make any representation which the co. can send to all its shareholders orread out at the GM.

To take advice from experts.

To receive Branch Audit Report.

To sign the audit report.

To receive remuneration.To attend AGM.

To speak at AGM.

To be indemnified.

Right of lien.20

Appntmnt Rmvl Aditr Tz

Documents

Transcript of Appntmnt Rmvl Aditr Tz