- 10 Marks
Question
Auditor appointment, dismissal, and remuneration is regulated by Companies Act 2019 (Act 992).
Required:
i) How are auditors of Limited Liability companies:
- Appointed (3 marks)
- Remunerated (2 marks)
ii) What may cause auditors to resign from their appointments? (5 marks)
Answer
i) Per the Companies Act 2019 (Act 992), auditors are appointed by the following process:
- The first auditors of companies are appointed by the directors, who also fill in casual vacancies.
- When a company has no auditor for a continuous period of three months, the Registrar General may appoint an auditor for the company.
- By shareholders at an Annual General Meeting when the appointment of the existing auditor ceases.
(3 points @ 1 mark each = 3 marks)
Per the Companies Act 2019 (Act 992), auditors are remunerated by the following process:
- When directors appoint an auditor, the directors fix the fees for the period expiring at the next AGM.
- When the Registrar General appoints an auditor, the fees are fixed by the Registrar General.
- By an ordinary resolution of the company or in a manner by which the company may direct by an ordinary resolution.
(2 points @ 1 mark each = 2 marks)
ii) Reasons why an auditor may resign:
- In relation to fee matters.
- When the management of the auditee and those charged with governance demonstrate a lack of integrity.
- When audit firms can no longer maintain independence.
- Irreconcilable differences between the client and the auditor.
- When the client changes in size and nature, and the auditor no longer has the competency to perform.
- When the client is engaging in illegal activities.
(Any 5 points @ 1 mark each = 5 marks)
- Topic: Regulatory Framework and Audit Responsibilities
- Series: MAY 2021
- Uploader: Dotse