Statutory Auditors

Part 6 – Financial Statements, Annual Return and Audit

The law in relation to the appointment of statutory auditors stays the same.

It used to be found in Section 160 of the 1963 Act. Now it is found here (Section 380).

• When determining their remuneration, practitioners should turn to Section 381.

• The power of directors to appoint statutory auditors is set out in Section 384.

• The DCE also has the power to appoint them (Section 385).

Statutory auditors have a right of access to the accounting records of the company at all reasonable times.

The most important points to note in this area are:

• They have the right to any information and explanations that appear to them to be within the knowledge of the company’s officers (Section 387). Officers have a mere 2 days to comply with such requests.

• They have powers to extract information and explanations in relation to subsidiaries too (Section 388) and it is a Category 2 Offence to make false statements to them (Section 389).

• Statutory auditors must act with professional integrity, and they have a duty to report to the DCE and to the CRO where they come to the view that inadequate accounting records have been kept (Section 392).

The issues which arise where a SA is removed – or an attempt to remove one is made – or where a statutory auditor resigns – are dealt with between Sections 394 and 402 of the new Act.

The following may be briefly noted:

• A company may remove a statutory auditor in general meeting by passing an ordinary resolution. This is subject to the restrictions set out in Section 395. The main point is that there must be “good and substantial grounds” for the removal. It must be related to the conduct of the auditor in the performance of his duties as auditor of the company.

• A statutory auditor has the right to make representations where his removal is proposed (Section 397). A removed statutory auditor has the right to attend the next AGM of the company, and the next general meeting, at which there is a proposal to put another auditor in their place. A full suite of their rights can be found at Section 398.

Statutory auditors have a duty to notify the Supervisory Authority if they have ceased to act. This should be done within 30 days after the date of cessation. (Section 403).

Practitioners will recognise Section 161A of the 1963 Act in this provision.

The company also has a duty to notify the Supervisory Authority if the statutory auditor has ceased to act. The 30 day time limit is the same, and if the auditor was removed, the company must also send a copy of the resolution which removed him and a copy of any representations he made in writing before the resolution was passed. (Section 404).

A person against whom a disqualification order has been made will be guilty of a Category 2 Offence if he tries to become involved in an audit in any of the three ways listed here (Section 405).

Also a Category 2 Offence is the making of any false statements in any return, financial statement or any document necessary under this part of the Act.