AUE2601 ASSIGNMENT 2 GROUP A
1.1 State whether the appointment of FGN as auditors of EL complies with Section 91 of the
Companies Act. Describe in your answer the procedures that should have been followed to ensure
compliance with the Companies Act.
The appointment of the New auditors of Evergreen did not comply with Section 91 of the
Companies Act due following reasons:
-The new auditors, Fisher, Gani and Nkosi Auditors (FGN) was not appointed within 40 business days
of the vacancy arising [Sec 91(2)]
-financial director of Evergreen Lawn Ltd (EL) took it upon himself to appoint the firm.
-The board did not propose the name of at least one registered auditor to the audit committee
within 15 days S e c 91(3a)].
Section 91 of the Companies Act that covers the resignation of auditors and vacancies, the
procedures that should have been followed to ensure compliance with the Companies
Act include the following:
-The new auditor must be appointed within 40 business days of the vacancy arising [Sec 91(2)]
-Within 15 days the board must propose the name of at least one registered auditor to the audit
committee [Sec 91(3a)].
-The audit committee has five business days after a proposal has been delivered to reject in writing,
or else the board may make the appointment S e c 91(3)(b)]
1.2 Explain why EL needs to have their financial statements audited.
-EL is a public company according to the designation of its name (Ltd) and the Companies Act makes
it compulsory for all public companies to be audited.
Q2. With reference to the information under "identifying and assessing the risk of material
misstatement"
2.1 Provide a reason why each identified risk indicator in (a) to (d) can be regarded to increase the
risk of material misstatement
1.1 State whether the appointment of FGN as auditors of EL complies with Section 91 of the
Companies Act. Describe in your answer the procedures that should have been followed to ensure
compliance with the Companies Act.
The appointment of the New auditors of Evergreen did not comply with Section 91 of the
Companies Act due following reasons:
-The new auditors, Fisher, Gani and Nkosi Auditors (FGN) was not appointed within 40 business days
of the vacancy arising [Sec 91(2)]
-financial director of Evergreen Lawn Ltd (EL) took it upon himself to appoint the firm.
-The board did not propose the name of at least one registered auditor to the audit committee
within 15 days S e c 91(3a)].
Section 91 of the Companies Act that covers the resignation of auditors and vacancies, the
procedures that should have been followed to ensure compliance with the Companies
Act include the following:
-The new auditor must be appointed within 40 business days of the vacancy arising [Sec 91(2)]
-Within 15 days the board must propose the name of at least one registered auditor to the audit
committee [Sec 91(3a)].
-The audit committee has five business days after a proposal has been delivered to reject in writing,
or else the board may make the appointment S e c 91(3)(b)]
1.2 Explain why EL needs to have their financial statements audited.
-EL is a public company according to the designation of its name (Ltd) and the Companies Act makes
it compulsory for all public companies to be audited.
Q2. With reference to the information under "identifying and assessing the risk of material
misstatement"
2.1 Provide a reason why each identified risk indicator in (a) to (d) can be regarded to increase the
risk of material misstatement
