This checklist guides the Board's decision-making process for the appointment or re-appointment of external auditors, ensuring compliance with statutory requirements and good corporate governance.
- 1. Assessment of Need and Scope:
- Statutory Requirement: Confirm that the appointment of an external auditor is a statutory requirement for the Company as per the Companies Act, No. 71 of 2008 (South Africa) (or other relevant legislation). (Yes/No)
- Audit Scope: Has the proposed scope of the audit engagement been clearly defined, considering regulatory requirements, company size, and complexity? (Yes/No)
- Timing: Are the timelines for the audit process aligned with internal reporting deadlines and statutory filing requirements? (Yes/No)
2. Auditor Identification and Selection Process:
- Request for Proposals (RFP): If new auditors are being considered, have proposals been formally invited from multiple qualified and registered auditing firms? (Yes/No/N/A)
- Evaluation Criteria: Have clear evaluation criteria been established for assessing proposals, including but not limited to:
- Independence and Objectivity: Demonstrated independence from the Company and its management. (Yes/No)
- Experience and Expertise: Proven track record, industry-specific knowledge, and qualifications of the proposed engagement team. (Yes/No)
- Reputation and Quality Control: The firm's professional reputation, quality control processes, and regulatory standing with relevant bodies (e.g., IRBA in South Africa). (Yes/No)
- Cost-Effectiveness: Competitiveness and transparency of proposed fees and resource allocation. (Yes/No)
- Culture Fit: Alignment with the Company's values and working style. (Yes/No)
- Due Diligence: Has appropriate due diligence been conducted on shortlisted firms/auditors (e.g., reference checks, review of public disciplinary records)? (Yes/No/N/A)
- Rotation Considerations (if applicable): If the current auditors have served for a significant period, have auditor rotation requirements (e.g., JSE listing requirements for audit partners) or best practices regarding auditor tenure been considered? (Yes/No/N/A)
3. Audit Committee Recommendation (if applicable):
- If an Audit Committee exists, has it reviewed the proposals/re-appointment, interviewed potential firms/partners, and formally recommended the preferred auditing firm to the Board? (Yes/No/N/A)
- Date of Audit Committee meeting where recommendation was made: [Insert Date]
4. Board Review and Approval:
- Full Board Discussion: Has the Board conducted a thorough discussion on the suitability of the proposed auditors, considering all evaluation criteria and the Audit Committee's recommendation (if any)? (Yes/No)
- Independence Confirmation: Has the Board received written confirmation from the proposed auditor regarding their independence from the Company as required by professional standards and the Companies Act? (Yes/No)
- Documentation: Are the selection process, evaluation, and the Board's decision for appointment/re-appointment duly documented in the board meeting minutes? (Yes/No)
5. Post-Appointment Activities:
- Engagement Letter: Has a formal engagement letter outlining the terms, scope, responsibilities of both parties, and fees been drafted and agreed upon? (Yes/No)
- Pre-Audit Meeting: Has a pre-audit meeting been scheduled or conducted with the appointed auditors to outline expectations, communication protocols, key risk areas, and the overall audit timeline? (Yes/No)
- CIPC Notification: Is there a process in place to notify the Companies and Intellectual Property Commission (CIPC) of the auditor's appointment/re-appointment as required by the Companies Act? (Yes/No)
Board Resolution for External Auditor Appointment
RESOLVED THAT:
- Having considered the recommendation of the Audit Committee (if applicable) and undertaken a comprehensive review of [Auditor Firm Name]'s qualifications, independence, experience, and proposed engagement terms, the Board of Directors hereby approves the appointment/re-appointment of [Auditor Firm Name], with [Name of Engagement Partner, if known] as the designated engagement partner, as the external auditors of [Company Name] for the financial year ending [Insert End Date of Financial Year, e.g., 31 December 2025].
- The Board is satisfied that [Auditor Firm Name] meets the independence requirements of the Companies Act, No. 71 of 2008 (South Africa), and all relevant professional and ethical standards.
- The Chairperson of the Board, or any other director, together with the Company Secretary, are hereby authorised to:
- Sign the formal engagement letter with [Auditor Firm Name] on behalf of the Company.
- Take all necessary steps to give effect to this resolution, including notifying the Companies and Intellectual Property Commission (CIPC) of this appointment in accordance with the Companies Act.
Signed by the Chairperson on behalf of the Board:
[Chairperson's Full Name & Signature]
Chairperson of the Board
Date: [Date of Board Meeting where approved]
Supporting Documents (To be attached to the Board Pack)
- Proposals received from auditing firms (if applicable).
- Summary of evaluation findings and recommendation (e.g., Audit Committee report).
- Confirmation of Auditor Independence from the proposed firm.
- Draft Engagement Letter.
