Auditors Can Do The Books/AFS
Section 90 (2) and (3) of the Companies Act, 2008 in essence deals with the persons who are disqualified from being appointed as auditors of companies. The question arises as to whether Section 90 (2) and (3) of the Companies Act, 2008, expressly disqualifies an auditor being appointed to perform a statutory audit if that person provides accounting or secretarial services to company requiring the audit?
Section 90 (1) ensures that a
person has to be a registered auditor as defined in the Auditing Profession
Act, No. 26 of 2005 (APA) before qualifying for any statutory appointment as an
auditor of a company. The term “registered auditor” has the meaning assigned to
it in S 1 of the APA: “an individual or
firm registered as an auditor with the Regulatory Board”. The reference to “auditor” in the Auditing Profession Act
and the Companies Act denotes both a firm and an individual who is a registered
auditor, unless the reference expressly indicates a particular meaning (e.g. “individual auditor” or “designated auditor”). [1]
Section 90 (2) states that to be appointed as
an auditor of a company, whether as required by subsection (1) or as
contemplated in section 34 (2), a person or firm in addition to the prohibition
contemplated in section 84(5), must not be: an employee or consultant of the
company who was or has been engaged for more than one year in the maintenance
of any of the company’s financial records or the preparation of any of its
financial statements; or a person who, alone or with a partner or employees,
habitually or regularly performs the duties of accountant or bookkeeper, or
performs related secretarial work, for the company. The emphasis appears to be
on the words “for more than one year”,
so that a person who is called in only temporarily to perform the duties of a
bookkeeper, e.g. when the permanent bookkeeper is away, or who has done so for
not longer than a year, pending the appointment of a permanent bookkeeper,
would not be disqualified in terms of this subsection. A part-time bookkeeper,
however, who is permanently employed as such is consequently disqualified.
Section 90 (3) states that If a
company appoints a firm as an auditor, the individual determined by that firm,
in terms of section 44(1) of the Auditing Profession Act, to be responsible for
performing the functions of auditor must satisfy the requirements of subsection
(2).
The two important subsections
that deal with this problem are Section 90 (2) (ii) must not be: an employee or
consultant of the company who was or has been engaged for more than one year in
the maintenance of any of the
company’s financial records or the preparation
of any of its financial statements and (iv) a person who, alone or with a partner
or employees, habitually or
regularly performs the duties of accountant or bookkeeper, or performs
related secretarial work, for the company.
Section 90 (2) (ii) specifically
refers to the auditor as an employee or the auditor as a consultant. Therefore
before an auditor is disqualified for appointment in terms of this section the
auditor would have to be an employee of or a consultant to the company.
Consequently if the auditor is neither of the two that auditor is not
disqualified for appointment of auditor of that company. The question of
whether a person is an employee of a company must be viewed in the light of the
??.
Section 90 (2) (iv) emphasises
the words “habitually or regularly”,
so that a person who is called in only occasionally to perform the duties of accountant
or bookkeeper would not be disqualified in terms of this subsection.
Section 90 (3) states that if a
company appoints a firm as an auditor, the individual
determined by that firm, in terms of Section 44 (1) of the Auditing Profession
Act, to be responsible for performing the functions of auditor must satisfy the
requirements of subsection (2). In terms of S 44 (1) of the APA, where a firm is appointed to perform an
audit, that firm must immediately decide as to the individual registered auditor(s) within the firm that will be
responsible for the audit. The first name and surname of such individual must
be forwarded to the company (as well as to the Independent Regulatory Board for
Auditors on its request). The designated auditor has to comply with the
requirements of sub-s (2). The impact of S 90 (3) is that the disqualification
criteria in Section 90 (2) (ii) and (iv) extends only to the individual partner, not the firm.
[1]
e.g. S 91 (resignation of auditors and vacancies); S 92 (rotation of auditors);
S 93 (rights and restricted functions of auditors). Thus, as is the case in
terms of the Auditing Profession Act, in terms of the Companies Act, certain of
the duties imposed upon an auditor apply only to an individual who is the
registered auditor, while other provisions apply both to the appointed firm and
to the designated individual.
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