COMPANY AUDITORS

INTRODUCTION

Every company (private or public) must appoint auditor(s) at each annual general meeting to take
office from the conclusion of that up to the conclusion of the next annual general meeting.

Appointment of auditors is therefore compulsory for companies and is not a choice.

PURPOSE

The purpose/objective of the auditor(s) is to examine and report to members on the accounts,
every balance sheet, profit and loss account and all group accounts, if any, laid before the
company the annual general meeting.

An audit safeguards the interest of the members as they do not participate in the day to day
management/control of their company. They therefore appoint a person independent of
management to protect their interest.

QUALIFICATION FOR APPOINTMENT

Must be a member of a body of accountants for this purpose by the Registrar of Companies and
must be a holder of a practicing certificate from that body. This is in order to ensure that only
qualified and deserving persons become company auditors.

(mention ICPAK AND ACCA)

DISQUALIFICATION FROM APPOINTMENT

The following persons are disqualified for appointment as company auditors:

a) An officer or servant of the company (an employee)

b) A person who is a partner of or in the employment of an officer or servant of the
company.
c) A body corporate i.e. a company
d) A person disqualified from acting as auditor of a company’s subsidiary or holding
company of a subsidiary.
FIRST AUDITORS.

Are appointed by directors at any time before the first annual general meeting.

Hold office up to the end of that meeting.

Company, may, at the meeting, remove any such auditors and appoint any other person
nominated by any member at least fourteen days before the meeting.

If directors fail to appoint the first auditors their power to do so expire on commencement of that
first annual general meeting.

AUTOMATIC RE-APPOINTMENT

Once a company auditor is appointed he is considered to be automatically reappointed in the

following AGMs without a resolution being passed unless:

1) He is not qualified for re –appointment; or

2) A resolution has been passed in that meeting appointing another person in his place or
providing expressly that the retiring auditor shall not be reappointed;
3) He has given the company notice in writing of his unwillingness to be reappointed.

SUBSESQUENT REAPPOINTMENT

This done by members in the annual general meeting if retiring auditor is not automatically
reappointed. At least fourteen days’ notice must have been given to the company by a member
nominating a person, other than, the retiring auditor for appointment.

Members vote by a show of hands for the resolution to appoint.

NB

Special notice is required for a resolution at a company AGM appointing as auditor a person
other than a retiring auditor

APPOINTMENT BY REGISTRAR OF COMPANIES

The Registrar of companies has power to appoint auditor for a company in case none is appoint
during the annual general meeting.

When failure to appoint occurs, the company must within fourteen days give a notice of the
same to the Registrar, who may then exercise his statutory power to appoint.

An auditor appointed by the Registrar works for and reports to the members and not the
Registrar.

Members have power to remove such auditor from office expiry of his tenure of office or during
the following AGM.
APPOINTMENT TO FILL A CASUAL VACANCY

A company auditor may be appointed by the Board of directors to fill a casual vacancy in the
office of the auditor.

A casual vacancy arises if auditor vacates office by sudden death (case of sole auditor),
bankruptcy, and unsoundness of mind.

AUDITOR RESIGNATION

A company auditor may resign from office at any time by delivering a written notice on the same
to the registered office of the company.

However, the resignation is incomplete unless accompanied by;

a) a statement of facts which he feels should be brought to the attention of members about
the situation, or
b) a statement that there are no such facts.
REMUNERATION

Auditors’ remuneration is determined by the appointing authority. If appointed by members they

fix his remuneration, and directors and Registrar of companies fix it if they appoint auditor.

Members may, however, delegate their power to directors to fix remuneration for the auditor
they appoint.

Remuneration is by way of professional fees for services rendered and includes sums paid by the
company to auditor in respect of the auditors’ expenses.

Auditors’ remuneration must be shown separately in the company’s profit and loss account

REMOVAL OF AUDITOR FROM OFFICE

Members in a company general meeting have power to appoint the auditor from office at any
time. This is the case irrespective of any agreement between the auditor and the company to the
contrary.

Members therefore have absolute power to retain or remove their company auditor.

Procedure ( leave out for diploma but include for degree)

RIGHTS OF A COMPANY AUDITOR

A company auditor has the following statutory rights to enable smooth performance of his duties:

1) Access to company books at all times

2) Requiring from officers of the company such information and explanations as he thinks
necessary for the performance of his duties.
3) Receiving all notices of, and other communications relating to any general meeting of the
company
4) Attending any general meeting of the company and being heard on any part of the
meeting which concerns him as an auditor.
5) Making representations to defend himself in case of accusation and intended removal
6) Lien over company books in his possession until payment from services rendered.
DUTIES OF COMPANY AUDITORS

1) To examine financial statements and underlying books of account

2) To report to the members if financial statement portray a true or fair view or not.
3) To provide auditors’ report for issue with prospectus- if any, is being issued
4) To exercise skill and care (due diligence, reasonable competence and caution) in giving
professional opinions.
5) To carry out investigations as to whether;
-proper books of account have been kept,
-proper returns adequate for their audit have been received from unvisited branches
-final accounts are in agreement with books of account
6) To report by exception i.e. if
- proper books of account are not kept,
- adequate returns are not availed for braches not visited,
-balance sheet and profit and loss account are not in agreement with books.
7) Certifying the statutory report