Appointing or Waiving the Requirement for an Auditor

Corporations are generally obligated to appoint an auditor. However, most small private corporations (non-distributing corporations) may waive this requirement.

Benefits of Appointing an Auditor

Audited financial statements offer thorough, independent review of financial health. They build credibility with shareholders, creditors, and potential partners. An auditor can also serve as an invaluable advisor.

Drawbacks

The most immediate drawback is cost — expect a minimum of $5,000 for audited financial statements, often much more. The process is also time-consuming and may be overkill for small corporations.

Eligibility for Waiver

Federal Corporations: Non-distributing entities can waive the auditor requirement with consent from all shareholders, including those holding non-voting shares. This consent must be obtained each year.

Alberta Corporations: A recent amendment now requires only a special resolution (2/3 majority of votes cast) rather than unanimous consent. The waiver must still be renewed each year.

Why Get It in Writing

Failing to properly document the waiver can lead to disgruntled shareholders demanding audited financial statements for several past years. This is one of the key reasons that preparing annual corporate resolutions is so important.

Our corporate legal support plans include preparing annual resolutions that address the audit waiver.