As a general rule, the auditor is appointed by the shareholders at the annual general meeting. Which of the following is not true concerning the appointment of an auditor?
A)In practice the shareholders generally accept the recommendations of the directors concerning the appointment.
B)The appointment stands for 12 months until the next annual general meeting.
C)The company is liable to pay reasonable fees and expenses of the auditor.
D)An auditor ceases to hold office after a company goes into liquidation.
A)In practice the shareholders generally accept the recommendations of the directors concerning the appointment.
The statement “In practice, the shareholders generally accept the recommendations of the directors concerning the appointment” is not true concerning the appointment of an auditor. The appointment of an auditor is a responsibility of the shareholders and not the directors. The shareholders have the right to appoint and remove the auditor. Although the directors may recommend an auditor, the decision ultimately lies with the shareholders, who vote on the appointment at the annual general meeting. Therefore, the correct option is A)In practice the shareholders generally accept the recommendations of the directors concerning the appointment.