When a company is formed, one of the first things that needs to be done is to appoint an auditor. The auditor is a professional who is responsible for reviewing the financial statements of the company and making sure that they are accurate and comply with the relevant accounting standards. The appointment of the first auditor is an important step in the life of a company, and it is something that should be taken seriously.
What is the Role of an Auditor?
The role of an auditor is to review the financial statements of a company and provide an independent opinion on whether they are accurate and comply with the relevant accounting standards. This is an important role because it helps to ensure that the financial statements of a company are reliable and can be used by investors, creditors, and other stakeholders to make informed decisions about the company.
Some of the key tasks that an auditor will perform include:
- Reviewing the financial statements to ensure that they are accurate and complete
- Checking that the company has complied with all relevant accounting standards
- Assessing the company's internal controls to make sure that they are effective
- Providing an opinion on the financial statements
When Should the First Auditor be Appointed?
The first auditor of a company should be appointed as soon as possible after the company is formed. This is because the auditor will need to review the company's financial statements from the start of the company's operations. The Companies Act 2014 requires that the first auditor is appointed within 28 days of the registration of the company.
The appointment of the first auditor is usually done by the board of directors of the company. The auditor must be a qualified accountant and must be independent of the company. This means that they cannot have any financial or personal interest in the company.
What Happens if the First Auditor is Not Appointed?
If the first auditor of a company is not appointed within 28 days of the registration of the company, there can be legal consequences. The Companies Act 2014 provides that if the first auditor is not appointed within the required time frame, the company can be fined up to ???5,000. In addition, if the company fails to appoint an auditor within 3 months of the end of its financial year, the company can be fined up to ???50,000.
It is therefore important that the first auditor is appointed in a timely manner to avoid any legal consequences.
How Long Does the First Auditor Hold Office?
The first auditor of a company holds office until the first annual general meeting (AGM) of the company. At this AGM, the members of the company will appoint the auditor for the next financial year. The auditor will then hold office until the end of that financial year.
After the first year, the auditor will be appointed annually by the members of the company at the AGM. The appointment of the auditor is subject to ratification by the members at each AGM.
Conclusion
The appointment of the first auditor of a company is an important step in the life of a company. It ensures that the financial statements of the company are accurate and reliable, and can be used by investors, creditors, and other stakeholders to make informed decisions about the company.
The first auditor should be appointed as soon as possible after the company is formed, and should be a qualified accountant who is independent of the company. Failure to appoint the first auditor within the required time frame can result in legal consequences.
