AUDITORS—AND DIRECTORS
TACTFUL CO-OPERATION The question of the responsibilities of auditors to directors of companies is discussed editorially in the current issue of the New Zealand "Accountants’ Journal.” “While primarily the Companies Act provides that an auditor is elected by the shareholders and is generally regarded as their representative rather than as a servant of the directors it must be conceded that the successful and harmonious conduct of a company is possible only with the co-operation of the auditor, the secretary, and the board,” it is stated. "Apart from the impropriety of individual shareholders approaching either the secretary or the auditor to obtain information to which they are
not entitled and the broadcasting of which may detrimentally affect the company, a disclosure of confidential details is unfair to the management. "In our experience auditors as a rule can be classed with that proverbial bivalve, the oyster, in respect to the inner workings of their clients’ affairs and our code of ethics rightly dictates that this should be the case. If shareholders in a company are not satisfied with the conduct of its affairs they have a constitutional remedy and that is to nominate other directors. Otherwise, they have no right to expect company officials or the auditor to give them details which are not available to outsiders. We may state, however, that it is not unusual for nervous investors to sometimes seek information from directors or the secreand a company’s prospects. Such enquiries can be discreetly and tactfully handled and this is the usual procedure. "A board of directors is elected by shareholders to control the affairs of a company and each director is not only legally responsible for his actions and those of his colleagues but he assumes certain moral obligations. While an auditor may feel it incumbent upon himself to draw the attention of the directors to what he considers to be mistakes in matters of policy the responsibility of management must rest on the shoulders of the board. Provided that the records and accounts are kept in proper manner and the final returns adequately represent the true financial psition of the company as disclosed by the books the auditor can give a clean certificate. Obviously if errors of principle have occurred, if insufficient depreciation has been allowed or if book debts, stock or other assets have been over-valued the auditor will qualify his certificate and draw attention to the position in his report. "We have known of cases where auditors have rendered valuable services to companies by helpful and tactful suggestions and recommendations to the management or the directors but this has been accomplished by cooperation and not in any dictatorial spirit. Where ideas, as a result probably of wide experience, are proffered by the auditor in the right manner they will be welcomed if they can be adopted and we are sure that this is what happens in most instances.”
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Bibliographic details
Timaru Herald, Volume CXLVII, Issue 21507, 21 November 1939, Page 3
Word Count
484AUDITORS—AND DIRECTORS Timaru Herald, Volume CXLVII, Issue 21507, 21 November 1939, Page 3
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