Raphael Gordon, Guest Writer

Auditors of public companies or private companies which are obliged to file accounts, have to be registered public accountants as defined by Section 2 of the Public Accountancy Act.

The act excludes an officer or servant of a company, a person who is a partner of or in the employment of an officer or servant of the company and a body corporate from being the auditor of the company.

It does appear as if a shareholder of a company is not disqualified from being its auditor.

This situation would create a lack of independence issue as the auditor will be reporting to the members, which includes himself, on his audit.

In addition, a number of countries are debating or taking steps to limit the liability of auditors. There are discussions relating to proportionate liability.

Responsible for elements attributable to him

It is suggested that where losses are incurred, an auditor should only be responsible for the elements attributable to him. There should also be consideration given to limit any liability by reference to fees earned.

A number of countries, including the United Kingdom and Anguilla, allow audits to be carried out by limited-liability companies.

Recently, the Barbados parliament dealt with a bill which proposed to change that island's Companies Act to allow limited-liability companies to act as auditors.

This move was a timely response to the international changes that are taking place.

Jamaica should follow its CARICOM partner and allow limited-liability companies to be auditors.

Shareholders of a company should also be excluded from being its auditor.

A cap on auditors' liability by reference to fees received is also desirable as companies seek to reduce audit costs at a time when reporting standards and financial statements disclosures are increasing.