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AUE2601 Assignment 2 Semester 2 2023
Group A
, Question 1
1.1 The appointment of FGN as auditors of EL may not comply with Section 91 of the Companies Act
based on the provided information. Section 91 of the Companies Act typically requires that the
appointment of auditors be approved by the shareholders of the company at an annual general meeting
(AGM). However, in this case, it is mentioned that the financial director appointed FGN as auditors
without discussing it with the rest of the EL board members. To comply with Section 91, the following
procedures should have been followed:
a) The financial director should have proposed the appointment of FGN as auditors at an AGM or a
special general meeting.
b) Shareholders should have been given notice of this proposal and had the opportunity to vote on the
appointment.
c) A majority vote by the shareholders should have been obtained to officially appoint FGN as the
auditors.
1.2 EL needs to have its financial statements audited for several reasons:
a) Regulatory Compliance: Audited financial statements are often a legal requirement, especially for
publicly listed companies like EL. Compliance with regulatory bodies, such as the Johannesburg Stock
Exchange (JSE), may necessitate annual audits.
b) Shareholder Confidence: Audited financial statements provide assurance to shareholders and
potential investors about the accuracy and reliability of the company's financial information. This
enhances trust and confidence in the company.
AUE2601 Assignment 2 Semester 2 2023
Group A
, Question 1
1.1 The appointment of FGN as auditors of EL may not comply with Section 91 of the Companies Act
based on the provided information. Section 91 of the Companies Act typically requires that the
appointment of auditors be approved by the shareholders of the company at an annual general meeting
(AGM). However, in this case, it is mentioned that the financial director appointed FGN as auditors
without discussing it with the rest of the EL board members. To comply with Section 91, the following
procedures should have been followed:
a) The financial director should have proposed the appointment of FGN as auditors at an AGM or a
special general meeting.
b) Shareholders should have been given notice of this proposal and had the opportunity to vote on the
appointment.
c) A majority vote by the shareholders should have been obtained to officially appoint FGN as the
auditors.
1.2 EL needs to have its financial statements audited for several reasons:
a) Regulatory Compliance: Audited financial statements are often a legal requirement, especially for
publicly listed companies like EL. Compliance with regulatory bodies, such as the Johannesburg Stock
Exchange (JSE), may necessitate annual audits.
b) Shareholder Confidence: Audited financial statements provide assurance to shareholders and
potential investors about the accuracy and reliability of the company's financial information. This
enhances trust and confidence in the company.
