AUDITS AND PUBLIC

Poverty Bay Herald, Volume LX, Issue 18236, 3 November 1933, Page 11

AUDITS AND PUBLIC

A DEBATED PROVISION A MATTER OP PROTECTION QUESTION OP QUALIFICATION An unpui'ianL principle oi. pnot-ection ol shareholders in companies registered under the Companies Art is involved it) .section 1«10. suh-sertion of the. Conn panips Bill which inis been introduced in the lltnise of l!< j>iesentatives, states the \V(»11 iiit*tini Post. As the- holding of shares in such companies is very widespread antoii" tin’ general public, the new proposal demands attention. Some of the pu'dished eommout on this matter indicates a irtisiiinle.istanding of the position. and tile. Council of the New Zealand Soniatv of Aceountants explains I hat tlie o ojffled legislation relates only to tlia audit of the accounts ol companies registered mider the Act and is designed to protect- the public. In no way is tin- section concerned with the practice of accountancy generally. Till-: PRESENT RISK “Under the. existing Companies .Act,” the conned states, “any person other than a director or olliccr of tiie company may be appointed auditor of a company. No' qualiliealion of any kind is required. The appointment is made and the remuneration is fixed by the shareholders. to whom the 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 now being taken of the provisions of the Companies Act to form limited liability companies, it is a question for the Legislature to .decide whether it is in the public interest that the present state of affairs should bo permitted to continue. Obviously it is capable of being gravely abused, to the injury of shareholders, debentureholders. creditors, employees, and tho public generally. Till: PROPOSED SIFTING “The Companies Bill now before Parliament provides that, except with the approval of the Minister of Finance, no person shall be 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, tho New Zealand Accountants’ and Auditors’ Association, or of some body of accountants constituted elsewhere in the. British Empire and approved by the Minister of Finance. 11. will 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 nominated bodies. Furthermore, it is specially provided that any person who, at tho commencement of the Act, is acting as the auditor of a company, shall not be disqualified either from continuing in office or from reappointment. These provisions are designed to protect the interest, while at the same, time avoiding the imposition of undue hardship on persons who are now carrying out the 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 25 years ago led Parliament to the conclusion that in tlm public interest tho time bad arrived to place the accountancy profession under proper control and regulation. Under the Act passed in 1808 the society was established to control and regulate tho practice of ac countancy in New Zealand. “By regulations issued under Order in 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 25 years of unremitting effort in many directions, the society lias raised the status of accountancy in the Dominion to a level comparable with that in any part of tho world. “From the outset every care has been exercised to avoid hardship in individual cases, and in every direction the policy of the society lias been ns liberal as the maintenance of a proper standard of qualification will permit. “Since the registration of the original members the method of admission has been Try examination. The council of the society took steps to institute an examination system and the examinations have been for over 20 years conducted bv the University of New Zealand.

“Any allegation that the society is a ‘close corporation’ is refuted by the fact that the society lias spent over £6OOO in providing accountancy tuition at university colleges and technical schools throughout the Dominion, so that training for the profession of accountancy may lie made available to all candidates. In addition the, s<icie|y renders substantial monetary and other assistance to _ the various accountant student societies which are established in all main centres. “During the past 25 years more than 1200 persons have qualified by examination and have been admitted to membership of the society. Seventy per cent., of (he 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 to-day who are outside the society’s membership have had an equal opportunity with those 1200 of qualifying by examination, hut have either been incapable of passing the examinations or have not had sufficient- application to settle down to the necessary study. More than 3000 students sit each year in the various stages of the society’s examination —the largest number sitting for any group of examinations conducted by the University of New Zealand. “Auditing is a specialised branch cu 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 he conducted by qualified members of the body that the Parliament of the country has , set up to control the practice of the profession.’’ :