Judicial Review Proceedings 2002

The High Court endorses the principle of Auditor independence as enshrined in Section 187 of the Companies Act, 1990.

19 November 2002


The High Court endorses the principle of Auditor independence as enshrined in Section 187 of the Companies Act, 1990. 

The issue arose in a District Court prosecution pursued by the Director where it was alleged that an accused had acted as auditor of two companies at a time when he was a director of each of those companies contrary to section 187. A similar case was taken against the auditor's audit partners arising from the audit firm acting as auditors of the company concerned at a time when the auditor was an officer of that company. 

The District Court judge dismissed the charges against the auditor and his partners on various grounds. This led the Director to seek, by way of Case Stated, the opinion of the High Court on three questions, viz: 

 

  • if the judge was correct in deciding on the evidence before him that the auditor had no case to answer concerning the charge;
  • if the judge was correct in deciding on the evidence before him that the auditor's partners had no case to answer;
  • if the judge was correct in determining that having regard to the dictates of justice, that all of the accused had no case to answer. 

In response to each of the three questions, the High Court answered in the negative. In particular, the judge held that he was satisfied that the judge of the District Court erred in law in concluding that it was necessary to establish “mens rea” in the context of the charges against the respondents. It was further held that the issue is not one of who is appointed as auditors of the companies in question but rather whether any person acted as auditor when disqualified to so act. Following this decision of the High Court, the District Court determined the outcome of the prosecution case on the 1st May 2003.

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