REMOVAL OF AUDITOR FROM OFFICE BY SHAREHOLDERS


If a shareholder wishes to propose that their current auditors’ be removed from office during the forth coming annual general meeting he must follow the following procedures under the provisions of the companies Act.

  • He must issue a notice to the directors of the company of the intended resolution to remove the current auditors from office. The notice should be sent within such time that it is possible for the directors to serve the auditor with a 28days notice of the intended removal before the annual general meeting or such meeting where the auditor’s removal will be discussed.
  • Having received the notice, 28 days before the meeting, the auditor has a right to make written representations to be circulated to the members of the company before the general meeting. If the directors do not circulate such representations, the auditor has a right to read them during the general meeting.
  • During the general meeting the auditor has a right to speak on any matter that concerns him as the outgoing auditor.
  • During the meeting the proposed resolution to remove the current auditor will be brought for voting. Only a simple majority of over 50% of the voting shareholders will be required to remove the auditor from office.

Inadditions to the guidelines issued by ICPAK on professional independence, suggest other steps that may be undertaken by regulators, the client and the profession to improve auditors’ independence.

  • Peer reviews should be made compulsory. Peer reviews involve an independent auditor or body of independent experts carrying out a review of the work carried out by another auditor. Such reviews will ensure that all audit work especially for public limited companies is carried out to the best quality possible.
  • The Companies Act should be amended to include provisions on the maximum duration of time that an auditor can serve one client. Currently there is no restriction as to how long an auditor can serve a client. Compulsory rotation of auditors should be enforced.
  • Strict guidelines should be issued on the provision of non-audit services such as tax consultancy and accountancy services to audit clients. This will eliminate the possibility of conflict of interest that arises when an auditor performs other work in addition to the audit. In addition the provision of these services has been known to make auditors financially dependent clients.
  • The companies’ Act should seek to offer more protection to the auditor from being removed from office because of reasons such as issuing a qualified opinion. Such protection would be necessary if auditors are to avoid being compromised for fear of losing a client.
  • The law should penalise clients who deliberately seek to influence the outcome of the auditor’s work. E.g. through undue hospitality.