Section 39: Appointment, powers and duties of auditors

39. Appointment, powers and duties of auditors (1) Subject to this section, a financial institution shall at each annual meeting appoint, and at all times have, one or more firms of auditors. (2) Any firm of auditors appointed under subsection (1) shall be subject to the approval of the central bank. (3) In addition to the requirements of the Companies Act and the Financial Reporting Act, the firm of auditors shall be independent, experienced in the audit of financial institutions and have the necessary resources to undertake audits of financial institutions on a consolidated basis as the central bank may determine. (4) No firm of auditors appointed under subsection (1) shall be responsible for the audit of a financial institution for a continuous period of more than 5 years. (5) Where a firm of auditors has been responsible for the audit of a financial institution for a continuous period of 5 years or less, that firm shall not be entrusted the responsibility for the audit of the same financial institution before a period of 5 years from the date of termination of his last audit assignment. (6) The firm of auditors shall make a report— (a) in the case of a financial institution incorporated in Mauritius, to the shareholders of the financial institution, and the report shall be consolidated to include the affiliates and the overseas branches and affiliates of the financial institution, if any; (b) in the case of a financial institution incorporated outside Mauritius, to the head office of the financial institution. (7) The auditor’s report shall be made on the financial statements of the financial institution. (8) The auditor shall, in the report, state whether— (a) the financial statements have been prepared in accordance with International Accounting Standards and any additional prudential requirements set out in guidelines issued by the central bank; (b) the financial statements are, in his opinion, complete, fair and properly drawn up; B3 – 32 (1) [Issue 9] Banking Act (c) the financial statements present a true and fair view of the affairs of the financial institution; (d) the financial statements have been prepared on a basis consistent with that of the preceding year; and (e) the explanations or information called for or given to him by the officers or agents of the financial institution, are satisfactory to him. (9) The report shall— (a) in the case of a financial institution incorporated in Mauritius, be read together with the report of its board of directors at its annual meeting of shareholders; (b) in the case of a financial institution incorporated outside Mauritius, be transmitted to its head office; and (c) be transmitted to the board of directors of the financial institution through the Audit Committee established under section 40. (10) A certified copy of the report together with the audited financial statements and notes thereon shall be sent to the central bank by the financial institution within such period as the central bank may specify and in any event not later than one month after it is made. (11) An auditor may be appointed by the central bank in every case where a financial institution fails to appoint an auditor approved by the central bank. (12) Every auditor appointed under subsection (1) or (11) shall have a right of access at all times to the books, accounts and records referred to in section 33 (2) of the financial institution, whether kept electronically or otherwise, in relation to which he has been app may specify and in any event not later than one month after it is made. (11) An auditor may be appointed by the central bank in every case where a financial institution fails to appoint an auditor approved by the central bank. (12) Every auditor appointed under subsection (1) or (11) shall have a right of access at all times to the books, accounts and records referred to in section 33 (2) of the financial institution, whether kept electronically or otherwise, in relation to which he has been appointed and those of its affiliates in Mauritius and of its branches and affiliates outside Mauritius, if any, and may require from the directors, officers and agents of the financial institution or its affiliates in Mauritius or its branches and affiliates outside Mauritius, if any, such information and explanations as may appear to him to be necessary for the performance of his duties under this section. (13) Every auditor appointed under subsection (1) or (11) shall be paid by the financial institution in respect of the appointment and where the appointment is made under subsection (11), the remuneration shall be determined by the central bank. (14) The central bank may impose on an auditor, in addition to any duty specified in subsection (8), a duty to— (a) carry out any extended scope audit or other examination and make recommendations as necessary; (b) submit to the central bank such additional information in relation to the audit, extended scope audit or other examination as the central bank considers necessary; (c) submit to the central bank a report on any matter specified in paragraphs (a) and (b); [Issue 9] B3 – 32 (2) Revised Laws of Mauritius (d) submit to the central bank a report on the financial and accounting systems and internal controls of the financial institution; and (e) submit to the central bank a report as to whether, in his opinion, the systems of credit provisioning and write-offs specified by the central bank are being complied with and whether or not measures to counter the possibility of money laundering or the funding of terrorist activities have been adopted by the financial institution and are being implemented in accordance with any enactment relating to anti-money laundering and prevention of terrorism and with guidelines or instructions issued by the central bank. (15) A financial institution shall remunerate the auditor in respect of the discharge by him of any additional duties under subsection (14). (16) Where in the course of the performance of his duties under the Act, an auditor comes across transactions or conditions in a financial institution affecting its well-being and he has reason to believe that— (a) there has been a material adverse change in the risks inherent in the business of the financial institution with the potential to jeopardise its ability to continue as a going concern; (b) there has been or there is a breach of any of the provisions of the banking laws, or the Companies Act relating to the accounting records and audit; (c) measures to counter the possibility of money laundering or the funding of terrorist activities in accordance with any enactment have not been or are not being properly implemented; (d) guidelines or instructions issued by the central bank have not been or are not being properly followed; (e) a criminal offence involving fraud or other dishonesty has been, is being or is likely to be committed; (f) losses have been incurred which reduce the amount paid as stated capita ting records and audit; (c) measures to counter the possibility of money laundering or the funding of terrorist activities in accordance with any enactment have not been or are not being properly implemented; (d) guidelines or instructions issued by the central bank have not been or are not being properly followed; (e) a criminal offence involving fraud or other dishonesty has been, is being or is likely to be committed; (f) losses have been incurred which reduce the amount paid as stated capital or assigned capital, as the case may be, of the financial institution by 50 per cent or more; (g) serious irregularities have occurred, including those that jeopardise the security of depositors and creditors; or (h) he is unable to confirm that the claims of depositors and creditors are still covered by the assets, he shall immediately inform the central bank of the matter and, as soon as practicable, submit a report thereon to the central bank. (17) Where, in the performance of his duties, the auditor finds any matter which in his opinion is of material importance to the well-being of the financial institution, he shall call a meeting of the Audit Committee for the purpose of considering the matter. B3 – 32 (3) [Issue 9] Banking Act (18) The central bank shall at least once a year arrange meetings with every financial institution and its auditors to discuss matters relevant to the central bank’s supervisory functions which have arisen in the supervisory process, including on-site inspections and off-site monitoring of the financial institution, relevant aspects of the financial institution’s business, its accounting and control systems, and its monthly statements under section 35, disclosure statement, and any matters arising out of the statutory audit. (19) The central bank may, where it considers it desirable or necessary in the interests of depositors, arrange meetings with auditors of financial institutions. (20) No civil, criminal or disciplinary proceeding shall lie against an auditor by reason of his communicating in good faith to the central bank, whether or not in response to a request made by it, any information or opinion which is relevant to the central bank’s functions under this Act or any enactment, guidelines or instructions referred to in subsection (16) (b), (c) and (d). [S. 39 amended by s. 2 (n) of Act 18 of 2008 w.e.f. 19 July 2008; s. 3 (f) of Act 10 of 2010 w.e.f. 24 December 2010; s. 4 (c) of Act 38 of 2011 w.e.f. 15 December 2011; s. 3 (m) of Act 18 of 2016 w.e.f. 7 September 2016.]