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Citirights wants auditors rotated

Listed companies should change their auditors every three years and auditors should not be allowed to do consultancy work for companies whose accounts they audit, Citirights, an organisation that looks after the interests of small investors and minority shareholders, has suggested.

It said it had proposed to the Securities and Exchange Commission to revamp the auditing and accounting standards system which has many defects and was hindering the development of the private sector.

The absence of any restriction on how long auditors can continue to audit the accounts of client firms "has led to a very close relationship between the companies and auditors, affecting a comprehensive audit," Citirights said in a statement about their activities. It said it was dissatisfied with the present principles of auditing.

The practice of auditors doing consultancy work for companies whose accounts they audit was "detrimental to the well being of the company" and affected corporate good governance, it said.

Audit firms should form consultation bodies separately. Citirights also said disclosures made by auditors were also inadequate and that audit firms should make a physical verification of purchases and disposal of items and comment whether such purchases or disposals were really necessary and on prices paid or received.

"The responsibility of submitting a factual report lies with the auditors. At present it does not happen," Citirights said. "At the time when questions are raised answers given are evasive.

The auditors should also have the right to comment on loans obtained and their use. Citirights also said its members had "vehemently protested" against efforts to convert C.W. Mackie and Co. Ltd into a private company. It members who are minority shareholders of the company also allegedly accused the previous board for having acted in a manner that brought the company into bankruptcy.

C.W. Mackie had informed minority shareholders it had decided to reverse the decision taken at the AGM in considering the views expressed by the minority shareholders, and would continue as a public company.

Citirights said its members who were shareholders of the local unit of Coca Cola had protested to the SEC against the conversion of the company from a public company to a private one.

Despite SEC assurances it would obtain a higher price for minority shareholders when the company was delisted, this failed to happen, Citirights said.

However, it said "our members took the case very strongly at the (company) AGM. They severely criticised the directors for having brought the company into a state of bankruptcy."