Chapter 11 - Company auditors Flashcards
Compulsory disclosure of financial information concerning the company plays an important role in protecting the interests of shareholders, investors and creditors. In order to undertake certain projects, companies usually depend on capital investments made by members of the public. For example, members of the public may purchase shares or debentures in the company or advance loans to the company. Investors and financiers are usually not willing to invest or lend money unless there is proper fina
Which companies are obliged to appoint an auditor?
- Public Companies
- State-owned Companies
- Certain types of private companies
Who may be appointed as an auditor?
Only a registered auditor may be appointed as auditor of a company. In terms of Section 37 of the Auditing Profession Act, only a person who has complied with the prescribed education, training, and competency requirements, who has made arrangements regarding his or her continued professional development where that individual is not a member of an accredited professional body, who is fit and proper person to act as an auditor, and who is resident within South Africa, may be registered as an auditor.
Which people are disqualified from becoming an auditor?
According to Section 37(3) of the Auditing Profession Act, any person who has been removed from an office of trust as a result of misconduct, who has been convicted of theft, fraud, forgery or other acts of dishonesty or corruption, or who has been declared by a court to be of unsound mind and unable to manage his or her own affairs, may not be registered an auditor.
At which meeting must an auditor be appointed?
At a general meeting
How often must an auditor be appointed?
Every year.
Which companies are obliged to appoint an audit committee?
- A public company
- A state-owned enterprise
- Any other company that has voluntarily decided to have an audit committee.
For how long may the position of auditor remain vacant in a company?
A new auditor must be appointed to replace an auditor who resigns within 40 business days after the filing of his or her resignation .
Explain the procedure for the appointment of an auditor to fill a company vacancy
Prior to making an appointment, the board must propose to the audit committee, within 15 business days after the vacancy occurs, the name of at least one registered auditor to be considered to replace the auditor who resigned. The board of directors may appoint the person proposed if, within five business days of making the proposal, the audit committee does not give notice in writing to the board rejecting the proposed auditor.
For how many consecutive years may the same auditor compile a company’s financial statements?
The same individual may not serve as the auditor or designated auditor of a company for more than five consecutive financial years.
What rights do company auditors enjoy?
The company auditor has a right to access, at all times, the accounting records and all books and documents of the company. The may attend any general meeting held by the company.
How is the audit committee appointed?
An audit committee is appointed at each annual general meeting and must be appointed for every financial year. The audit committee must have at least three members and consist only of non-executive directors of the company who have not been involved in the day-to-day management of the company in the preceding three financial years.
What are the duties of the audit committee?
- Nominate and appoint a registered, independent auditor.
- Determine the fees to be paid to the auditor and the auditor’s terms of engagement.
- Ensure that the appointment of the auditor complies with the Companies Act and other legislation.
- Determine the nature and extent of non-audit services that the auditor may provide or must not provide
- Pre-approve any proposed agreement with the auditor for the provision of non-audit services.
- Prepare a report to be included in the annual financial statements.
- Receive and deal with complaints to the accounting practices and internal audit of the company related matter.
- Make submissions to the board on accounting policies, financial control, records and reporting.
- Perform other functions as determined by the board, including the development of policy in order to improve governance.
- Consider whether the auditor’s independence may have been prejudiced.
- Consider whether compliance with other criteria relating to independence or conflict of interest as prescribed by the IRBA.
