Ch 14 - Auditors, The Secretary and Company Accounts Flashcards
Explain the main duties owed by an auditor to the company
(i) to report to the members as to whether the accounts give a true and fair view and have been properly
prepared in accordance with the Companies Act;
(ii) the auditor must state in his report whether or not the directors’ report is consistent with the accounts and
the report must be signed by the auditor.
The auditor in preparing his report has a duty to out investigations as are necessary to form an opinion as to
whether:
(i) proper accounting records have been kept and proper returns adequate for the audit have been received
from the branches;
(ii) accounts are in agreement with the accounting records;
(iii) the information in the director’s remuneration report is consistent with the accounts- if the auditor considers
that any of the above has not been carried out he has a duty to state this in his report.
The Auditor has a right to access all books and accounts of the company, attend and speak at general
company meetings and a right to receive a copy of any written resolution proposed.
[Students may also refer to the ‘duty of care’ an auditor owes the company, which means that the auditor
must carry out his work with reasonable care and skill]
Outline the procedure for the appointment and removal of an auditor
Section 485 CA 2006 states that the first Auditor of the company is appointed by the directors at any time
before the first period for appointing an auditor and remains in office until the end of the first meeting at which
the account are considered.
Thereafter the members may then appoint or reappoint an auditor at a meeting of the company’s members,
If members do not do so, the auditor remains in office and is deemed automatically reappointed unless:
1. the Auditor is the first auditor who was appointed by the and has not yet had their first appointment by the
members;
2. the Articles require formal reappointment;
3. members holding 5% of the voting rights serve notice that the auditor should not be reappointed;
4. a resolution has been passed to appoint another person as Auditor; or
5. the directors have resolved that the next financial year the company will be exempt from audit.
The directors also have the capacity to appoint a person to act as auditor to fill a casual vacancy arising
during the year. If the members fail to make the appointment of an auditor then the Secretary of State can
make the appointment.
Removal of the auditor :
Sections 510-513 CA 2006 provides that an Auditor may be removed from office by an ordinary resolution,
requiring special notice to members.
A copy of this resolution must be sent to the Registrar within 14 days and to the Auditor whose removal is
intended.
The Auditor has the right to contact the company and shareholders for the purpose of canvassing for his
re-appointment, and may attend the relevant company meeting or make a representation in writing to the
company.
If this representation is received in advance of the meeting then it should be circulated to all members, at the
company’s expense.
If the auditor is removed, he must make a statement of circumstances.
Outline the conditions that must be satisfied in order for them to obtain an audit exemption.
Audit Exemption Requirements
- turnover does not exceed £10,200,000;
- balance sheet total of not more than £5,100,000 for that year;
- the company is a small company - not more than 50 employees;
- a company “dormant” since its foundation or since the last financial year;
- it meets the above criteria and is not a public, bank or insurance company (Sections 471-481 CA 2006);
- a company that is non commercial, non profit making and subject to audit by a public sector auditor.
Outline the content of the annual return;
General information included in the annual return include the following (as per CA 2006 and the Companies
Act? 2006 (Annual Return and Service Addresses) Regulations 2008):
(i) the address of the registered office of the company;
(ii) the address (if different) where the register of members is kept;
(iii) the type of company and its principal business activities;
(iv) particulars of members of the company;
(v) particulars of those who have ceased to be members;
(vi) the particulars of directors and secretary;
(vii) if the company has shares - information regarding the share capital;
(viii) details of the shareholders.
When is the company’s Annual Return Date (ARD)?
The ARD is either the anniversary of the company’s incorporation or if the company’s previous return was
made on a different date to that, the anniversary of that date.
When must the Annual Return be filed and what are the consequences for failure to file?
The annual return must be delivered to the Registrar within 28 days of the return date - failure to comply
means that the company is guilty of an offence and liable to a fine.
Explain the role of an auditor;
An auditor is an independent professional expert appointed by a company to prepare an independent report
on the financial affairs of the company (audit the company), and to present this report to the shareholders at
the annual general meeting.
What must be stated in the ‘statement of circumstance’ submitted by the auditor before leaving office?
(i) that there are no circumstances that the auditor believes that should be brought to the members or creditors
attention; or
(ii) that there are circumstances that the auditor believes that should be brought to the members or creditors
attention.
Conditions to be appointed auditor.
(i) must hold the correct qualification and be a member of the recognised supervisory body;
(ii) must not be guilty of a company law offence;
(iii) must be independent from the company- must not be an officer or employee of the company
