New respect for your friend in Biz Admin

That’s the weirdest title but to be honest, when I read auditors under corporate law practice, I was like wow, accountants, auditors and all those types of professionals are under such rigorous scrutiny. It’s not easy to deal with people politics while trying to ensure you don’t get embroiled in a fraud/scandal. The removal process alone cracks me up. Let’s dive in.

The first base to touch are the accounting records and financial statement (I was quite eager to hear what is in this document, having heard it for so long and had no idea of its contents).

The accounting record must have:

  • Entries from day to day of the income and expenditure of the company.
  • A record of the assets and liabilities of the company

Then if the company is trading in goods it must also have the following:

  • Statements of stocks
  • Statement of stock taken from any stocks for which a statement has been or is to be prepared
  • Statements of all goods sold and purchased showing the goods and the buyers and sellers in sufficient detail

The law prescribes where the accounting records should be kept in Section 332(1) – It must be at the registered office, and it must be available to the officers of the company for inspection. However the company does not have to keep their accounting records forever, once 6 years pass they are not obliged to hold on to the record and won’t run afoul of this section if they can’t produce a record of over 6 years.

Not keeping records is a big deal yo, default attracts penalty.

Audit Statement

Contents of the audit statement too are located in Section 334(2) {yeah you must sha read that CAMA, I won’t tell you 😜}. The financial statement is the duty of the board and they prepare it yearly; its contents should span nothing more than a 9 month period.

Financial Year

Also ever heard a company refer to its financial year? Yeah fixing that is also the duty of the directors. And once the board decide on a financial year, they are to notify the CAC within 14 days. Banks are quite special because the CBN has given them a compulsory financial year between Jan 1 to Dec 31, so their directors do not have to bother themselves about that. Also holding companies are expected to have the same financial year with their subsidiaries unless there’s a reason against it.

So who gets them statements?

  • Members
  • Debenture holders
  • Those entitled to getting notice of meetings

If you don’t fall under the above categories, or you are one of a set of joint shareholders and they’ve given one of you, you have no right to demand the statement.

Then in addition the directors are required to lay the financial statements at the AGM

Let’s meet our auditors: There are

  • first auditors
  • subsequent auditors

The first auditors are appointed by either

  • the Directors, within 6 months of incorporation OR
  • The general meeting at a GM can appoint if the directors have failed to exercise that small power they dashed them. And once the GM appoints the first auditors, there’s no going back, the directors have lost their chance.

If the members wish to remove such an auditor they can do so at an AGM and replace him by an auditor recommended by a member. The member who wants to nominate must give a special notice to the company of his nominee and backstabbing intentions.

Tenure: The tenure of an auditor is from the AGM where they are appointed to the end of the next AGM. This means they must also retire (like directors). Paragraph 8(2) of the Code of Corporate Governance for Banks 2010 (COCG Banks), provides for a special tenure of bank auditors: a cumulative period of 10 years and after those 10 years he can only be eligible for re-appointment after another 10 years. When an auditor is retired automatically, he is not given the boot just yet, he is automatically re-appointed too unless

  • Somebody wants him out
  • There’s actually a replacement or people expressly resolve they don’t want him
  • He really wants to get out of the company and is not interested in being re-elected (he must notify the company in writing)

Note that if there is a notice of nomination of a different auditor in place of a retiring one, and for some reason the nominated person cannot be appointed whether because he kicked the bucket or was disqualified, it doesn’t mean the retiring auditor is automatically re-appointed. I think this is because the fact that they found a replacement for him shows they don’t want him in the picture again, so it doesn’t matter that the replacement can’t fill his spot, he is still unwanted 😔

Casual Vacancy Section 358: An auditor may resign, or retire without a replacement, may pass on, and may be disqualified, thereby leaving his position vacant. This position can be filled by the BOARD, subject to ratification in the next AGM.

Criteria: Anyone can be an auditor; the law does not prescribe any profession but you sef won’t want to hire a doctor to audit your account, so it’s usual to get accountants, the key thing is independence. He must not have been

  • An employee or partner of an officer of the company
  • A person who was employed by the company during the period in review; or connected in any other way.
  • Anyone who is disqualified from being an auditor of the company or subsidiary/the holding company.

Also you can get a firm to be your auditor BUT EVERYONE in that firm, must be auditor.

Remuneration: Yes! They are entitled to remuneration by law. I mean obviously, what if someone buys them to falsify accounts. Section 361(1). The remuneration is determined by whoever appointed them: board or the general meeting. They are also entitled to compensation for premature termination of appointment;

Removal: As we said earlier, they are subject to automatic retirement at the AGM following their appointment. However they may also be kicked out prematurely. Section 362(1). The deed is to be done by the GM by ordinary resolution, and there must be special notice (28 days) Section 364(1d). The company is to give notice of the successful removal of any auditor within 14 days to the CAC.

If you remove an auditor contrary to the terms of his employment, you must compensate him. However if the reason for removing him was as a result of an intervening factor (e.g CBN directive) he is not entitled to compensation.  So if an auditor of a bank has a padlock contract with the bank for 12 years and is enjoying his position jejely and nobody has been opposing his re-election for the past 9 years. On the 11th year he will have to give it a rest. And if he tries to sue the company based on that contract, he’ll get nothing. (See Paragraph 8(2) of the COCG Banks)


  • Notice of any meetings which members have a right to attend during his tenure
  • The meeting at which his tenure of office would have expire or where the vacancy caused by his removal is to be filed. So if we nominate an auditor in an AGM, Shebi he will automatically retire at the next AGM, so if you sack him before that next AGM, he still has a right to attend that AGM
  • Any meeting even after his removal, where the reports he prepared is to be reviewed
  • To be head at such meetings
  • To examine the company books, vouchers and the like
  • To ask the company officials for any information he needs to carry out his duties.


  • To prepare an audit report (remember this is one of the items in the financial statement) based on the account being examined and laid before the GM in any year during the tenure of the auditor.
  • To check whether the information given by the board in their directors; report is consistent with the accounts for which they are prepared. If not, they (auditors) will have to state it their report.
  • To carry out investigations on the accounting practices, procedure, etc. employed by the company so as to deliver a well-balanced report, etc. see Section 360 for both powers and duties.

Liabilities: Section 348

In all of their doings the auditors owe a duty of care and reasonable skill to the company depending on the circumstances. They have a fiduciary duty to the company. Where the company suffers loss due to their breach, an action may be instituted against them by

  • the directors
  • If the directors do not act within 30 days any member may bring the action.

This liability remains even when it was a company official that gave the auditor wrong information whether mistakenly or purposely. Imagine that! But I guess, to be fair CAMA says that person too will pay some fine or face imprisonment or both (issa serious something)

Special Notices: Where a person wants to do any of the following acts, he must give 28 days to the company Section 364(1)

  1. Appointing a person other than a retiring auditor, i.e. you want to bring a new face. You have to tell them, so they can tell the retiring auditors and the whole company in advance
  2. To fill a casual vacancy in the office of an auditor. The company will have to notify the auditor whose resignation/removal, caused a casual vacancy.
  3. If an auditor was appointed by the directors to fill a casual vacancy and lucky him, some member wants him re-elected, give special notice to the company so they can give notice to the person who caused the casual vacancy
  4. If you plan to remove an auditor prematurely – before his tenure expires, give special notice so they can tell the poor guy so he can find another job, just in case.

This could easily be a sub-question in exam so remember these key words, new face, casual vacancy2, premature removal

Special procedure for a resigning auditor: So the CAMA has refused to let things slide if an auditor says he’s not doing again:

  • First he is to give a written notice at the registered office and the resignation kicks off from that day or any other day stated in the notice. For such a notice to be valid it must state
  • Whether or not there are any ‘circumstances’ connected with his desire to resign which he feels should be brought to the notice of the members and creditors.
  • If any, he must state those special circumstances
  • After this, the company will send within 14 days the notice of resignation to
    • CAC
    • Those entitled to financial statements; if there are ‘circumstances’

If somebody does not like what the auditor was going on about in the notice of resignation, the person can go to the FHC within 14 days of getting the notice on the ground that the notice was a publicity stunt (lol the law says using it to seek needless publicity for defamatory matter). If the court agrees they can order that the notice should not be distributed to members again, and give costs to the company against the auditor.

If the court makes such an order, the company will send the order, explaining its ramifications to those entitled to receive financial statement, if not they must send the notice to those same people.

Resignation meeting

Remember when we did meetings and mentioned those who can convene a company meeting, well a resigning auditor is one. If he feels he needs to look the members in the eye and tell them what is going down in their company, he can requisition the directors to call an EGM in his notice. The directors will face penalty if they don’t comply, and as I pointed out earlier the director is entitled to attend such a meeting and spill all the tea. 🍵🍵🍵🍵🍵🍵🍵🍵🍵

The Audit Committee

They are a group of people that check on the auditor(s). Section 359. They comprise of both directors and shareholders in equal number i.e. if there are 2 shareholders, there must be 2 directors. Also they must not be more than 6 in number altogether and obviously a minimum of 2. They are NOT entitled to remuneration but they may be given sitting allowance.

Tenure: They also have to be re-elected annually. If a member wants someone to be a member of the audit committee he may nominate the person by giving 21 days written notice to the company. They are elected by the general meeting and VOTING BY POLL IS PROHIBITED when it comes to the nomination of members of the audit committee Section 225

The law requires them to have a copy of the audit report and perform the following functions:

  • Making sure the accounting and reporting policies are in accordance with the law and ethics agreed by the company
  • Reviewing the scope and planning of audit requirements
  • Make recommendations to the board concerning the external auditors
  • Instructing the internal auditor to carry out investigations which they find to be of importance.
  • Reviewing the company’s internal accounting system

To remember think: Review, Recommend, instruct, check

We ought to fill forms, especially 2A and such. That should be 2 posts away. The next psot is on Annual Returns. Stay tuned and holla at me if you want:


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