Auditors Report

[D.Llama]

RONR refers to the need for the adoption of the auditors report . Where did this come from in a historical context and is it in any way - current ?  . This appears  to concern issues of potential liability and   shielding from liability . Is this not a  matter  that  only  experts in law and accounting  are experienced enough to make or determine  (?)- that is -that the auditors report needs to be adopted by vote of the assembly . Today I spoke to a CFO of a major corporation and he indicated that such a motion before corporate owners ,at the Annual General Meeting - is an unknown . Does anyone have a fix on this ? Thank-you . 

[Kim Goldsworthy]

Yes, to the question whether "liability" is a question of law.

But that is assumed.

***

After the organization's ______

     (a.) expert in accounting has finished the audit; and

     (b.) the expert in law has advised the organization regarding liability;

. . . then, the organization must either:

     (a.) take the advice; or

     (b.) reject the advice

. . . of their two experts.

***

A new treasurer must be assured that the organization has recognized a known point of turnover-of-responsibility of the "numbers".

The new treasurer, and the organization, as well, must have a known starting point where "all the new mistakes are the new treasurer's fault" and "all the old mistakes are the old treasurer's fault", so that the responsibility is reasonably certain, who-did-what.

The auditor's report, which was completed by a neutral third party (ideally) who is trained in accounting (ideally), is an aid to draw such a line.

But that "line" is not always done. -- Not all organizations conduct audits. -- Not all organizations who do audits have an accountant lead the auditing team.

Thus we come to the point -- that the adoption of one's audit report should only occur after your two experts have been consulted.

It would be fool-hardy to adopt an audit where you don't trust who did the audit, and don't trust the actual numbers in all the documents.

***

But then we come to the new treasurer. -- What shall the new treasurer do, when the organization itself does not trust any of the financial reports? Where does the responsibility lie for this year's irregularities?

I think that is the point of "adopting an auditor's report."

 

 

[D.Llama]

Sir :

Much obliged for this but  ,with respect - it does not answer the inquiry ,save for the  fringes- at best  . Say  there  is no question an auditor is the norm for this organization  "X" -and may I  add, this is a real situation and a  corporation with sales well over a billion $  per year . My question is related to the antecedents  of this proposition in RONR ( p. 479 - lines 30-35 - where did it  come  from- (?) what actual value does it  have today ?. When it was initially inserted in RONR  was it based on sound legal and accounting principles  . ? Is it an accurate proposition for  todays accounting/tax/litigation context  ? There must be litigation and accounting experts on this forum who  may well be able to address this .  And this is not to offer offence to your response  Mr Potzbie - but are you expert enough  in accounting and tax law principles  to know if this remains  a legitimate  proposition for RONR ? 

If this is an accurate proposition - presently in RONR - then it should  be capable of justification by anyone who offers it  - and from a source and background ( expertise ) that can backstop it with credible analysis and response  . Otherwise it sits in RONR ,without apparent justification or support, in this  second decade of the 2000's and we parliamnatatrians are vulnerable to questions and inquiry as to its legitimacy- if we assert it  . In a boardroom yesterday I asserted  that it was a safeguard of sorts  respecting  liability for the CFO ( Treasurer)   and other internal players  and that it placed greater responsibity on the external auditor if the owner/members were to adopt the auditors report - rather than the report simply come is as  other reports do ( not adopted by vote -  but merely  submitted ,and "in", on submission  )   . Basically I parroted what RONR suggests . However, the CFO ( a 30 year- very seasoned professional  accountant ) questioned this and I was left merely repeating RONR ,without the actual   accounting or  liability knowledge to back it up .Where and what is that deeper background knowledge ? Without that ( and as justifiable ) this appears a dicey/tenuous  area for parliamentarians  to tread about  (?) and muddle in . An informed answer is very much needed for this- in my experience ( as of yesterday ), and in my  respectful submission.The CFO ( noted above )  is now seeking an expert legal response and it will certainly  be interesting to see where this will lead .But I now  feel quite vulnerable on this-  going forward . That was not the case in past circumstances where no challenge was made to my assertion that the auditor report ought to be subject to member/owner adoption.  

Thank-you .

[Kim Goldsworthy]

Good question.

Since there are no footnotes/endnotes in RONR Eleventh Edition, then I don't know the original source of the parliamentary concept of "adopting an auditor's report".

***

I suppose it is possible that the common parliamentary law of 1876 (year of original publication of "Robert's Rules of Order") has changed since the 19th century, and thus it possible that the common parliamentary law of 2016 (21st century) is one where there is no adoption of the auditor's report.

Perhaps today's accountants and today's lawyers are -- indeed -- being trained that it is inadvisable for their organizations to adopt the auditor's report. -- But that question is one you should put to (a.) a C.P.A. who has been recently trained in standard accounting practices; (b.) a lawyer who specializes in nonprofit law.

I certainly don't know what their respective Continuing Education credits are covering, nowadays. -- Change is slow. But change is possible.

***

For the nonce, the Eleventh Edition is the current edition.

And the rule (more of a suggestion than a rule) says that

(a.) the monthly reports from one's treasurer are not to be adopted (because they have not been audited, and the organization ought not make an un-proofed document its official statement);

(b.) the auditor's report ought to be adopted (as a safeguard for the newly-elected incoming treasurer).

. . . But, as you say, The Book might be in conflict with accounting/legal practices of 2016. -- The two industries do not talk to one another, in general.

***

(If nothing else, I will ask my accountant friend, who is a younger parliamentarian than myself, what they are teaching nowadays to the young whippersnappers which us old fogies haven't picked up on.)

[D.Llama]

Thank-you. This simply confirms that we  mere parliamentarians do not know what we are talking about-  to  rely on   RONR  for the proposition  that the auditors  report should be processed by adoption . And if you ask your accountant friend  by all means do respond further . The accountant expert  I dealt with yesterday was unequivocal - no obligation whatsoever . And this is no mere bookkeeper - CPA for the community Club or Church  Association . This is a  top end senior  accountant with enormous  financial challenges and experience ( multi- organization corporate/boards  ) -  a financial  accounting expert . We tread on very thin ice over  this patch - as mere  parliamentarians -  it seems !

 

OBLIGED .

[Joshua Katz]

So far as I know, parliamentarians are hired to advise on parliamentary procedure.  If an organization has adopted RONR and hires a parliamentarian to advise on its use thereof, what is the question to ask?  Parliamentarians aren't hired to advise on whether or not RONR should contain some rule or other.  Certainly parliamentarians aren't hired as consultants on accounting or law.  If an organization doesn't like that rule, it is free to adopt a different rule.  

A parliamentarian could be legally said to skate on thin ice when advising that a motion is not out of order simply for violating substantive law - if someone were to mistakenly think that parliamentarians are supposed to give legal advise. 

So, when we're talking about RONR, then, many parliamentarians do know what they're talking about.  If they were to talk about accounting, many would not.  But the rule under discussion here is not an accounting rule, nor is it a law.  Parliamentarians, I agree, should refrain from saying the reason for this rule is about liability for the corporate officers as opposed to the auditors.  I certainly wouldn't make the assertion given here, as it makes no sense to me.  I also wouldn't make one that does make sense to me, formally, if it's in an area I am not familiar with, such as accounting or law.  

I've been told that the American College of Parliamentary Attorneys advises against including the name of the mover of an original main motion.  Most organizations, though, adopt RONR, not the recommendations of said organization.  No one claims that following RONR is a safeguard against liability, other than that arising from not following your bylaws/parliamentary authority.  This question seems similar, if less important.

The key here, for most organizations, is that one should not adopt an unaudited treasurer's report - although organizations remain incredibly stubborn on this point, in my experience.  I've always looked at that one and said - well, of course there shouldn't be a vote on adopting that, how on earth do I know?  I don't look at the books, how do I know if the treasurer is correct or not, in order to vote?  An audit report, on the other hand, makes sense to me for adoption, since an outside expert delivered it, and we now adopt it as the statement of the body.  That doesn't seem to me to be about protecting incoming treasurers or corporate officers, but just saying "yes, we see things this way as of this moment."

[Guest]

Thank you Goldefan :

Parliamantarians do indeed know what they are talking about when they stick to Parliamantarians areas of expertise . But surely this context  re the auditors report is beyond the scope of that knowledge - and that is the point here . It is not a matter of common sense nor Parliamantarians expertise that the auditors report need go to adoption process . And the experience of this mere Parliamantarians is that RONR does not equip me to defend the proposition that RONR asserts in this connection , nor do the two accounting courses I took in a B.Com degree  40 years ago -hardly enough .

Where is the expert voice on this that can cut through and simply  advise "yes " or "no" - "this is a reasonably sound proposition - it can be accepted or not - but it is reasonably sound - and here is the reason why ( expert on accounting/ legal liability ) " . May I ask Goldefan ( thus respectfully made ) do you assert such a claim of expertise in this connection ?  Obliged . 

[Joshua Katz]

I have no such claim of expertise, and I still say you are misrepresenting what a parliamentarian is supposed to do.  Lots of things are beyond the expertise of a parliamentarian, but "what rule does RONR give for audit reports" is not.  A parliamentarian can happily stick to "RONR says to do this.  Further questions are better directed to a CPA or attorney" just as an attorney, when asking about a motion to hire an assassin, should say "the law says hiring assassins, in this context, is illegal.  Further questions about the motion itself are better directed to a PRP."

Since when are parliamentarians called upon to defend rules in RONR?  If a parliamentarian is not a mathematician, are they on thin ice when advising clients that secondary amendments, but not amendments of the third degree, are permitted?  

[Shmuel Gerber]

11 hours ago, D.Llama said:

RONR refers to the need for the adoption of the auditors report . Where did this come from in a historical context and is it in any way - current ?  . This appears  to concern issues of potential liability and   shielding from liability . Is this not a  matter  that  only  experts in law and accounting  are experienced enough to make or determine  (?)- that is -that the auditors report needs to be adopted by vote of the assembly . Today I spoke to a CFO of a major corporation and he indicated that such a motion before corporate owners ,at the Annual General Meeting - is an unknown . Does anyone have a fix on this ? Thank-you . 

All of the rules in RONR are not only current but indeed timeless (at least until the next edition is published).

RONR (11th ed.) says, "[In] a stock corporation, although the board of directors is elected by stockholders who hold an annual meeting, it constitutes the highest authority in the management of the corporation" (p. 9, ll.-14) and that "the board [in an organized society] has only such power as is delegated to it by the bylaws or by vote of the society's assembly referring individual matters to it. . . . It should be noted, however, that exactly the opposite condition prevails in connection with boards of business corporations, in which the board has exclusive power and authority to operate the business" (pp. 482-483).

It should therefore come as no surprise to hear an assertion from the chief financial officer of a major corporation that a motion at the annual meeting of stockholders to accept the auditors' report is unknown. I'm not saying that his statement is accurate, and I don't know what the actual practice is at most corporations, but it is in no way at odds with the rules in RONR to leave such matters to the board of the corporation, rather than the owners.

[Thomas Ralph]

I will put the opposite point. On this side of the water, the annual report and accounts of a large corporation do need to get approved by the shareholders.

Best to let stock corporations follow stock corporation law, and parliamentary organizations follow RONR.

[Guest]

Mr .Gerber :

 

I do find some value in this  response although likewise I do not know the ( stock )  corporate accounting/liability parameters .But- (And) I'm not all so clear that this actually addresses the core point . I do not seem to  have the answer even with this - re the core question .

So , if you will consider  ,   let it be  be hypothetically, that  the  board of an organized society ( not stock ) is the type faced with this question or inquiry . . In such an instance  is the proposition  reasonably sound or not ( even then  ? ) that the auditors report  should be dealt with by the adoption process ?  The reason being ( ?)  it allows for greater liability protections for the treasurer ( does it ?). And if so where is the authority for that from an expert in the  accounting/liability  field- otherwise is it but the barefaced assertion by RONR to be accepted with but no more than that ? I cannot fathom that it is axiomatically obvious- or so clearly common sense that any reasonable person would conclude as much .Whereas a great deal of RONR ( apart from this point ) does indeed make very good sense and can easily be explained and defended .  Thank-you .

 

Mr Godelfan :

Thank you as well for the response above . But permit me to  respectfully differ . In my view we are indeed called on to explain and defend the use of rules of order  and provide rationale- for their  use and application ,as sound - more so than merely" they are adopted -live with it" although this can on occasion be the result    . We are not mere automatons  that rattle of  page and line of RONR, and then retreat to silence when an inquiry arises as to ( for example ) : " Why ,may I ask Mr/Ms.Parliamentarian is a third level amendment not permitted "? .  The answer for that,or any other like  questions of inquiry is surely not " It says so in RONR - full stop - any question you have is  of no consequence after you have been quoted from the parliamentarians gospel " . Indeed, RONR offers that procedural rules are to aid and assist in the facilitation of sound and effective meetings and this incudes assisting members in understanding basic approaches that the rules seek to advance- grounded in reason and logic . And in that respect the bare answer that: "its in RONR that the adoption of an auditors report is best and sound re liability aspects and the Treasurer - that  is sufficient - ask no further of me as your parliamentarian  "  would seem a very inadequate  response  .It is  one thing to say "these rules  have been adopted -you have heard it  go away " ( the parliamentarian to then go away   happily ? ) ,  and another to say- "these have been adopted - thank you for the question and this is the rationale for that, and the best explanation I have  - I hope that is helpful " . The latter seems the better ,  the more  appropriate, and the one to strive for  under RONR .   Obliged .

 

 

[Guest]

Thank you Mr Ralph. And may I ask of you Sir - What is the basis and rationale ( accounting / liability ) for doing so in the UK  - if you know on this point . ? Why is it done in the UK ( is it required by legislation or regulation )  - who does it protect and  has it the same or a different rational than in RONR .And does this apply to the auditors report or all of the financial reports submitted to the owner/members/shareholders ?

 I will be very much obliged for anything you can offer on this, or any resource I can look at to go forward on this subject - it remains a curret matter that I will be obliged to deal with and ( again )  soon ?

In your debt  for any crumbs- large or small  .

[Joshua Katz]

Then please tell me why an amendment of third degree is not permitted.  You hinted that you have an answer to that other than citing pages.  What is your answer?  

If asked to explain that rule, I myself would point out that we can't permit unlimited degrees of amendment because it would let two people effectively refuse to allow a motion to proceed if they oppose it.  As a result, we have to choose some level.  But why 2?  I have no reason for that, specifically.

More to your point - as parliamentarians, yes, we need to explain the reasons for the rules of order, and no, we are not automatons.  But what you're asking here isn't the reason for a rule of order - you're asking for a substantive reason, one having to do with the underlying subject matter, not with rules of order persay.  That is something we are neither obligated to expound upon, nor qualified.  

[Guest]

Mr Godelfan:

 

Permit to offer as well that I appreciate the point you make - the parliamentarian does not oblige any assembly to pick and choose its rules - RONR or otherwise . He/she is there to advise and assist the assembly in applying -  what they have chosen to use as their tool . And ,of course, when they adopt RONR they often do not know what they have chosen  and often  need an expert to help them along .

But I think it  overly simplistic and something of a false answer ( no offence meant here ) to say in that connection : "I'm here as parliamentarian - but only ,  to tell you what you must do to apply what you have voluntarily chosen to adopt . That's my job and all of my job - explaint it to yourself as to reason and rationale for any of these rules  - I'm  simply  the mechanic here for going forward procedurally   ".

I'm not suggesting that a parliamentarian  could invariably be faulted for such an approach - however , that  is not the approach  that seems appropriate to me -  nor at all helpful . Wherever possible we need . may I propose , to explain and assist members in understanding the rules of order they have adopted and any rational ( that we know of )  for their construction  .A parliamentarian  might indeed  say -" these were the rules you adopted and now you must live with them - like /understand  them or not" - but this would be in my experience poor service- and indeed perhaps the end of  future service for that parliamentarian  .I am not, however, suggesting at all that explanations and discussion as to the rational and meaning of rules be  engaged in at an actual meeting - but when the meeting is not active ( recessed or adjourned ) I consider that we  should be available for complimentary assistance for explanations and assistance- that we can provide . Or in other seminar settings .    Thank-you .   

.

[Guest]

Mr Godlefan :

 

Your last post  - response and mine ,came in   at approximately   the same time. With respect to why- no third level amendments - I do not know if the reason you offer is correct or not .Nor do I know if historically under parliamentary law third level amendments were prohibited - nor the rational, of course for that , if it was so historically- in the, say 1700's  . No doubt that can be researched- however  . In RONR as you know ( RONR 135- line 22-23)  no rationale is provided against  third level amendment  . Perhaps in an earlier NAP  article or in Parliamentary  Law  ( Robert ) or elsewhere ,the answer can be tracked down.

However, I have read in other authorities touching  on this point ( and I will locate that source and advise on that ) that by the time the process gets to second level amendment it  often  becomes  difficult for members in the assembly to understand where matters  stand - and to add a third level amendment would complicate matters beyond the capacity of many in attendance . I do not know , of course , if that is the actual historical reason or not . However in practice ( at meetings )  I have observed  this develop and arise and that members are indeed,  often confused- when even the second level amendment is pending . Therefore when asked- I do indeed offer that- as the rational  and that seems both useful  and practically  accurate  . For that, and for many other procedures, I therefore have an answer - historically sound or not - and  that I see as invariably reliable and sufficiently sound . But for  the auditor report/ adoption - there I am am well at sea - and that is why I am on this "quest" . Thank-you .

[Gary Novosielski]

Is D.Llama the same as Guest, here?  And why?

I can add that as a member of a publicly elected school board for many years, the board did approve the annual audit report each year, and if any recommendations were offered, it adopted resolutions to implement an appropriate corrective action plan.  That situation is more analogous to the corporate one, where the board has ultimate responsibility, and the public (the general membership) exerts direct control only through elections.

It was my understanding, after consulting with legal counsel, that this was a legal requirement of all similar boards.  It reflected the concept that the buck stops at the board level, and the actions of the board in approving the annual budget, the tax levy, capital expenditures, RFP's and bids, and the audit report were the method by which the board accepted its responsibility as the custodian of the taxpayer's money.

As a taxpayer, I would want my elected representatives to properly (and officially) shoulder that responsibility.

[Guest]

Yes- D.Llama is the same as Guest- but on a different computer location .Sorry should have identified at the bottom of all  these later posts .

Thank-you Gary. I'm not sure whether or not you are offering some response as to the rationale in RONR -that  the adoption of the auditors report by the members/owners in a non-corporate context, is a valuable or needed action . RONR, by implication, suggests it is- in that such is the rule provided . ? I certainly  like the idea that the owners /members should vote on the auditors report  ( approve or not )  , and indeed question the auditor on the report -if they are pleased to do so . But is it necessary that it be adopted by motion when other financial reports do not at all  require such a process? Where does this come from and why (?), and is it still advisable - that remains the inquiry ?.Is it useful or should it be trumped by a Special Rule ? .

 Obliged .

D. Llama     

 

 

[Gary Novosielski]

Yes, in the context I mentioned, the auditing firm attended a meeting of the board and presented the report, having previously provided copies of the report along with a management summary to all members.  Questions were welcome and appropriate.  

I think adopting the report, including responding to any recommendations, is appropriate even when other financial reports are not adopted.  

Typically, interim reports are the product of the work of one person, one small group, or perhaps the output of a computer program.  It would be next to impossible for the board members to be familiar enough with the details of the production any given report to be able to vouch for its correctness by adopting it.  

In the case of the audit report, it is compiled after a thorough investigation of the records, procedures, and compliance with those procedures, by a group that is independent of the staff people who deal with the data on a daily basis.  In a single document, it comprises the sum total of all the interim reports, independently verified, as well as an independent evaluation of the controls in place to ensure the accuracy and integrity of the financial records.

Based upon that comprehensive evaluation, the board should have enough confidence to approve the report.  If for some reason it does not have that confidence, it should replace the auditors.

[Guest]

Thank -you Gary - I think much the same and favor that the auditor report be subject to adoption in such a process . As member  of  various  organizations in the past I was invariably in favor of any and all reviews that allowed for the highest level of financial accountability -  a protection for both members , Board of Directors, and employees as well . But here is the difficult part for me :   

RONR  p. 479-480 ,  line 35- onwards  :

 

"The adoption of the auditor's report has the effect of reliveing the treasurer of responsibility  for the period covered by his report , except in the case of fraud".

Is that statement correct- do you know - is that accurate ?. Would the treasurer then be relived of responsibility for the " Books " and errors in the "Books ". The best I can say myself  is that I do not  know- really- if its true or not true. For years I have been going along recommending that the auditors report best be dealt with by the adoption process- but  is it actually an accurate statement  respecting the liability arising- if the "books "   are  erroneous . In one context I have been told it is not- and that the auditors report need not be subject to adoption but should come in like any other report  - and this by a financial expert .

I suppose one could take the position why not advocate  for this ( benignly )  anyway even if one is not  at all sure  . But that seems a weak place of retreat - why not know, or have a better handle on this than mere speculation  . And that is- so it seems to me -  whether this be for  corporate-  or not corporate  structures .I have various corporate clients who apply RONR  fully ,  on  adoption, or as a" guide and reference" .  Any further thoughts most welcome .

 

D. Llama  

[Gary Novosielski]

I would no sooner take the word of a financial "expert" on matters of law than I would take the word of a lawyer on matters of parliamentary procedure.

From an organizational point of view, the treasurer should be relived of responsibility for the period covered by the report, once that responsibility has been assumed by the body as a whole, especially since the treasurer may have been someone else during that period.

Questions of what does and does not constitute fraud is a legal matter, so ultimately, questions of legal responsibility are beyond the area of expertise of accountants and parliamentarians alike.  But I don't believe this argues either way with respect to the question of adopting the report.  I'm content to follow the rule, which in my experience is anything but an anachronism.

[Guest]

Hi Gary ;

What you say here has merit and  I expect to have the ( some )  legal response in due course - at the moment , however, the financial expert goes on the practices  he has observed in many other instances and in various organizations .

I would have to credit him with better knowledge as to general  financial matters than  my own ( and even as to treasurer's potential  liability ). These are areas he would be more exposed to and have far  more second hand knowklwdge than I .Indeed, since financial experts are invariably concerned with their levels of responsibilities  these are the workers who would be in the know on these issues - ( we all want to know where our  responsibility begins and/or  ends ) even if not the authors of the core  legal opinions  on "liability for treasurers, etc." .  On the other hand -I am entirely uninformed except for the gut feeling of - "get as much coverage as you can from liability' -  and am not in the habit of contact with corporate legal counsel over legal/financial matters. But he  is and many financial experts   are .

Thank-you - more to follow in a few weeks on this .

Be well- D. Llama       .   

 

 

[D.Llama]

8 hours ago, Godelfan said:

Then please tell me why an amendment of third degree is not permitted.  You hinted that you have an answer to that other than citing pages.  What is your answer?  

If asked to explain that rule, I myself would point out that we can't permit unlimited degrees of amendment because it would let two people effectively refuse to allow a motion to proceed if they oppose it.  As a result, we have to choose some level.  But why 2?  I have no reason for that, specifically.

More to your point - as parliamentarians, yes, we need to explain the reasons for the rules of order, and no, we are not automatons.  But what you're asking here isn't the reason for a rule of order - you're asking for a substantive reason, one having to do with the underlying subject matter, not with rules of order persay.  That is something we are neither obligated to expound upon, nor qualified.  

 

Hi Godelfan ;

 

i checked in "Parliamamnatary Law " ( H. R. Robert (1923) ) on why no third level amendment - and your reason ( above )  seems basically what was behind the approach taken .

P. 19 

"An amendment of the third degree is not allowed. It is necessary to stop somewhere , and this point has been found to be the best ."

D. Llama 

[Joshua Katz]

Thank you.  As I said, though, that's an explanation as a rule of order, but not a substantive explanation.  In this particular instance, there is no substantive explanation possible, so far as I know.  Which is fine, because my obligation is to explain it in those terms anyway.

[D.Llama]

Hi Godelfan:

The distinction you make is not clear to me ( for third level amendment  ) and I am curious to ask - what would a "substantive  explanation" for this  rule focus on  ? General Robert apparently crafted many a rule (himself) after his first edition . The above ,from the General,  may reflect the initial reason for no third level amendment "as an  explanation  as a rule of order ". When you refer to "substantive explanation "  what place or terrain  are you suggesting is not for the parliamentarian  to expound upon  or be qualified in  - ( "underlying subject matter ") as it relates to third level amendment ?

Obliged . 

 

PS: I agree, however ,that the parliamentarian need not know at all as to the legitimacy or the workings of various  things that can arise in a meeting . There may be scientific  reports, or  balance sheet and income statement data, or other technical data that is beyond the knowledge of a parlimanatatrain and he/she is ( may be )  neither obligated  nor qualified to "expound"- upon as you say  . But that is not what is at issue in the above example ( amendment ) at all .

[E A Lemoine]

 

So let me provide you the accountant's response to this being one of the few CPA's and professional parliamentarians out there...

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Where did this come from in a historical context and is it in any way - current ?  . This appears  to concern issues of potential liability and   shielding from liability . Is this not a  matter  that  only  experts in law and accounting  are experienced enough to make or determine  (?)- that is -that the auditors report needs to be adopted by vote of the assembly . Today I spoke to a CFO of a major corporation and he indicated that such a motion before corporate owners ,at the Annual General Meeting - is an unknown . Does anyone have a fix on this ? Thank-you .

What is done with for-profit, publicly traded companies is very different than what happens in non-profit, non-stock corporations. Shareholders DO ratify the audit committee's decision about which independent CPA firm is used, but no they don't adopt the auditor's report seeing as they have no rights or obligations to do that. While some things fall onto the shareholders to make decisions, ultimately they aren't viewed as the governing body, the board of directors has most of the legal powers. And with respects to audits, for the most part the audit committee has jurisdiction over it seeing as they have independent charters granting them certain authority. But even they don't need to "accept" the auditors report per se, because the CFO/treasurer of a publicly traded company is an employee and they can fire him/her, sue him/her personally, and also because the CFO need to make certain attestations about the financials as required by law (as do all of the directors) -- so they're all pretty "active" in regards to what is going on in the organization.  

As noted by others above, in non-profit organizations, it's assumed that the members have those powers unless otherwise delegated to the board. Further, much of RONR has application in millions of organizations that are unincorporated where there is technically unlimited legal liability on each of the members of the organization. When you're incorporated you do at least get that legal protection as a member. But your average organization's treasurer is unpaid, not an employee, and while not always a check signer, is usually involved to some degree in the financial decision making of an organization. Adopting the auditor's report in a non-profit is very similar to saying "We, the members, aren't experts in financial matters, but we believe that Firm CPA are experts and trust their opinion, so we're comfortable with relieving the treasurer of liability except in instances of fraud." Now you may not have the resources to pay for an audit and one should then have some members perform a financial review, again, to look for the same thing. The intent here is to create a control to potentially mitigate fraud from occurring. 

Under the Model Nonprofit Corporations Act, members generally have the right to demand a copy of the annual financial statements, and if they are audited, reviewed, or compiled by a CPA, their report should accompany the financials. If the directors do not have financial knowledge themselves on the financial statements or financial data, they can rely on a director who is competent in this area or a CPA. One should be able to rely on the expertise of others, and knowing the board or members are placing that reliance on the expertise of others and relieving the treasurer of those obligations is helpful.