16.2.02 Audit Fee of Statutory Auditors

Enquiry:

We would like to submit that our statutory auditors while offering their services for re-appointment for the year ending September 30, 2010 had requested in their consent letter dated December 14, 2009 that their audit fee may be fixed with mutual agreement in accordance with the guidelines given in ATR-14 of ICAP.

In consultation and mutual agreement with the auditors, their audit fee for the year ending September 30, 2010 was fixed in accordance with the guideline given in ATR-14 based on our turnover for the year ended September 30, 2009 and the Board of Directors recommended for re-appointment of the auditors on the agreed fee by the shareholders in the AGM. The auditors were re-appointed and the recommended fee for the year ending September 30, 2010 was approved by the shareholders in our AGM held on January 30, 2010 including the extra fee for CCG and limited scope review of Half Yearly Accounts.

The turnover of our company for the year ending September 30, 2010 (for which the auditors were appointed) has increased due to rise of sugar price in the market. The process of audit is underway but the auditors are insisting to charge increased audit fee for the year ending September 30, 2010 based on the turn over for the year whereas the audit fee for the year is already approved by shareholders in the AGM based on the turnover of last year with mutual consent of Auditors.

Your guidance is needed whether the auditors are justified in insisting to charge increased audit fee than that agreed by them and approved by shareholders for the year ended September 30, 2010 based on the turnover of the year, or they may request to increase their audit fee for the next year i.e. September 30, 2011, which will be mutually agreed and put up before our shareholders for their approval in the forthcoming AGM scheduled to be held in January, 2011.

Opinion:

For ready reference the Committee likes to draw your attention to the following clauses of section 252 of the Companies Ordinance 1984:

252. Appointment and remuneration of auditors.

(1)     Every company shall at each annual general meeting appoint an auditor or auditors to hold office from the conclusion of that meeting until the conclusion of the next annual general meeting:

(8)     The remuneration of the auditors of a company shall be fixed,—

(a)     in the case of an auditor appointed by the directors or by the Commission, as the case may be; and
(b)     in all other cases, by the company in general meeting or in such manner as the general meeting may determine.

Based on above, the Committee is of the opinion that the Company is required to pay the audit fee fixed or approved in the AGM keeping in view the requirements of audit fee referred to in ATR 14.

(November 8, 2010)