You are chatting with a close friend who is a quantity surveyor and he tells you that he is purchasing a majority$$holding in a private company. In addition, he tells you he will be the managing director but will retain the services of the two existing directors, neither of whom are shareholders. There are four other shareholders.

He also informs you that the company has, besides himself, $27$ employees and that the expected turnover for the year is R $36$ million and that the only liabilities which the company has are current creditors of just less than R $1$ million and long term loans of R $4\mathrm{.}8$ million. Your friend$$has just been told by a lawyer, who is responsible for the formalities related to the purchase$$of the company, that at the next annual general meeting of the company, an auditor$$will have to be appointed. Your friend$$is concerned about this and, knowing that you are in the auditing profession, he asks the following questions:

$1.$ Must the company have an auditor and if so$,$ is it an external or internal auditor the company must have?

$2.$ Even if we are not required to appoint an auditor, can we still appoint one? Could I appoint you as the auditor?

$3.$ Whose responsibility would it be to appoint the auditor and must there be an agreement amongst the directors as to who the auditor should be$?$

$4.$ What benefit would there be from an audit for the company and for me$,$ bearing in mind that I am the majority shareholder and managing director?