During the annual general meeting of a large, quoted company, the directors have been asked the following questions regarding the reappointment of the auditor:

(a) The auditor is supposed to be appointed by the shareholders and to act on our behalf. Why is it that we are simply asked to rubber stamp your recommendation every year? To make matters worse, the reappointment would always seem to have been agreed with the auditor in advance because he always seems to have indicated that he is willing to accept the post.

(b) How can the auditor be independent anyway? You negotiate his fees. You give him all sorts of lucrative consultancies which we never hear about. He would sign anything which was put in front of him!

Frame a (polite) response to the shareholder’s complaints. Suggest why the shareholders tend to delegate so many of their powers regarding the appointment and remuneration of the auditor to the directors.