Date of publication: 13 February 2014
Leonid Gilevych, Lawyer
In cases where a business has no Chief Accountant and the recordkeeping is outsourced to an external auditor, statutory liability of his deputy can vary depending on a number of factors.
First, it is important to know what exact responsibilities the deputy has, namely, whether he or she can be held liable ex officio, by authority of an employment contract or company’s internal regulations, resolutions, executive orders, etc.
Second, liability will depend on whether a deputy was officially appointed Acting Chief Accountant. This can be done by a separate resolution of automatically when the Chief Accountant resigns, if stipulated by company’s internal regulations.
Thirdly, the contract between the company and an external auditor is also important. It must contain detailed provisions on the liability of each party (the company, i.e. its officers, and the auditor) in terms of recordkeeping. So, for example, the contract must require the auditor’s representative to sign on client’s reporting. In particular, Section 9(8) of the Accounting and Financial Reporting Act provides that liability for failure to timely produce source documents and accounting registers and for any fraud thereon vests in the persons who had compiled and signed these documents.
With regard to the above, it is useful to remember that pursuant to Section 8(4) of the Accounting and Financial Reporting Act, Director of the company can be responsible for the recordkeeping where there is no Chief Accountant.