COMPANIES AND ALLIED MATTERS ACT (CAMA) CAP C20, 2004

The Companies and Allied Matters Act, (CAMA) CAP C20, LFN 2004 is the
principal law which sets the tone for the incorporation and conduct of business
in Nigeria.

Appointment of auditors

Section 357 of the Companies and Allied Matters Act provides for the
appointment of auditors. The section states as follows:
(a) Every company shall at each annual general meeting appoint an auditor
or auditors to audit the financial statements of the company, and to
hold office from the conclusion of that, until the conclusion of the next,
annual general meeting.
(b) At any annual general meeting a retiring auditor, however appointed,
shall be reappointed without any resolution being passed unless:
(i) he is not qualified for re-appointment;
(ii) a resolution has been passed at that meeting appointing some
other person instead of him or providing expressly that he shall
not be re-appointed; and
(iii) he has given the company notice in writing of his unwillingness
to be re-appointed.
Where notice is given of an intended resolution to appoint some other person or
persons in place of a retiring auditor, and by reason of the death, incapacity or
disqualification of that other person or of all those other persons, as the case
may be, the resolution cannot be proceeded with, the retiring auditor shall not
be automatically re-appointed by virtue of this sub-section.
Where at an annual general meeting, no auditors are appointed or re-appointed,
the directors may appoint a person to fill the vacancy:
(a) The company shall, within one week of the power of the directors
becoming exercisable, give notice of that fact to the Corporate Affairs
Commission; and if a company fails to give required notice the company
and every officer of the company who is in default shall be guilty of an
offence and liable to a fine of N100 for every day during which the
default continues;
(b) The first auditors of a company may be appointed by the directors at
any time before the company is entitled to commence business and
auditors so appointed shall hold office until the conclusion of the next
annual general meeting:
Provided that:
(i) the company may at a general meeting remove any such auditors
and appoint in their place any other person who has been
nominated for appointment by any member of the company and
of whose nomination notice has been given to the members of
the company not less than 14 days before the date of the meeting;
and
(c) The company may, in a general meeting convened for that purpose,
appoint the first auditors and thereupon the said powers of the directors
shall cease.
The directors may fill any casual vacancy in the office of auditor but while any
such vacancy continues, the surviving or continuing auditor or auditors, if any,
may act.

Qualification of auditors

The provisions of the Institute of Chartered Accountants of Nigeria Act 1965
shall have effect in relation to any investigation or audit for the purpose of this
Act so however that none of the following persons shall be qualified for
appointment as auditor of a company, that is
(a) an officer or servant of the company;
(b) a person who is a partner of or in the employment of an officer or
servant of the company; or
(c) a body corporate,
The disqualification shall extend and apply to persons who in respect of any
period of an audit were in the employment of the company or were otherwise
connected therewith in any manner.
A person shall also not qualify for appointment as an auditor of a company if
he is disqualified for appointment as auditor of any other body corporate which
is that company’s subsidiary or holding company or a subsidiary of that
company’s holding company, or would be so disqualified if the body corporate
were a company.
A firm is qualified for appointment as auditor of a company if, but only if, all
the partners are qualified for appointment as auditors of it.
No person shall act as auditor of a company at a time when he knows that he is
disqualified for appointment to that office and if an auditor of a company to
his knowledge becomes so disqualified during his term of office, he shall
thereupon vacate his office and give notice in writing to the company that he
has vacated it by reason of that disqualification.
A person who acts as auditor in contravention or fails without reasonable excuse
to give notice of vacating his office shall be guilty of an offence and liable to a
fine of 500 and, for continued contravention, to a daily default fine of
50, (Section 358).

Auditors’ Report

The auditors of a company shall make a report to its members on the accounts
examined by them, and on every balance sheet and profit and loss account,
and on all group financial statements, copies of which are to be laid before the
company in a general meeting during the auditors’ tenure of office.
The auditors’ report shall state the matters set out in the Sixth Schedule to the
Companies and Allied Matters Act as follows:
(a) Basis of preparation of the entity’s financial statements (i.e. that the
financial statements have been prepared on the basis of the entity’s
accounting policies);
(b) Respective responsibilities of the directors and the auditors;
(c) Basis of the auditors’ opinion;
(d) Whether proper books of account have been kept;
(e) Compliance with the provisions of the Companies and Allied Matters
Act, Cap. C 20 LFN 2004; and
(f) Compliance with the statements of accounting standards issued by the
Nigerian Accounting Standards Board.
The Companies and Allied Matters Act, CAP C20, LFN 2004 further provides
that:
(a) It shall be the duty of the company’s auditors, in preparing their report
to carry out such investigations as may enable them to form an opinion
as to the following matters whether;
(i) proper accounting records have been kept by the company and
proper returns adequate for their audit have been received from
branches not visited by them; and
(ii) the company’s balance sheet and (if not consolidated) its profit
and loss account are in agreement with the accounting records
and returns.
(b) If the auditors are of the opinion that proper accounting records have
not been received from branches not visited by them, or if the balance
sheet and (if not consolidated) the profit and loss account are not in
agreement with the accounting records and returns, the auditors shall
state that fact in their report.
(c) Where certain requirements (i.e. Part V and VI of the Third Schedule and
Parts I to III of the Fourth Schedule) of the Companies and Allied Matters
Act are not complied with in the accounts, it shall be the auditors’ duty
to include such matters in their report, so far as they are reasonably
able to do so, a statement giving the required particulars.
(d) It shall be the auditors’ duty to consider whether the information given
in the directors’ report for the year for which the accounts are prepared
is consistent with those accounts; and if they are of opinion that it is not,
they shall state that fact in their report, (Section 359).

Audit Committee

The Companies and Allied Matters Act, CAP C20, LFN 2004 provides that:
(a) In addition to the auditors report made to the members on the entity’s
financial statements, the auditor shall in the case of a public company
also make a report to an audit committee which shall be established by
the public company.
(b) The audit committee shall consist of an equal number of directors and
representatives of the shareholders of the company (subject to a
maximum number of six members) and shall examine the auditors’
report and make recommendations thereon to the annual general
meeting as it may think fit, provided, however, that such member of the
audit committee shall not be entitled to remuneration and shall be
subject to re-election annually.
(c) Any member may nominate a shareholder as a member of the audit
committee by giving notice in writing of such nomination to the secretary
of the company at least 21 days before the annual general meeting.
(d) Subject to such other additional functions and powers that the company’s
articles of association may stipulate, the objectives and functions of the
audit committee shall be to:
(i) ascertain whether the accounting and reporting policies of the
company are in accordance with legal requirements and agreed
ethical practices;
(ii) review the scope and planning of audit requirements;
(iii) review the findings on management matters in conjunction with
the external auditor and departmental responses thereon;
(iv) keep under review the effectiveness of the company’s system of
accounting and internal control;
(v) make recommendations to the Board with regard to the
appointment, removal and remuneration of the external auditors
of the company; and
(vi) authorise the internal auditor to carry out investigations into any
activities of the company which may be of interest or concern to
the committee, (Section 359).

Auditors’ Duties and Powers

(a) It shall be the duty of the company’s auditors, in preparing their report
to carry out such investigations as may enable them to form an opinion
as to the following matters whether:
(i) proper accounting records have been kept by the company and
proper returns adequate for their audit have been received from
branches not visited by them; and
(ii) the company’s balance sheet and (if not consolidated) its profit
and loss account are in agreement with the accounting records
and returns.
(b) Every auditor of a company shall have a right of access at all times to
the company’s books, accounts and vouchers, and be entitled to require
from the company’s office such information and explanations as he
thinks necessary for the performance of the auditor’s duties.
(c) It shall be the auditors’ duty to consider whether the information given
in the directors’ report for the year for which the accounts are prepared
is consistent with those accounts (Section 360).

Remuneration of Auditors

(a) The remuneration of the auditors of a company-
(i) in the case of an auditor appointed by the directors, may be
fixed by the directors if the general meeting empowers the
directors to do so; or
(ii) shall be fixed by the company in general meeting.
(b) “Remuneration” includes sums paid by the company in respect of the
auditors’ expenses. (Section 361).

Removal of Auditors

(a) A company may by ordinary resolution remove an auditor before the
expiration of his term of office, notwithstanding anything in any
agreement between it and him.
Where a resolution removing an auditor is passed at a general meeting
of a company, the company shall within 14 days give notice of that fact
in the prescribed form to the Corporate Affairs Commission and if a
company fails to give the required notice the company and every officer
of it who is in default shall be guilty of an offence and liable to a daily
default fine of 100.
(b) Nothing shall be taken as depriving the auditor removed of
compensation or damages payable to him in respect of the termination
of his appointment as auditor or of any appointment terminating with
that as auditor. (Section 362).

Auditors’ Right to Attend Company’s Meetings

(a) A company’s auditors shall be entitled to attend any general meeting of
the company and to receive all notices of and other communications
relating to any general meeting which a member of the company is
entitled to receive and to be heard at any general meeting which they
attend on any part of the business of the meeting which concerns them
as auditor.
(b) An auditor of a company who has been removed shall be entitled to
attend:
(i) the general meeting at which his term of office would otherwise
have expired; and
(ii) any general meeting at which it is proposed to fill the vacancy
caused by his removal, and to receive all notices of, and other
communications relating to, and such meeting which any
member of the company is entitled to receive, and to be heard at
any such meeting which he attends on any part of the business of
the meeting which concerns him as former auditor of the company.
(Section 363)

Supplementary provisions relating to auditors

(a) A special notice shall be required for a resolution at a general meting of
a company:
(i) appointing as auditor a person other than a retiring auditor;
(ii) filling a casual vacancy in the office of auditor;
(iii) re-appointing as auditor a retiring auditor who was appointed
by the directors to fill a casual vacancy; and
(iv) removing an auditor before the expiration of his term of office.
(b) On receipt of notice of such an intended resolution the company shall
forthwith send a copy of it:
(i) to the person proposed to be appointed or removed, as the case
may be;
(ii) to the retiring auditors; and
(iii) where the casual vacancy was caused by the resignation of an
auditor who resigned.
(c) Where notice is given of such a resolution the retiring auditor (or, as
case may be, the auditor proposed to be removed) makes with respect
to the intended resolution representations in writing to the company not
exceeding a reasonable length, and requests their notification to
members of the company, the company shall (unless the representations
are received by it too late for it to do so:
(i) in any notice of the resolution given to members of the company,
state the fact of the representations having been made; and
(ii) send a copy of the representations to every member of the
company to whom notice of the meeting is or has been made;
(d) If a copy of any such representations is not sent out as required because
they were received too late or because of the company’s default, the
auditor may (without prejudice to his right to be heard orally) require
that the representations shall be read out at the meeting; and
(e) Copies of the representations need not be sent out and the representations
need not be read out at the meeting if, on the application either of the
company or of any other person claiming to be aggrieved, the court is
satisfied that the rights conferred are being abused to secure needless
publicity for defamatory matter; and the court may order the company’s
costs on the application to be paid in whole or in part by the auditor,
notwithstanding that he is not a party to the application. (Section 364)

Resignation of Auditors

(a) An auditor of a company may resign his office by depositing a notice in
writing to that effect at the company’s registered office; and any such
notice shall operate to bring his term of office to an end on the date of
which the notice is deposited, or on such later date as may be specified
in it.
(b) An auditor’s notice of resignation shall not be effective unless it contains
either:
(i) a statement to the effect that there are no circumstances connected
with his resignation which he considers should be brought to the
notice of the members or creditors of the company; or
(ii) a statement of any such circumstances as are mentioned above.
(c) Where a notice under this section is deposited at a company’s registered
office, the company shall within 14 days send a copy of the notice-
(i) to the Corporate Affairs Commission; and
(ii) if the notice contained a statement, to every person who is entitled
to be sent copies of the financial statements.
(d) The company or any person claiming to be aggrieved may, within 14
days of the receipt by the company of a notice containing a statement,
apply to the court for an order.
(e) If in such an application the court is satisfied that the auditor is using
the notice to secure needless publicity for defamatory matter, it may, by
order, direct that copies of the notice need not be sent out; and the court
may further direct the company’s costs on the application to be paid in
whole or in part by the auditor, notwithstanding that he is not a party to
the application.
(f) The company shall, within 14 days of the court’s decision, send to the
persons mentioned:
(i) if the court makes an order a statement setting out the effect of
the order; and
(ii) if not, a copy of the notice containing the statement.
(g) If default is made in complying with certain provisions the company
and every officer of it who is in default shall be guilty of an offence and
liable to a daily default fine of 100. (Section 365)

Right of Resigning Auditor to Requisition for Company Meeting

(a) Where an auditor’s notice of resignation contains a statement, there
may be deposited with the notice a requisition signed by the auditor
calling on the directors of the company forthwith to duly convene an
extra-ordinary general meeting of the company for the purpose of
receiving and considering such explanation of the circumstances
connected with his resignation as he may wish to place before the
meeting.
(b) Where an auditor’s notice of resignation contains such a statement, the
auditor may request the company to circulate to its members before:
(i) the general meting at which his term of office would otherwise
have expired; or
(ii) any general meeting at which it is proposed to fill the vacancy
caused by his resignation or convened on his requisition, a
statement in writing (not exceeding a reasonable length) of the
circumstances connected with his resignation.
(c) If a resigning auditor requests the circulation of a statement the
company shall (unless the statement is received by it too late for it to
comply):
(i) in any notice of the meeting given to members of the company,
state the fact of the statement having been made; and
(ii) send a copy of the statement to every member of the company to
whom notice of the meeting is or has been sent.
(d) If the directors do not within 21 days from the date of the deposit of a
requisition under this section proceed duly to convene a meeting for a
day not more than 28 days after the date on which the notice convening
the meeting is given, every director who fails to take all reasonable
steps to ensure that a meeting is convened as mentioned above shall be
guilty of an offence and liable to a fine of 500.
(e) If a copy of the statement is not sent out as required because it was
received too late or because of the company’s default, the auditor may
(without prejudice to his right to be heard orally) require that the
statement be read out at the meeting.
(f) Copies of a statement need not be sent out and the statement need not
be read out at the meeting if, on the application, either of the company
or of any other person who claims to be aggrieved, the court is satisfied
that the rights conferred are being abused to secure needless publicity
for defamatory matter; and the court may order the company’s costs on
such an application to be paid in whole or in part by the auditor,
notwithstanding that he is not a party to the application.
(g) An auditor who has resigned his office shall be entitled to attend any
such meeting and to receive all notices of and other communications
relating to any such meeting which any member of the company is
entitled to receive, and to be heard at any such meeting which concerns
him as former auditor of the company. (Section 366).

Powers of Auditors in Relation to Subsidiaries

(a) Where a company has a subsidiary, then-
(i) if the subsidiary is a body corporate incorporated in Nigeria it
shall be the duty of the subsidiaries and its auditors to give the
auditors of the holding company such information and
explanation as those auditors may reasonably require for the
purposes of their duties as auditors of the holding company;
(ii) in any other case, it shall be the duty of the holding company, if
required by its auditors to do so, to take all such steps as are
reasonably open to it to obtain from the subsidiary such
information and explanation as are mentioned above.
(b) if a subsidiary or holding company fails to comply with the provisions,
the subsidiary or holding company, and every officer of it who is in
default, shall be guilty of an offence and liable to a fine; and if an auditor
fails without reasonable excuse to comply he shall be guilty of an offence
and so liable. (Section 367).

Liability of Auditors for Negligence

(a) A company’s auditor shall in the performance of his duties, exercise all
such care, diligence and skill as is reasonably necessary in each
particular circumstance.
(b) Where a company suffers loss or damage as a result of the failure of its
auditor to discharge the fiduciary duty imposed on him the auditor shall
be liable for negligence and the directors may institute an action for
negligence against him in the court.
(c) If the directors fail to institute an action against the auditor, any member
may do so after the expiration of 30 days’ notice to the company, of his
intention to institute such action, (Section 368).

False Statements to Auditors

(a) An officer of a company commits an offence if he knowingly or recklessly
makes to a company’s auditors a statement (whether written or oral)
which:
(i) conveys or purports to convey to the auditors any such information
or explanation which the auditors require, or are entitled to
require, as auditors of the company; and
(ii) is misleading, false or deceptive in a material particular.
(c) A person guilty of an offence shall be liable to imprisonment for one
year or to a fine of 500 or both, (Section 369).

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