Local Audit and Accountability Bill (HL Bill 4)

(b) any requirement of subsection (5).”

16 For section 1249 (supplementary provision about second audits)
substitute—

“1249 Supplementary provisions about second audits

(1) 5If a person accepts an appointment, or continues to act, as a local
auditor of the accounts of a relevant authority at a time when the
person knows the person is not appropriate, the relevant authority
may recover from the person any costs incurred by it in complying
with the requirements of section 1248.

10For this purpose “appropriate” is to be construed in accordance with
subsection (3) of that section.

For this purpose “appropriate” is to be construed in accordance with
subsection (3) of that section.

(2) Where a second audit is carried out under section 1248, any statutory
15or other provision applying in relation to the first audit applies also,
in so far as practicable, in relation to the second audit.

(3) A direction under section 1248(2) is, on the application of the
Secretary of State, enforceable by injunction.”

17 (1) Section 1250 (misleading, false and deceptive statements) applies with the
20following modifications.

(2) Omit subsection (3).

(3) In subsection (5)(b)—

(a) in sub-paragraph (i) omit “in England and Wales”, and

(b) omit sub-paragraph (ii).

(4) 25In subsection (6)—

(a) omit “, (3)”,

(b) in paragraph (a) omit “in England and Wales”, and

(c) omit paragraph (b).

(5) In each of subsections (7) and (8) omit “, (3)”.

18 (1) 30Section 1251 (fees) applies with the following modifications.

(2) In subsection (1), after “a recognition order under this Part” insert “or under
regulations under this Part”.

(3) In subsection (2)—

(a) at the end of paragraph (a) insert “and”, and

(b) 35omit paragraphs (c) and (d).

19 In section 1251A (duty of Secretary of State to report on inspections) omit
paragraph (a).

20 (1) Section 1252 (delegation of the Secretary of State’s functions) applies with
the following modifications.

(2) 40For subsection (3) substitute—

“(3) A delegation order may provide that it has the effect of making the
body designated under section 5 of the Freedom of Information Act
2000 (further power to designate public authorities), subject to
subsection (3A).

(3A) A delegation order may only provide that the body is so designated
to the extent that it is exercising functions transferred or conferred by
the order (so that nothing in Parts 1 to 5 of that Act applies by virtue
of the order to information held by the body which does not relate to
5the exercise of those functions).”

(3) In subsection (4)(b) omit sub-paragraph (ii) and the “and” preceding it.

(4) In subsection (6) omit paragraph (b).

(5) Omit subsection (7).

21 In section 1253(5) (delegation of functions to an existing body)—

(a) 10for “to 22B” substitute “, 22”, and

(b) omit “or paragraph 1 or 2 of Schedule 12”.

22 (1) Section 1254 (directions to comply with international obligations) applies
with the following modifications.

(2) In subsection (1) omit “, the Independent Supervisor”.

(3) 15For subsection (3) substitute—

“(3) A direction under this section given to a body designated by order
under section 1252 is enforceable on the application of the Secretary
of State by injunction.”

23 (1) Section 1256 (time limits for prosecution of offences) applies with the
20following modifications.

(2) In subsection (1) omit “in England and Wales”.

(3) Omit subsections (2) to (4).

(4) For subsection (5) substitute—

“(5) This section does not authorise the trial of an information laid more
25than 3 years after the commission of the offence.”

(5) In subsection (6) omit “, the Lord Advocate, the Director of Public
Prosecutions for Northern Ireland”.

(6) In subsection (7) omit the words from “, section 331” to the end.

24 (1) Section 1257 (jurisdiction and procedure in respect of offences) applies with
30the following modifications.

(2) In subsection (1), in each of paragraphs (a) and (b), after “at any place” insert
“in England and Wales”.

(3) Omit subsections (4) and (5).

25 (1) Section 1261 (minor definitions) applies with the following modifications.

(2) 35In subsection (1) omit the following definitions—

• “audit working papers”;

• “company”;

• “parent undertaking” and “subsidiary undertaking”;

• “third country”;

• 40“third country auditor”;

Local Audit and Accountability BillPage 52

• “third country competent authority”;

• “transfer”.

(3) In subsection (1), in the definition of “officer”, after “a body corporate” insert
“other than a relevant authority”.

(4) 5After subsection (1) insert—

“(1A) Expressions used in this Part that are defined in the Local Audit and
Accountability Act 2013 have the same meaning as in that Act.”

26 (1) Section 1262 (index of defined expressions) applies with the following
modifications.

(2) 10Omit the following entries—

• “approved third country competent authority”;

• “audit working papers”;

• “audited person”;

• “Auditor General”;

• 15“company”;

• “enactment”;

• “main purposes of this Part”;

• “parent undertaking”;

• “registered third country auditor”;

• 20“recognised, in relation to a qualifying body”;

• “rules of a qualifying body”;

• “statutory auditor, statutory audit and statutory audit work”;

• “subsidiary undertaking”;

• “third country”;

• 25“third country auditor”;

• “third country competent authority”;

• “transfer (in relation to audit working papers)”;

• “UK-traded non EEA company”.

(3) At the appropriate places insert—

(4) In the entry for “officer”, after ““officer”” insert “, in relation to a body
5corporate other than a relevant authority”.

(5) In the entry for “qualifying body” for “section 1220(1)” substitute
“1219(3)(a)”.

(6) For the entry for “recognised, in relation to a professional qualification”
substitute—

27 (1) Schedule 10 (recognised supervisory bodies) applies with the following
modifications.

(2) Omit the following paragraphs—

(a) 15paragraph 4 (recognition orders under old companies legislation to
have effect under Schedule);

(b) paragraphs 10B and 10C (public interest entity reporting and
independence requirements);

(c) paragraphs 16A to 16AB (transfer of papers to third countries);

(d) 20paragraph 20A (definition of public interest entity etc);

(e) paragraphs 22A and 22B (arrangements for setting standards
relating to public interest entity reporting and independence
requirements);

(f) paragraph 23A (arrangements for independent monitoring of third
25country audits).

(3) In paragraph 6 (holding of appropriate qualifications), in each of sub-
paragraphs (2)(a)(i) and (2A), after “recognised professional qualifications”
insert “(if there are any such qualifications)”.

(4) After paragraph 7 insert—

30“Auditors to have sufficient skill and experience

7A (1) The body must have rules to the effect that a person is not eligible
for appointment as a local auditor unless—

(a) in the case of a firm, the key audit partner, or each of the
key audit partners, has an appropriate level of competence
35to carry out local audits, and

(b) in the case of an individual, the individual has an
appropriate level of competence to carry out local audits.

(2) Rules under sub-paragraph (1) must comply with guidance issued
by the Secretary of State.

(3) In sub-paragraph (1) “key audit partner” means an individual
identified by the firm as being primarily responsible for local
audits.”

(5) For paragraph 10A substitute—

5“Technical standards for group audit

10A (1) The body must have rules and practices as to technical standards
ensuring that local auditors undertaking a group audit—

(a) review for the purposes of the audit the audit work
conducted by other persons, and

(b) 10record that review.

(2) The body must participate in arrangements within paragraph 22
(arrangements for setting standards), and the rules and practices
mentioned in sub-paragraph (1) must include provision requiring
compliance with any standards for the time being determined
15under those arrangements.

(3) In this paragraph “group audit” means an audit that relates to the
statement of accounts of a relevant authority, or, where the
relevant authority is a health service body, the accounts of the
body, in a case where, in accordance with proper practices, the
20financial transactions of an entity other than the authority must be
consolidated into the statement or (as the case may be) the
accounts.

(4) In sub-paragraph (3) “entity” means any entity, whether or not a
legal person.”

(6) 25For paragraph 13 substitute—

“Monitoring of audits

13 (1) The body must—

(a) have adequate arrangements for enabling the performance
by its members of local audit functions, other than
30functions in respect of major local audits, to be monitored
by means of inspections,

(b) in the case of members of the body who perform any local
audit functions in respect of major local audits—

(i) participate in arrangements within paragraph
3523(1), and

(ii) have rules and practices designed to ensure that a
sanction determined under paragraph 23(1)(b) is to
be treated as if it were a sanction which the body
had determined under arrangements for
40enforcement within paragraph 12(1A), and

(c) have rules designed to ensure that members of the body
take reasonable steps to enable their performance of any
local audit functions to be monitored by means of
inspections.

(2) 45Any monitoring of members of the body under the arrangements
within paragraph 23(1) is to be regarded (so far as their

performance of local audit functions in respect of major local
audits is concerned) as monitoring of compliance with the body’s
rules for the purposes of paragraph 12(1) and (1A).

(3) The arrangements referred to in sub-paragraph (1)(a) must
5include an inspection which is conducted in relation to each
person eligible for appointment as a local auditor at least once
every 6 years.

(4) The inspection must be conducted by persons who—

(a) have an appropriate professional education,

(b) 10have experience of—

(i) local audit work,

(ii) statutory audit work within the meaning of this
Part of this Act as it has effect apart from its
application by virtue of Schedule 5 to the Local
15Audit and Accountability Act 2013,

(iii) other audit work relating to any body whose
accounts form part of a group for which the
Treasury prepares accounts under section 9(1) of
the Government Resources and Accounts Act 2000,
20or

(iv) work equivalent to that within any of sub-
paragraphs (i) to (iii) on the audit of accounts under
the law of an EEA State, or part of an EEA State,
other than the United Kingdom,

(c) 25have received adequate training in the conduct of
inspections concerning the audits of relevant authorities,
and

(d) do not have any interests likely to conflict with the proper
conduct of the inspection.

(5) 30The inspection must review one or more local audits in which the
person to whom the inspection relates has participated.

(6) The inspection must include an assessment of—

(a) the person’s compliance with the body’s rules established
for the purposes of paragraphs 9 (professional integrity
35and independence), 10 (technical standards) and 10A
(technical standards for group audits),

(b) the resources allocated by the person to local audit work,

(c) in the case of an inspection in relation to a firm, its internal
quality control system, and

(d) 40the remuneration received by the person in respect of local
audit work.

(7) An inspection conducted in relation to a firm may be treated as an
inspection of all individuals responsible for local audit work on
behalf of that firm, if the firm has a common quality assurance
45policy with which each of those individuals is required to comply.

(8) The main conclusions of the inspection must be recorded in a
report which is made available to—

(a) the person to whom the inspection relates, and

(b) the body.

(9) The body must, at least once every calendar year, give to the
Secretary of State a summary of the results of inspections
conducted under this paragraph.

(10) For the purposes of this Schedule a local audit of the accounts of a
5relevant authority is a “major local audit” if the authority is
specified in, or of a description specified in—

(a) regulations made for the purposes of this sub-paragraph
by the Secretary of State, or

(b) a direction (which has not been revoked) given by the
10Secretary of State to the body.

(11) Regulations under sub-paragraph (10)(a) may in particular specify
a description of relevant authority by reference to its income or
expenditure.

(12) Regulations under sub-paragraph (10)(a) are subject to negative
15resolution procedure.

(13) A direction may be given under sub-paragraph (10)(b) only if the
Secretary of State thinks that there is significant public interest in
the authority, or in authorities of the description, specified in the
direction.

(14) 20In this Schedule “local audit function” means any function
performed as a local auditor.”

(7) In paragraph 23 (arrangements for independent monitoring of audits of
listed companies and other major bodies)—

(a) in the heading, for “audits of listed companies and other major
25bodies” substitute “major local audits”,

(b) for “statutory audit functions” in each place substitute “local audit
functions”,

(c) for “major audits” in each place substitute “major local audits”, and

(d) omit sub-paragraph (2).

(8) 30In paragraph 24 (arrangements for independent investigation for
disciplinary purposes of public interest cases)—

(a) in sub-paragraph (1)(a) omit “or third country audit functions”, and

(b) in sub-paragraph (2) omit the definitions of “statutory audit
function” and “third country audit function”.

(9) 35In paragraph 25(1) (supplementary: arrangements to operate independently
of body)—

(a) at the end of paragraph (c) insert “, or”, and

(b) omit paragraph (ca).

(10) In paragraph 26 (supplementary: funding of arrangements) omit “, 23A”.

(11) 40In paragraph 27 (supplementary: scope of arrangement) omit “, 23A”.

28 In Schedule 13 (supplementary provision with respect to delegation order),
in paragraph 9 (legislative functions) omit “or, in Scotland, sufficient
evidence”.

Section 18

SCHEDULE 6 Codes of audit practice and guidance

Duty to prepare code

1 (1) The Comptroller and Auditor General must prepare one or more codes of
5audit practice prescribing the way in which local auditors are to carry out
their functions under this Act.

(2) Different codes may be prepared for different relevant authorities (but the
Comptroller and Auditor General must ensure that each kind of relevant
authority is covered by a code).

(3) 10A code may contain different provision for different relevant authorities.

(4) A code must embody what the Comptroller and Auditor General considers
to be the best professional practice with respect to the standards, procedures
and techniques to be adopted by local auditors.

(5) Before preparing a code, the Comptroller and Auditor General must
15consult—

(a) such associations or representatives of relevant authorities as the
Comptroller and Auditor General thinks appropriate,

(b) the recognised supervisory bodies,

(c) the persons appearing on the register of auditors kept under
20regulations under section 1239 of the Companies Act 2006 as it has
effect by virtue of Schedule 5,

(d) the Secretary of State,

(e) the Treasury,

(f) each body to whom the Secretary of State has delegated functions
25under section 1252 of the Companies Act 2006 as it has effect by
virtue of Schedule 5, and

(g) such other bodies or persons as the Comptroller and Auditor
General thinks appropriate.

Procedure for code

2 (1) 30After preparing a code of audit practice, the Comptroller and Auditor
General must—

(a) publish it in draft, and

(b) send it to a Minister of the Crown, who must lay it before Parliament.

(2) If, within the 40-day period, either House of Parliament resolves not to
35approve the code—

(a) it must not be published by the Comptroller and Auditor General,
and

(b) the Comptroller and Auditor General must prepare another code.

(3) If no such resolution is made within that period, the Comptroller and
40Auditor General must publish the code.

(4) This paragraph does not apply to a code of audit practice prepared to replace
an existing code of audit practice (but see paragraph 5).

Duty to keep code under review

3 The Comptroller and Auditor General must keep each code of audit practice
under review.

Alteration of code

4 (1) 5The Comptroller and Auditor General may prepare alterations to a code of
audit practice.

(2) Paragraph 1(5) applies to alterations to a code as it applies to a code.

(3) After preparing alterations to a code, the Comptroller and Auditor General
must—

(a) 10publish the code as altered in draft, and

(b) send the code as altered to a Minister of the Crown, who must lay it
before Parliament.

(4) If, within the 40-day period, either House of Parliament resolves not to
approve the code as altered, it must not be published by the Comptroller and
15Auditor General.

(5) If no such resolution is made within that period, the Comptroller and
Auditor General must publish the code as altered.

(6) A code published under sub-paragraph (3)(a) or (5) must show the
alterations that are proposed to be made to it or (as the case may be) have
20been made to it in such manner as the Comptroller and Auditor General
thinks appropriate.

Replacement of code

5 (1) The Comptroller and Auditor General may prepare a code of audit practice
to replace a code published under paragraph 2(3) or sub-paragraph (7).

(2) 25The Comptroller and Auditor General must—

(a) use reasonable endeavours to ensure that a code is published under
sub-paragraph (7) to replace a code published under paragraph 2(3)
or that sub-paragraph (“the original code”) before the end of 5 years
beginning with the date on which the original code was so
30published, or

(b) if it does not prove possible to comply with paragraph (a), ensure
that a code of the kind referred to in that paragraph is published
under sub-paragraph (7) as soon as is reasonably practicable after the
end of the period referred in that paragraph.

(3) 35Sub-paragraphs (1) and (2) apply regardless of whether the original code has
been published with alterations under paragraph 4 in the meantime.

(4) A replacement code prepared to comply with sub-paragraph (2) need not
make different provision from that made by the original code.

(5) After preparing a replacement code, the Comptroller and Auditor General
40must—

(a) publish it in draft, and

(b) send it to a Minister of the Crown, who must lay it before Parliament.

(6) If, within the 40-day period, either House of Parliament resolves not to
approve the replacement code—

(a) the code must not be published by the Comptroller and Auditor
General, and

(b) 5if the period of 5 years beginning with the date on which the original
code was published under paragraph 2(3) or sub-paragraph (7) has
expired, the Comptroller and Auditor General must prepare another
replacement code.

(7) If no such resolution is made within that period, the Comptroller and
10Auditor General must publish the replacement code.

Publication of code

6 (1) A code of audit practice may be published in such manner as the
Comptroller and Auditor General thinks fit.

(2) A code comes into force on the day on which it is published under paragraph
152(3) or 5(7) unless it specifies a different commencement date.

(3) Alterations to a code come into force on the day on which the code as altered
is published under paragraph 4(5) unless it specifies a different
commencement date for those alterations.

(4) A code may—

(a) 20specify different commencement dates for different purposes;

(b) include transitional provisions and savings.

(5) A code may, in particular, provide that all or part of an existing code of audit
practice has effect until all or part of the new code comes into force.

Assistance from relevant authority

7 25A relevant authority must provide the Comptroller and Auditor General
with the information that the Comptroller and Auditor General reasonably
requires for the purposes of this Schedule.

Saving for codes of practice under Audit Commission Act 1998

8 (1) Despite the repeal of section 4 of the Audit Commission Act 1998 by this Act,
30a provision of a code of audit practice under that section continues in force
until it is replaced by a provision of a code of audit practice under this
Schedule.

(2) A provision of a code under that section is to be read subject to the
modifications necessary for it to have effect in relation to the functions of a
35local auditor under this Act.

(3) A code under that section—

(a) is not to be treated as a code of audit practice for the purposes of this
Schedule (other than this paragraph), but,

(b) is otherwise to be treated as a code of audit practice for the purposes
40of this Act.