Local Audit and Accountability Bill (HL Bill 42)

(4) The Mayor’s Office for Policing and Crime must consult and take into
account the advice of the Office’s auditor panel on the selection and
appointment of the auditor.

Provisions applying to other authorities

4 (1) 5The Secretary of State may by regulations make provision about the
appointment of a local auditor to audit the accounts of a relevant authority—

(a) which is not an authority to which any of paragraphs 1 to 3 applies,
and

(b) which is specified, or of a description specified, in the regulations.

(2) 10Regulations under sub-paragraph (1) may, in particular—

(a) make further provision about the operation of this Act or any
provision made under it in relation to a relevant authority to which
the regulations apply;

(b) provide for any provision of or made under this Act not to apply, or
15to apply with modifications, in relation to a relevant authority to
which the regulations apply.

Section 9

SCHEDULE 4 Further provisions about auditor panels

Options for auditor panels

1 (1) 20The auditor panel of a relevant authority (“R”) must be—

(a) a panel appointed as an auditor panel by R,

(b) a panel appointed as an auditor panel by R and one or more other
relevant authorities,

(c) a committee of R to which sub-paragraph (2) applies, or

(d) 25a panel to which sub-paragraph (3) applies.

(2) This sub-paragraph applies to a committee of R (however described) which
has not been appointed as an auditor panel if—

(a) R determines that the committee should be R’s auditor panel,

(b) the committee agrees to be R’s auditor panel, and

(c) 30the committee complies with the other provisions applying to
auditor panels made by or under this Schedule.

(3) This sub-paragraph applies to a panel if—

(a) the panel is (by virtue of any of paragraphs (a) to (c) of sub-
paragraph (1)) the auditor panel of a relevant authority other than R,

(b) 35R determines that the panel should be R’s auditor panel,

(c) the panel agrees to be R’s auditor panel, and

(d) the panel complies (as regards R) with the other provisions applying
to auditor panels made by or under this Schedule.

(4) References in sub-paragraphs (1) and (2) to a committee of R include a sub-
40committee of a committee of R.

(5) The function of appointing a panel or making a determination under this
paragraph is to be exercised in the case of the Greater London Authority by
the Mayor of London and the London Assembly acting jointly on behalf of
the Authority.

5Constitution of auditor panels

2 (1) A relevant authority’s auditor panel, other than a health service body’s
auditor panel—

(a) must consist of a majority of independent members (or wholly of
independent members), and

(b) 10must be chaired by an independent member.

(2) A member of a relevant authority’s auditor panel, other than a health service
body’s auditor panel, is “independent” at any given time if—

(a) the panel member has not been a member or officer of the authority
within the period of 5 years ending with that time,

(b) 15the panel member has not been an officer or employee of an entity
connected with the authority within that period, and

(c) the panel member is not at that time a relative or close friend of a
member or officer of the authority or an officer or employee of an
entity connected with the authority.

(3) 20An elected mayor of a relevant authority is not independent of that authority
for the purposes of sub-paragraph (2).

(4) In the application of sub-paragraph (2) to a corporation sole, the reference to
a member is a reference to a holder of that office.

(5) In the application of sub-paragraph (2) to the auditor panel of a police and
25crime commissioner for an area, references to the authority include the chief
constable for the area.

(6) In the application of sub-paragraph (2) to the auditor panel of the Mayor’s
Office for Policing and Crime, references to the authority include the
Commissioner of Police of the Metropolis.

(7) 30In sub-paragraph (2) “officer”, in relation to an entity connected with a
relevant authority, means a person elected or appointed as, or to, that entity
or to an office of that entity.

(8) For the purposes of sub-paragraph (2)(c), a person (“R”) is a relative of
another person (“P”) if R is—

(a) 35P’s partner,

(b) P’s parent or grandparent,

(c) P’s son, daughter, stepson, stepdaughter or grandchild,

(d) P’s brother or sister,

(e) P’s uncle, aunt, nephew or niece,

(f) 40a parent, son, daughter, brother or sister of P’s partner, or

(g) a partner of any person within paragraphs (b) to (f),

and for this purpose “partner” means a spouse, civil partner or someone a
person lives with as if they were husband and wife or civil partners.

(9) The Secretary of State may by regulations amend this paragraph so as to
make provision about the members of a relevant authority’s auditor panel
who are or are not independent for the purposes of sub-paragraph (1).

Constitution of auditor panels: health service bodies

3 5The Secretary of State may by regulations make provision about—

(a) whether any of the members of a health service body’s auditor panel
must be independent and, if so, the proportion which must be
independent;

(b) whether the chair of a health service body’s auditor panel must be
10independent;

(c) the meaning of “independent” for the purposes of this paragraph.

Power to make further provision about constitution of auditor panels

4 (1) The Secretary of State may by regulations make provision about the
constitution of an auditor panel.

(2) 15This includes further provision about the matters mentioned in paragraph
2(1) and provision about—

(a) the number of members of an auditor panel;

(b) the appointment of members of an auditor panel (including to fill
casual vacancies);

(c) 20the term of office of members of an auditor panel;

(d) the removal or resignation of members of an auditor panel, or of its
chair;

(e) the payment of remuneration or allowances to members of an
auditor panel;

(f) 25the proceedings and validity of proceedings of an auditor panel.

(3) The regulations may provide for any of those matters to be determined for a
relevant authority’s auditor panel by the authority.

Application of local authority enactments to auditor panels

5 (1) The Secretary of State may by regulations—

(a) 30amend or otherwise modify any local authority enactment in its
application to auditor panels or members of auditor panels;

(b) apply any local authority enactment (with or without modifications)
to auditor panels or members of auditor panels if, or to the extent
that, it does not otherwise apply.

(2) 35In this paragraph—

• “local authority” means a county council, a district council, a London
  borough council, the Common Council or the Council of the Isles of
  Scilly;

• “local authority enactment” means an enactment which relates to—

  (a)

  40local authorities or committees or joint committees of local
  authorities, or

  (b)

  members of such authorities, committees or joint committees.

Status of auditor panels

6 (1) Where a relevant authority has determined that a committee of that
authority should be its auditor panel, the panel when acting as such is not be
treated as a committee of the authority for the purposes of any enactment.

(2) 5Sub-paragraph (1) is subject to provision made by regulations under
paragraph 5.

(3) References in this paragraph to a committee of a relevant authority include
a sub-committee of such a committee.

Expenses of auditor panels

7 10A relevant authority must meet the reasonable expenses of its auditor panel
incurred by the panel when acting as such.

Meaning of “connected entity”

8 (1) For the purposes of this Act, an entity (“E”) is connected with a relevant
authority at any time if E is an entity other than the relevant authority and
15the relevant authority considers that, in accordance with proper practices in
force at that time—

(a) the financial transactions, reserves, assets and liabilities of E are to be
consolidated into the relevant authority’s statement of accounts for
the financial year in which that time falls,

(b) 20the relevant authority’s share of the financial transactions, reserves,
assets and liabilities of E is to be consolidated into the relevant
authority’s statement of accounts for that financial year, or

(c) the relevant authority’s share of the net assets or net liabilities of E,
and of the profit or loss of E, are to be brought into the relevant
25authority’s statement of accounts for that financial year.

(2) In sub-paragraph (1) “entity” means any entity, whether or not a legal
person.

(3) The Secretary of State may by regulations amend sub-paragraph (1) or (2).

(4) In sub-paragraph (1) as it applies in relation to a health service body, the
30reference to the relevant authority’s statement of accounts is to be read as a
reference to the body’s accounts.

Section 17

SCHEDULE 5 Eligibility and regulation of local auditors

1 (1) Part 42 of the Companies Act 2006 (statutory auditors) applies in relation to
35local audits as it applies in relation to statutory audits within the meaning of
that Part, subject to—

(a) the general modifications to that Part in paragraph 2, and

(b) the specific modifications to that Part in the rest of this Schedule.

(2) For the purposes of this Schedule—

Local Audit and Accountability BillPage 44

• a “local audit” means an audit under this Act of the accounts of a
  relevant authority;

• “local audit work” means work in connection with such audits.

2 (1) The general modifications are that—

(a) 5references to a statutory auditor are to a local auditor,

(b) references to an audited person are to a relevant authority,

(c) references to a statutory audit are to a local audit,

(d) references to statutory audit work are to local audit work,

(e) references (however expressed) to Part 42 of the Companies Act 2006
10or any provision of that Part are to that Part or provision as it has
effect by virtue of this Schedule.

(2) Sub-paragraph (1) does not apply to a provision that—

(a) is treated as forming part of Part 42 of the Companies Act 2006 by
virtue of any of the following provisions of this Schedule, and

(b) 15provides for an expression listed in sub-paragraph (1) to have the
meaning it would have under that Part apart from its application by
virtue of this Schedule.

3 Omit the following provisions—

(a) Chapter 1 (introductory);

(b) 20sections 1220 (qualifying bodies and recognised professional
qualifications), 1221 (approval of third country qualifications) and
1222 (eligibility of individuals retaining only 1967 Act authorisation);

(c) section 1223A (notification of matters relevant to other EEA States);

(d) sections 1224A (restrictions on disclosure) and 1224B (offence of
25disclosure in contravention of section 1224A);

(e) Chapter 3 (Auditors General);

(f) Chapter 5 (registered third country auditors);

(g) sections 1253A to 1253F (co-operation with foreign competent
authorities);

(h) 30section 1264 (consequential amendments);

(i) Schedule 11 (recognised professional qualifications);

(j) Schedule 11A (specified persons, descriptions, disclosures etc for
purposes of section 1224A);

(k) Schedule 12 (arrangements in which registered third country
35auditors are required to participate);

(l) Schedule 14 (statutory auditors: consequential amendments).

4 In section 1212 (individuals and firms: eligibility for appointment as a
statutory auditor) omit subsection (2).

5 For section 1214 (independence requirement) substitute—

“1214 40Independence requirement

(1) A person (“P”) may not act as local auditor of the accounts of a
relevant authority if one or more of subsections (2), (3), (4) and (5)
apply to P.

(2) This subsection applies if—

(a) 45P is a member or officer of the relevant authority,

(b) where the relevant authority is a corporation sole, P is the
holder of that office, or

(c) P is a partner or employee of a person within paragraph (a)
or (b), or a partnership of which such a person is a partner.

(3) 5This subsection applies if—

(a) the relevant authority is a clinical commissioning group, and

(b) P is a member of the group’s governing body (established
pursuant to section 14L of the National Health Service Act
2006).

(4) 10This subsection applies if—

(a) P is a person elected or appointed—

(i) as an entity connected with the relevant authority,

(ii) to such an entity, or

(iii) to an office of such an entity,

(b) 15P is an employee of such an entity, or

(c) P is a partner or employee of a person within paragraph (a)
or (b), or a partnership of which such a person is a partner.

(5) This subsection applies if there exists a connection of a prescribed
description between—

(a) 20P or an associate of P, and

(b) the relevant authority or an entity connected with the
relevant authority.

(6) In subsection (5) “prescribed” means prescribed by regulations made
by the Secretary of State.

(7) 25Regulations under subsection (6) are subject to negative resolution
procedure.”

6 In section 1215 (effect of lack of independence) omit subsections (2) to (7).

7 In section 1217 (supervisory bodies), for subsection (1A) substitute—

“(1A) The rules referred to in paragraph 9(3)(b) (confidentiality of
30information) of Schedule 10 must also be binding on persons who—

(a) have sought appointment or acted as a local auditor, or

(b) have been members of the body at any time after the
commencement of Schedule 5 to the Local Audit and
Accountability Act 2013.”

8 35For section 1219 (appropriate qualifications) substitute—

“1219 Appropriate qualifications

(1) A person holds an appropriate qualification for the purposes of this
Chapter only if—

(a) the person holds a qualification that is an appropriate
40qualification in accordance with regulations under this
section, or

(b) the person holds an appropriate qualification for the
purposes of this Chapter as it has effect apart from its
application by virtue of Schedule 5 to the Local Audit and
45Accountability Act 2013.

(2) The Secretary of State may by regulations provide for a qualification
to be an appropriate qualification for the purposes of this Chapter
if—

(a) it is a professional qualification in accountancy,

(b) 5it is obtained from a body established in the United Kingdom,
and

(c) it meets, or the Secretary of State thinks that it meets,
specified requirements.

(3) Regulations under this section may, in particular, provide for a
10qualification to be an appropriate qualification if—

(a) it is offered by a body (a “qualifying body”) established in the
United Kingdom (whether a body corporate or an
unincorporated association), and

(b) it is recognised by the Secretary of State in accordance with
15the regulations.

(4) Regulations under this section that contain provision under
subsection (3) may in particular—

(a) provide for the Secretary of State to make an order (a
“recognition order”) recognising a qualification offered by a
20qualifying body;

(b) make provision about the application by a qualifying body
for a recognition order;

(c) provide for the Secretary of State to give directions or impose
requirements in connection with the application;

(d) 25make provision about the circumstances in which the
Secretary of State may or must make or refuse to make a
recognition order;

(e) make provision about the steps to be taken by the Secretary
of State on making or refusing to make a recognition order;

(f) 30provide for a recognition order to be revoked by a further
order (a “revocation order”);

(g) make provision about the circumstances in which a
revocation order may or must be made;

(h) make provision about the date on which a revocation order
35may or must take effect;

(i) provide for a revocation order to contain transitional
provision;

(j) make provision about the steps to be taken by the Secretary
of State before or on making a revocation order.

(5) 40The requirements that may be specified for a qualification to be an
appropriate qualification or to be the subject of a recognition order
include, in particular, requirements as to—

(a) the persons to whom the qualification is open;

(b) the course of instruction undertaken by persons to whom the
45qualification is awarded;

(c) the professional experience of such persons;

(d) the examinations passed by such persons;

(e) the practical training undertaken by such persons;

(f) the rules and arrangements of the body offering the
qualification for ensuring or monitoring compliance with
other specified requirements.

(6) Regulations under this section may in particular—

(a) 5provide for exceptions to a specified requirement;

(b) confer power on the Secretary of State to give or withhold
recognition or approval for the purposes of a specified
requirement.

(7) The Secretary of State may by regulations provide for a qualification
10to which section 3(5)(c) of the Audit Commission Act 1998 (approval
by Secretary of State) applied immediately before the relevant time
to be an appropriate qualification for the purposes of this Chapter
if—

(a) the person holding the qualification obtained it before the
15relevant time, or

(b) before the relevant time, that person began a course of study
or practical training leading to the qualification, and obtained
the qualification within a specified period beginning with the
relevant time.

(8) 20In subsection (7) “the relevant time” means the time at which
paragraph 8 of Schedule 5 to the Local Audit and Accountability Act
2013 comes into force.

(9) Regulations under this section are subject to negative resolution
procedure.

(10) 25In this section “specified” means specified in regulations under this
section.

(11) In this Part “recognised professional qualification” means a
professional qualification that is—

(a) offered by a qualifying body, and

(b) 30recognised by the Secretary of State in accordance with
regulations under this section.

(12) In this Act “recognised qualifying body” means a qualifying body
offering a recognised professional qualification.”

9 After section 1224 insert—

“1224ZA 35 Provision of documents to the Secretary of State

(1) For the purpose of assisting a person listed in subsection (2) to
maintain proper standards in the auditing of the accounts of a
relevant authority, the person may require the authority to make
available for inspection by that person—

(a) 40the accounts concerned, and

(b) the other documents relating to the relevant authority that
might reasonably be required by a local auditor for the
purposes of the audit.

(2) Those persons are—

(a) 45the Secretary of State,

(b) a body designated by order under section 1252 (delegation of
Secretary of State’s functions under this Part), and

(c) a recognised supervisory body.”

10 (1) Section 1225 (enforcement: general) applies with the following
5modifications.

(2) In subsection (1)(b), for “any requirement of Part 2 of Schedule 11 is not
satisfied” substitute “any requirement under regulations under section 1219
applying to the qualification is not satisfied”.

(3) In subsection (3), for “paragraph 3 of Schedule 11 (revocation of recognition
10orders)” substitute “any power of the Secretary of State to make a revocation
order under regulations under section 1219”.

11 In section 1225C(3) (compliance orders) omit “or, in Scotland, the Court of
Session”.

12 In section 1225F(10) (appeals against financial penalties) omit “or, in
15Scotland, the Court of Session”.

13 (1) Section 1239 (the register of auditors) applies with the following
modifications.

(2) In subsection (1) omit paragraph (b) and the “and” preceding it.

(3) In subsection (2)—

(a) 20at the end of paragraph (d) insert “, and”, and

(b) omit paragraph (f) and the “and” preceding it.

(4) After subsection (4) insert—

“(4A) The regulations may provide for the register to be kept with the
register under regulations under this section in its original form.”

(5) 25For subsection (5) substitute—

“(5) The regulations may impose such obligations as the Secretary of
State thinks fit on—

(a) recognised supervisory bodies,

(b) recognised supervisory bodies within the meaning of this
30Part in its original form,

(c) any body designated by order under section 1252 (delegation
of Secretary of State’s functions under this Part),

(d) any body designated by order under that section in its
original form,

(e) 35persons eligible for appointment as a local auditor,

(f) persons eligible for appointment as a statutory auditor in
accordance with this Part in its original form,

(g) any person with whom arrangements are made by one or
more recognised supervisory bodies, or by any body
40designated by order under section 1252, with respect to the
keeping of the register, or

(h) any person with whom arrangements are made by one or
more recognised supervisory bodies within the meaning of
this Part in its original form, or by any body designated by
45order under section 1252 in its original form, with respect to

the keeping of the register under regulations under this
section in its original form.”

(6) Omit subsection (7).

(7) In subsection (8)—

(a) 5for “(5)(b) or (e)” substitute “(5)(c), (d), (g) or (h)”, and

(b) omit “or, in Scotland, by an order under section 45 of the Court of
Session Act 1988 (c. 36)1988 (c. 36)”.

(8) After subsection (9) insert—

“(9A) References in subsections (4A) and (5) to this Part or a provision of
10this Part in its original form are to this Part or that provision as it has
effect apart from its application by virtue of Schedule 5 to the Local
Audit and Accountability Act 2013.”

14 In section 1240(1)(b) (information to be made available to public), for “audit
work” substitute “local audit work”.

15 15For section 1248 (Secretary of State’s power to require second audit of
company) substitute—

“1248 Secretary of State’s power to require second audit

(1) This section applies where a person appointed as a local auditor of
the accounts of a relevant authority (“the first auditor”) was not an
20appropriate person for any part of the period during which the audit
was conducted.

(2) The Secretary of State may direct the relevant authority to retain an
appropriate person—

(a) to conduct a second audit of the accounts in question, or

(b) 25to review the first audit and to report (giving the appropriate
person’s reasons) whether a second audit of those accounts is
needed.

(3) For the purposes of subsections (1) and (2) a person is “appropriate”
if the person—

(a) 30is eligible for appointment as a local auditor, and

(b) is not prohibited by section 1214(1) (independence
requirement) from acting as a local auditor of the accounts of
the relevant authority.

(4) The Secretary of State must send a copy of a direction under
35subsection (2) to the recognised supervisory body (if any) of which
the first auditor is or was a member.

(5) The relevant authority must—

(a) send a copy of a report under subsection (2)(b) to the
recognised supervisory body (if any) of which the first
40auditor is or was a member, and

(b) if the report states that a second audit is needed, take such
steps as are necessary for the carrying out of that audit.

(6) A direction under subsection (2) may specify when the authority
must comply with—

(a) 45the requirements of the direction, or