AUDITS AND PUBLIC

Evening Post, Volume CXVI, Issue 105, 31 October 1933, Page 11

AUDITS AND PUBLIC

A DEBATED PROVISION

MATTER OF PROTECTION

QUESTION OF QUALIFICATION

An important principle of protection of shareholders in companies registered under-the Companies Act is involved in section 140, sub-section 2', of the Companies Bill which lias teen introduced in tha House- of Representatives. As the holding of shares in such companies is very widespread among the general public, the new proposal demands attention. Some of the published comment on this matter indicates a misunderstanding of the position, and tho Council of the New Zealand Society of Accountants explains that the projected legislation- relates only to tho audit of the. accounts of companies registered under tho Act and is designed to. protect the public. In no way is the section concerned with the practice of accountancy generally.

THE PRESENT RISK.

"Under the existing Companies Act," tho council states, "any person other than a director or officer, of the .company may be appointed auditor of a company. No qualification, of any kiud is required. The appointment is made and the remuneration is fixed by the shareholders, to whom tho auditor is required to report. In actual practice) the appointment is frequently more or.less controlled ,by the directors. As a. general rule auditors of undoubted qualifications and standing are elected. Nevertheless, as the law stands, it is possible to appoint as auditors, persons who have no real qualifications or knowledge of the onerous duties and responsibilities of'the position. ' Having regard to, the extent to which advantage is nor beiilg taken of' the provisions of,the Companies Act to form limited liability companies^ Nit is a question for the.legislature . to whether it is in the public interest that the. present state of affairs should be permitted to continue, , Obyiously, it. is capable of being gravely abused, to the injury of shareholders, debenture-holders, creditors, empioyoes, and tho public generally.

THE PROPOSED SIFTING.

"The Gompanies Bill now : before Parliament provides that, except with tho approval of the Ministor of Finance, no person shall bo ' qualified for appointment as auditor of a company unless he is a .member of the New Zealand Society of Accountants,, the Incorporated Institute of Accountants of New Zealand, the New Zealand- Accountants' and Auditors' Association, or of some body, of accountants . constituted, elsewhero in tho British Empire and approved by the Minister of Finance. It wiir be observed that the Minister of Finance has discretionary .power to approve of. the qualifications of any person who may not be a member of any of the nomiuated^bodies. Furthermore, it is specially provided that any person who, at the commencement of the Act, is acting as the auditor of a company, shall not i He' disqualified cither from continuing in office or from reappointment. These provisions are designed to,-protect the.public interest, while at the' same tinie avoiding tho imposition of undue hardship on persons who are now carrying out tho duties of auditors, , .;

ORIGINAL;PURPOSE OF THE LAW;.

' '^Protection Of'the public against abuses in accounting and auditing was one of the main considerations which some twenty-five years ago led Parliament to the conclusion that in the public "interest the time had arrived to pluco the accountancy profession, under proper control and regulation. Under the Act passed in 1908 the society was established to control and regulate the practice of accountancy in New Zealand.'' ;

.'.' By regulations issued under Order ins Council the society was given extensive disciplinary powers over, its members; and by the judicious exercise of those powers by an exceptionally active educational policy and by twenty-five years of unremitting effort in many directions, the society has raised tho status of in the Dominion to a level comparable with that in any-part of the world.

"From thn outset every care has been exercised to avoid hardship in individual eases,. and 'in every direction tho policy of the-society has been as liberal as the maintenance of a proper standard of qualification will permit.' FOUNDATION OF THE SOCIETY.

When the,society's Act of incorporation was passed any person who made application- was entitled to be registered as a member provided that at any time before the passing of tho Act ho hud had three years' continuous service as an accountant and that ho satisfied the Eegistration Board (set up by the Government) as to his proficiency in the duties of an accountant. The board, approved of 2146 persons being registered, as foundation members of the- society..

NOT A "CLOSE CORPORATION."

.' f Since .tho registration of, the origv nal members the method of admission has been by examination. The council,of the society took steps in institute) an examination, system and the examinations have been'fpr over twenty years conducted by the University of New, Zealand. , . .

. "Any allegation that the society is a "«loso corporation" is refuted by the fact that the society has spent over £6000 ill providing accountancy tuition at university colleges -and technical schools throughout the Dominion, so that training for tho- profession of accountancy may bo made available to all candidates. In addition the- society renders substantial monetary and other assistance to the various accountant student societies which are established in all main centres.

"During the past twenty-five years more than 1200 persons have qualified by examination and have been admitted to membership of the society. Seventy, per cent, ot' the present members are qualified by examination and the remaining 30 per .cent, are qualified by 25 years' experience. Those few persons practising accountancy in the Dominion today who are outside the society's membership have had an equal opportunity with these 1200 of qualifying by examination, but have either been incapable- of passing the examinations or have not had sufficient application to settle down to the necessary .study. More than 3000 stu/lcnts sit each year in the various stages of the society's examinations—the largest number sitting for any group of examinations conducted by tho University of New Zealand.

. "Auditing is a specialised branch of accountancy, and its 'close and vital relation to the public interest makes it highly desirable and indisputably logical that audits—particularly the audits of registered companies—should be conducted by qualified members of the body that the Parliament of the country hns set up to control the practice of the profession."i

Ramsey Wilson and Co., auctioneers, will sell furniture and general household goods at their auction, mart, 98 Manners Street, at 1.30 , p.m. tomorrow.

The Rialto Auction .Rooms, Bond Street, will sell thermos flasks, a vacuum cleaner, and the general contents of a four-roomed house at 2 p.m. tomorrow,