INTRODUCTION:

Basically in Tanzania the formation of a company should base on the

companies Act ( Cap 212) of 2002. The founders/promoters should
seek and furnish information to various Institutions which facilitate
some legal requirements in order to take off. These Institutions are
NBAA and BRELA.

DEFINITION OF TERMS AND CONCEPT:

• Auditing firm:
 Means either the partners of a firm providing auditing
services or sole Practitioners Providing Audit Services as
appropriate. (E. Ajowi 2005)

• Limited Liability Company:

One having the liability of its members Limited by the
memorandum to the amount unpaid on the shares held by them
or

One having the liability of its members Limited to such amount

as the members may undertake to contribute to the assets of
the Company in the event of winding up termed as Company
Limited by guarantee. (Companies Act of 2002 section 3 -Cap
212)

SERVICES OFFERED BY AUDITING FIRM:

It includes the following:

• To provide financial and Accounting Services.

• To Provide Taxation Services
• Technical and Manpower Development Services.
• Recruitment Services.
• Asset Valuation.
• Liquidation.
• Establishment of Financial Systems.
• Training Services.

PROCEDURES TO ESTABLISH AN AUDITING FIRM:

1. Conceiving the idea to start a firm.

Everything has its own start. In order to have an auditing firm
an individual must be having an idea of establishing a firm and
will be providing the Auditing Services.

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2. Qualification and registration with NBAA.
To quality for registration he/she has to be certified Public
accountant (CPA) with particle experience of not less than three
years doing a professional services.

3. Finding Directors/partners.
-Partners for an audit firm must have at least two partners who
are registered by NBAA in Public Practice (CPA-PP). These
partners who are going to form a new firm, should not be
employees of auditing firms currently in Public Practice. Apart
from that key employees must hold CPA (T) or its equivalent
qualification.

4. Meeting and deciding the Legal form business name,

premise and address.
The Individual (Kazimoto) who is having the idea of establishing
firm (audit) and his/her fellow partners are required to meet and
decide whether that firm which will be established will be sole
proprietor, Partnership or Corporation. Also they should decide
the name of the firm, address and where that firm will be
located.

5. PREPARATION OF LOGAL DOCUMENT.

Formation of a coy is achieved in through registration on with
Registrar of compaies. There are a number of documents which
need to be filled with registrar at the time of application and
soon after incorporation.
-This process should involve the lawyers in order to be
successful. Legal documents which are supposed to be prepared
for use and submitting them to the registrar of company
(BRELA) are:-

(1) Memorandum of Association.

(2) Articles of Association.
(3) Certificate of Incorporation.

6. REGISTERING WITH BRELA.

- Apply for clearance of the proposed company name at the
Business Registration and Licencing Authority (BRELA).
7. - Apply for a certificate of Incorporation and commencement
to the Registrar of Companies.
8. Obtain Taxpayer Identification Number (TIN) from Tanzania
Revenue Authority (TRA) and thereafter a business Licence .
9. Starting operations in accordance with legal provision.
- It is advised that business should start soon after finishing

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 registration not later than one month.

SIGNIFICANCE AND PURPOSES OF THE FOLLOWING LEGAL

DOCUMENTS:

In order to be Incorporated with the registrar of companies who

issue certificate of incorporation after submitting memorandum of
Association and Articles of Association (Section 14 the Companies
Act 2002 - CAP 212).

MEMORANDAM OF ASSOCIATION:

Memorandum of Association is a Legal and special document which

is sent to the registrar of companies. This document governs the
company with the Investors and outside world. In other words deals
with the public at large. The memorandum sets out informing the
public, the basic facts relating to the company, It is an Important
document since it states the objects and powers of the company
and provides the company with its form and framework.

• The memorandum of Association contains:-

(a) The name of the company with ‘limited’ or
public Company as the last word(s) of the
name.
(b) The objects of the company which would
include the areas of activity in which the
company operates or intend to operate.
(c) The address of company’s registered office
and her/his location.
(d) The amount of authorized share capital to be
raised by way of issuing share.
(e) Contains also an agreement statement by
promoters that they wish to start a limited
company and that they intend to issue the
stated types of shares.

A company only has the power to carry out the objects specified
in its memorandum or anything which is reasonably incidental
thereto.

ARTICLES OF ASSOCIATION:
Articles of association is a document which regulates the internal
workings or management of the company. In effect, they are set
of rules and regulations which the company may draw up on its
own or adopt as a model of articles. It lays rules on,
(i) Procedure of calling a general meeting.

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 (ii) The rights/powers, duties or obligations of directors
(iii) Procedures shareholders shall follow to elect directors
(voting rights)
(iv) The arrangements for the division of profit.

Articles of association are subject to the memorandum and cannot

confer or include any power beyond those contained in the
memorandum of association.

CERTIFICATE OF INCORPORATION:
Is a special document which gives the company a legal existence after
the memorandum of and articles of associations have been inspected
and approved by the registrar of companies.

statements CHALLENGES INVOLVED AUDITING FIRM:

Currently the public put eyes into auditors that great expectation from
Auditors opinion true fair View. According to this expectation from
Public, Auditors face with legal liability including:

• Liability to a client under common law: for instance the

client may sue the auditor for not discovering defalcation
during the audit.
• Liability to third parties under common law: example the
bank may sue the Auditor for not discovering that borrowers
financial statements are partiality misstated.
• Liability under securities shareholders may sue the
Auditor for not discovering materially misstated in the
financial.
• Criminal liability where by the Government may sue the
Auditor for knowingly issuing Incorrect audit report.

These are some of the challenges (risks) involved the Auditor in his
normal working business as Auditing firm offering financial services.

• Auditing firm can not be advertised.

- This implies difficult to get customer.
- Where audit is conducted to specialized entity like Hospital,
there is a need to hire relative professional person which
may involve high cost.(need for combination of discipline –
especially to specialized.