ABSTRACT
The Council of the Institute have had Counsel’s opinion on the clauses of the new Companies Act affecting Auditors and Accountants, which is as follows:—
In our opinion the provisions contained in Sections 21, 22, and 23 of the Companies Act, 1900, are supplemental to and not in substitution for provisions as to audit contained in the Companies Act, 1879 (where applicable), and in Articles of Association or Regulations of a Company, and, accordingly, we are of opinion that the Act of 1900 does not relieve an Auditor from the necessity of complying with such provisions, even though the latter impose obligations beyond those imposed by the Act of 1900. In so far, however, as the Act of 1900 is inconsistent with the earlier provisions, the Act must, of course, prevail.
In our opinion the words “books of the Com-“pany” in Section 23, which gives to the Auditor a right of access at all times to the books and accounts and vouchers of the Company, mean all the books—not merely the books of account of the Company; the words, therefore, include the Minute Books and Letter Hooks.
In our opinion the word “requirements” in Section 23, which makes it necessary for the Auditor’s Certificate to state whether or not his requirements as Auditor have been complied with, is used in its popular sense, and not as referring merely to what he is entitled to require under the preceding words of the section.
In our opinion where the auditor’s requirements are not complied with the Auditor should specify in his Certificate in what respects they have not been complied with; and if there is no Balance Sheet on which to place the Certificate then the Auditor should so specify in his Report. But if the specification of the instances of non-compliance be lengthy we see no objection to the Certificate stating that all the requirements have not been complied with without specification of details, provided that it refers to the report for the details.
In our opinion the Certificate and Report referred to in Section 23 must be separate and separately signed, even though both be placed on the Balance Sheet. There would, however, be no objection, if it be desired, to connect the Certificate with the Report by inserting in the Certificate a reference to the “subjoined” or “accompanying” Report; and, as an alternative, where thought expedient, the Certificate might set out the Report verbatim, thus:—I certify, etc., and I report to the Shareholders that, etc. Signed A. B. If, however, this course be adopted it will, in our opinion, still be necessary that the Auditor should make and sign the Report separately, and send it in to the Directors to be placed before the Shareholders.
As regards the form of Certificate, it may run thus:— Auditor's Certificate.
In accordance with the provisions of the Companies Act, 1900, I certify that all my requirements as Auditor have been complied with.
And the Report might run thus:—
To the Shareholders of the Company,
Lim. Auditor's Report.
I have audited the above Balance Sheet [or the Company's Balance Sheet dated the day of ] and in my opinion such Balance Sheet is properly drawn up, so as to exhibit a true and correct view of the state of the Company’s affairs as shown by the Books of the Company.
Section 23 of the Act of 1900 requires the Auditor to report whether the Balance Sheet is properly drawn up, so as to exhibit a true and correct view of the state of the Company’s affairs, as shown by the Books of the Company. In our opinion, these words, “as shown by the Books of “the Company,” do not limit the Auditor’s duties to a comparison of the figures. No doubt he has to examine the Books, but as Lord Justice Lindley said, in In re The London and General Bank (1895, 2 Ch. 683): “He does not discharge his duty by “doing this without enquiry, and without taking “any trouble to see that the Books themselves “show the Company’s true position. He must “take reasonable care to ascertain that they do “so.”
R. B. HALDANE. C. SWINFEN EADY. A. R. KIRBY. FRANCIS B. PALMER.