THE CORPORATIONS LAW

CHAPTER 2M - FINANCIAL REPORTS AND AUDIT

PART 2M.4 - APPOINTMENT AND REMOVAL OF AUDITORS

Division 1 - Companies

SECTION 324   QUALIFICATIONS OF AUDITORS  

324(1)  (Individuals)  

Subject to this section, a person shall not:

(a)  consent to be appointed as auditor of a company;

(b)  act as auditor of a company; or

(c)  prepare a report required by this Law to be prepared by a registered company auditor or by an auditor of a company;

if:

(d)  the person is not a registered company auditor;

(e)  the person, or a body corporate in which the person has a substantial holding, owes more than $5,000 to the company, to a related body corporate or to an entity that the company controls; or

(f)  except where the company is a proprietary company, the person:

(i) is an officer of the company;

(ii) is a partner, employer or employee of an officer of the company; or

(iii) is a partner or employee of an employee of an officer of the company.

324(2)  (Firms)  

Subject to this section, a firm shall not:

(a)  consent to be appointed as auditor of a company;

(b)  act as auditor of a company; or

(c)  prepare a report required by this Law to be prepared by a registered company auditor or by an auditor of a company;

unless:

(d)  at least 1 member of the firm is a registered company auditor who is ordinarily resident in Australia;

(e)  the business name under which the firm is carrying on business is registered under a law of a State or Territory relating to the registration of business names or a return in the prescribed form has been lodged showing, in relation to each member of the firm, the member's full name and address as at the time when the firm so consents, acts or prepares a report;

(f)  no member of the firm, and no body corporate in which a member of the firm has a substantial holding, owes more than $5,000 to the company, to a related body corporate or to an entity that the company controls;

(g)  except where the company is a proprietary company, no member of the firm is:

(i) an officer of the company;

(ii) a partner, employer or employee of an officer of the company; or

(iii) a partner or employee of an employee of an officer of the company; and

(h)  except where the company is a proprietary company, no officer of the company receives any remuneration from the firm for acting as a consultant to it on accounting or auditing matters.

324(3)  [Indebtedness]  

For the purposes of paragraphs (1)(e) and (2)(f), disregard a debt owed by a natural person to a body corporate or entity if:

(a)  the body corporate or entity is:

(i) an Australian ADI; or

(ii) a body corporate registered under the Life Insurance Act 1995; and

(b)  the debt arose because of a loan that the body corporate or entity made to the person in the ordinary course of its ordinary business; and

(c)  the person used the amount of the loan to pay the whole or part of the purchase price of premises that the person uses as their principal place of residence.

324(4)  [Deemed officer]  

For the purposes of subsections (1) and (2), a person shall be deemed to be an officer of a company if:

(a)  the person is an officer of a related body corporate or of an entity that the company controls; or

(b)  except where the Commission, if it thinks fit in the circumstances of the case, directs that this paragraph shall not apply in relation to the person in relation to the company - the person has, at any time within the immediately preceding period of 12 months, been an officer or promoter of the company, of a related body corporate or of an entity that the company controlled at that time.

324(5)  [Liquidator]  

For the purposes of this section, a person shall not be taken to be an officer of a company by reason only of being or having been the liquidator of that company, of a related body corporate or of an entity that that company controls or has controlled.

324(6)  [Not necessarily officers]  

For the purposes of this section, a person is not taken to be an officer of a company merely because of one or more of the following:

(a)  having been appointed as auditor of the company, of a related body corporate or of an entity that the company controls or has controlled;

(b)  having been appointed, for any purpose relating to taxation, as public officer of a body corporate, an unincorporated body or a trust estate;

(c)  being or having been authorised to accept, on behalf of the company, a related body corporate or an entity that the company controls or has controlled, service of process or notices.

324(7)  [Appointment of firm as auditor]  

The appointment of a firm as auditor of a company shall be deemed to be an appointment of all persons who are members of the firm and are registered company auditors, whether resident in Australia or not, at the date of the appointment.

324(8)  [Reconstitution of firm]  

Where a firm that has been appointed as auditor of a company is reconstituted by reason of the death, retirement or withdrawal of a member or members or by reason of the admission of a new member or new members, or both:

(a)  a person who was deemed under subsection (7) to be an auditor of the company and who has so retired or withdrawn from the firm as previously constituted shall be deemed to have resigned as auditor of the company as from the day of his or her retirement or withdrawal but, unless that person was the only member of the firm who was a registered company auditor and, after the retirement or withdrawal of that person, there is no member of the firm who is a registered company auditor, section 329 does not apply to that resignation;

(b)  a person who is a registered company auditor and who is so admitted to the firm shall be deemed to have been appointed as an auditor of the company as from the day of his or her admission; and

(c)  the reconstitution of the firm does not affect the appointment of the continuing members of the firm who are registered company auditors as auditors of the company;

but nothing in this subsection affects the operation of subsection (2).

324(9)  [Dissolution of firm]  

Except as provided by subsection (8), the appointment of the members of a firm as auditors of a company that is deemed by subsection (7) to have been made by reason of the appointment of the firm as auditor of the company is not affected by the dissolution of the firm.

324(10)  [Reports or notices given by firm]  

A report or notice that purports to be made or given by a firm appointed as auditor of a company shall not be taken to be duly made or given unless it is signed in the firm name and in his or her own name by a member of the firm who is a registered company auditor.

324(11)  [Offence]  

Without limiting the generality of section 1311, if, in contravention of this section, a firm consents to be appointed, or acts as, auditor of a company or prepares a report required by this Law to be prepared by an auditor of a company, each member of the firm is guilty of an offence.

324(12)  [Proprietary company]  

Where it is, in the opinion of the Commission, impracticable for a proprietary company to obtain the services of a registered company auditor as auditor of the company by reason of the place where the company carries on business, a person who is, in the opinion of the Commission, suitably qualified or experienced and is approved by the Commission for the purposes of this Law in relation to the audit of the company's financial reports may be appointed as auditor of the company, subject to such terms and conditions as are specified in the approval.

324(13)  [Deemed registered company auditor]  

A person appointed in accordance with subsection (12) shall, in relation to the auditing of the company's financial reports (if any), but subject to the terms and conditions of the approval under that subsection, be deemed to be a registered company auditor and the provisions of this Law shall, with the necessary modifications, apply in relation to the person accordingly.

324(14)  [Termination, etc. of appointment]  

Where a person approved by the Commission under subsection (12) is acting as auditor of a company, the Commission may at any time, by notice in writing given to the company:

(a)  amend, revoke or vary the terms and conditions of its approval; or

(b)  terminate the appointment of that person as auditor of the company.

324(15)  [Notice of termination]  

A notice under subsection (14) terminating the appointment of a person as auditor of a company takes effect as if, on the date on which the notice is received by the company, the company had received from the person notice of the person's resignation as auditor taking effect from that date.

324(16)  [Knowing disqualification]  

A person shall not:

(a)  if the person has been appointed auditor of a company - knowingly disqualify himself or herself while the appointment continues from acting as auditor of the company; or

(b)  if the person is a member of a firm that has been appointed auditor of a company - knowingly disqualify the firm while the appointment continues from acting as auditor of the company.