The term of the auditor ship of first auditor would be from the date of appointment till__

 Options:

a) the conclusion of statutory meeting b) the conclusion of first annual general meeting c) the conclusion of next annual general meeting d) the date of removal

The Correct Answer Is:

b) the conclusion of first annual general meeting

Correct Answer Explanation: b) the conclusion of first annual general meeting

The term of an auditor’s appointment is a crucial aspect governed by company laws and regulations. In this context, let’s delve into why the correct answer is option (b) – “the conclusion of first annual general meeting” – and then explore why the other options are not the correct choices.

The term of an auditor’s office typically commences from the date of their appointment and extends until a specified event or meeting. In the case of the first auditor, their term lasts until the conclusion of the first annual general meeting (AGM). Here’s an elaboration on why this answer is correct:

The first annual general meeting of a company is a significant milestone where various crucial activities take place. During this meeting, shareholders and stakeholders review the company’s performance, financial statements, and other critical matters.

It is at this juncture that the company appoints the auditor for the following financial year. Thus, the first auditor’s term extends until the conclusion of this inaugural AGM, where their replacement or reappointment would be decided by the shareholders.

Now, let’s dissect why the other options provided are not the correct answers:

a) The conclusion of the statutory meeting:

The statutory meeting is a pivotal event held by a company within a specific timeframe after its incorporation, aiming to inform shareholders about the company’s progress, share capital, and various other matters.

However, the appointment of the auditor isn’t directly tied to this meeting. Statutory meetings focus more on reporting and disclosures related to the formation of the company rather than determining the auditor’s tenure. Therefore, the conclusion of the statutory meeting doesn’t serve as the endpoint for the first auditor’s term, making option a an incorrect choice.

c) The conclusion of the next annual general meeting:

This option suggests that the term of the first auditor extends until the conclusion of the subsequent AGM. However, the specific focus of the question pertains to the tenure of the first auditor, not subsequent auditors.

The term of the first auditor is explicitly linked to the inaugural AGM to maintain consistency and alignment with the company’s initial operational cycle. Hence, the conclusion of the next AGM doesn’t determine the first auditor’s term, rendering option c incorrect.

d) The date of removal:

While an auditor can be removed from office before the conclusion of their term under specific circumstances, such as incompetence or malpractice, this option doesn’t reflect the accurate duration of the first auditor’s term.

The tenure of the first auditor is inherently tied to a specific milestone – the first annual general meeting – rather than being contingent solely upon the possibility of removal. This option fails to capture the initial period of the first auditor’s office and, therefore, is not the correct duration for their term.

Understanding the nuances between different company meetings and the specific milestones tied to an auditor’s appointment and tenure is crucial for ensuring proper governance and oversight within a company.

The tenure of the first auditor until the conclusion of the first annual general meeting provides a clear and structured timeline for their initial term, ensuring appropriate financial oversight and accountability during the critical formative phase of the company.

Related Posts

• Which audit out of the following would not be regarded as one audit for the purposes of section 224(IB)?
• When restrictions that significantly affect the scope of the audit are imposed by the client the auditor generally should issue which of the following opinion?