Section 90 of the Companies Act 2008 Does Not Apply to Auditors - and thats final
Section 90 (1), (2) and (3) have given rise
to a variety of interpretation challenges which is currently having a profound
negative impact on auditing profession in South Africa. Confusion has been
created as result of the misconception that s 90 (2) of the Companies Act 2008
prohibits a registered auditor from providing auditing and certain non-audit services
to the same client. This confusion is aggravated by the lack of guidance on the
meaning of the terminology as used in the legislation and the overlap in
respect of the provisions in s 90 with various similar provisions in the
Auditing Profession Act 2005 (APA).
Section 90 must be read in conjunction with s
94 (7) (a) of the 2008Act. Section 94 (7) (a) places the appointment of the
auditor the sole responsibility on the company and its directors. As s 90 is
entitled “Appointment of auditor” it is safe to conclude that s 90 applies to the company and its directors. Section
94 (7) (a) reads as follows: An audit committee of a company has the following
duties: “To nominate, for appointment as
auditor of the company under section 90, a registered auditor who, in the
opinion of the audit committee, is independent of the company”. It
important to note that s 90 (2) contains very specific employment relationships
that a registered auditor may have with his or her client that if existed would
preclude the company and its directors from appointing the registered auditor
as the external auditor of a company. These employment relationships are the most
crucial from a policy perspective that if violated would detract from the
objectives of the 2008Act. Section 90 clearly places the onus on the company
and its board of directors to ensure that the auditor is independent of the
company. It would be an unlawful act – a contravention of s 90 - by the company
and its directors if a registered auditor were appointed where such an employment
relationship existed. In addition, any registered auditor who consents to be
appointed as auditor for any company knowing that he or she is in one of the
employment relationships such a registered auditor may have also committed an
unlawful act but not in contravention of s 90 but in contravention of s 41 of
the Auditing Profession Act 2005.
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