By Fitz Casserley, contributorI WOULD like to suggest that the new Companies Act, which is now before Parliament, incorporate the relevant provisions to make the audit of private companies, under the new Act, optional at the instance of the shareholders.
An audit of a private company pre-supposes the preparation and production of a standard set of financial statements.
Therefore, those private companies which opt not to have an audit, will be required, under the Act, to prepare a standard set of financial statements with an accountants' report attached.
With an audit report, the accountant expresses an opinion on the set of financial statements, as to whether or not they show a true and fair view of the state of affairs of the company. On the other hand, an accountants' report attached to a set of financial May 9, 2002
Statements will disclaim any such opinion.
An Example:
To the shareholders of Bull and Bears Limited for the year ended December 31, 2002.
ACCOUNTANTS' REPORT
We have prepared the attached balance sheet and supporting financial statements, contained in points 1-8, of Bulls and Bears Limited, for the year ended December 31, 2002, from the books, vouchers, information and explanations produced to us.
We have not performed an audit on these financial statements and therefore do not express our professional opinion on them.
COUNT AND ASSOCIATES CHARTERED ACCOUNTANTS
Many years ago a book was written entitled "Something of value". The theme from the author of the book was that, if "something is taken" from a person then it must be replaced by "something of value".
The option for a private company to subject itself to a statutory audit or to have a set of accounts with an accountants' report, could facilitate the following:
A new private company with one or two shareholders could opt for a set of financial statements with an accountants' report. However, as the company shows, the shareholders can opt to have an audited set of Financial statements with an audit report attached.
If a private company, with say, five shareholders, had opted for an audit, and the five shareholders sold their shares in the company to one major shareholder, then the new shareholder may opt to continue to have an annual audit or to have a set of financial statements with an accountants' report.
An existing private company will have the option to change from an accountants' report to an audit report on their annual financial statements or vice versa.
It should be observed that whichever option is selected by a private company, it will have a set of accounts coming under the scrutiny and report of practicising chartered accountants, as evidenced by the type of report attached.
Where a firm of practising chartered accountants have a block of private companies in their audit clients' portfolio, and some of those private companies opt for an accountants' report on their accounts, then in accordance with Mr. Richard Downer's (of PWC) contention, some amount of professional time will be released for deployment on other professional and management services.
This time saving will also be to the benefit of company directors and managers.
Private companies which, because of the nature of their trade or business, are subject to specialist financial and other regulations, would not be able to access the option not to have an annual audit, unless the nature of their trade or business change in such a fundamental manner so that they are no longer subject to these specialist financial and other regulations.
With the adoption of the "Option audit rule", there would be no need to pursue the problematic subjective classification of a "small company" in order to decide whether it should be exempt from a statutory audit.
Where the companies act requires an auditors' certificate to support an asset declaration, then the "balance sheet" of the company with the accountants' or auditors' report should suffice.
