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Company Law Reform Bill [HL]


Company Law Reform Bill [HL]
Part 16 — Audit
Chapter 2 — Appointment of auditors

231

 

General provisions

482     

Fixing of auditor’s remuneration

(1)   

The remuneration of an auditor appointed by the members of a company must

be fixed by the members by ordinary resolution or in such manner as the

members may by ordinary resolution determine.

5

(2)   

The remuneration of an auditor appointed by the directors of a company must

be fixed by the directors.

(3)   

The remuneration of an auditor appointed by the Secretary of State must be

fixed by the Secretary of State.

(4)   

For the purposes of this section “remuneration” includes sums paid in respect

10

of expenses.

(5)   

This section applies in relation to benefits in kind as to payments of money.

483     

Disclosure of terms of audit appointment

(1)   

The Secretary of State may make provision by regulations for securing the

disclosure of the terms on which a company’s auditor is appointed,

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remunerated or performs his duties.

   

Nothing in the following provisions of this section affects the generality of this

power.

(2)   

The regulations may—

(a)   

require disclosure of—

20

(i)   

a copy of any terms that are in writing and

(ii)   

a written memorandum setting out any terms that are not in

writing;

(b)   

require disclosure to be at such times, in such places and by such means

as are specified in the regulations;

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(c)   

require the place and means of disclosure to be stated—

(i)   

in a note to the company’s annual accounts (in the case of its

individual accounts) or in such manner as is specified in the

regulations (in the case of group accounts),

(ii)   

in the directors’ report, or

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(iii)   

in the auditor’s report on the company’s annual accounts.

(3)   

The provisions of this section apply to a variation of the terms mentioned in

subsection (1) as they apply to the original terms.

(4)   

Regulations under this section are subject to affirmative resolution procedure.

484     

Disclosure of services provided by auditor or associates and related

35

remuneration

(1)   

The Secretary of State may make provision by regulations for securing the

disclosure of—

(a)   

the nature of any services provided for a company by the company’s

auditor (whether in his capacity as auditor or otherwise) or by his

40

associates;

 
 

Company Law Reform Bill [HL]
Part 16 — Audit
Chapter 3 — Functions of auditor

232

 

(b)   

the amount of any remuneration received or receivable by a company’s

auditor, or his associates, in respect of any such services.

   

Nothing in the following provisions of this section affects the generality of this

power.

(2)   

The regulations may provide—

5

(a)   

for disclosure of the nature of any services provided to be made by

reference to any class or description of services specified in the

regulations (or any combination of services, however described);

(b)   

for the disclosure of amounts of remuneration received or receivable in

respect of services of any class or description specified in the

10

regulations (or any combination of services, however described);

(c)   

for the disclosure of separate amounts so received or receivable by the

company’s auditor or any of his associates, or of aggregate amounts so

received or receivable by all or any of those persons.

(3)   

The regulations may—

15

(a)   

provide that “remuneration” includes sums paid in respect of expenses;

(b)   

apply to benefits in kind as well as to payments of money, and require

the disclosure of the nature of any such benefits and their estimated

money value;

(c)   

apply to services provided for associates of a company as well as to

20

those provided for a company;

(d)   

define “associate” in relation to an auditor and a company respectively.

(4)   

The regulations may provide that any disclosure required by the regulations is

to be made—

(a)   

in a note to the company’s annual accounts (in the case of its individual

25

accounts) or in such manner as is specified in the regulations (in the

case of group accounts),

(b)   

in the directors’ report, or

(c)   

in the auditor’s report on the company’s annual accounts.

(5)   

If the regulations provide that any such disclosure is to be made as mentioned

30

in subsection (4)(a) or (b), the regulations may require the auditor to supply the

directors of the company with any information necessary to enable the

disclosure to be made.

(6)   

Regulations under this section are subject to negative resolution procedure.

Chapter 3

35

Functions of auditor

Auditor’s report

485     

Auditor’s report on company’s annual accounts

(1)   

A company’s auditor must make a report to the company’s members on all

annual accounts of the company of which copies are, during his tenure of

40

office—

(a)   

in the case of a private company, to be sent out to members under

section 405;

 
 

Company Law Reform Bill [HL]
Part 16 — Audit
Chapter 3 — Functions of auditor

233

 

(b)   

in the case of a public company, to be laid before the company in

general meeting under section 421.

(2)   

The auditor’s report must include—

(a)   

an introduction identifying the annual accounts that are the subject of

the audit and the financial reporting framework that has been applied

5

in their preparation, and

(b)   

a description of the scope of the audit identifying the auditing

standards in accordance with which the audit was conducted.

(3)   

The report must state clearly whether, in the auditor’s opinion, the annual

accounts—

10

(a)   

give a true and fair view—

(i)   

in the case of an individual balance sheet, of the state of affairs

of the company as at the end of the financial year,

(ii)   

in the case of an individual profit and loss account, of the profit

or loss of the company for the financial year,

15

(iii)   

in the case of group accounts, of the state of affairs as at the end

of the financial year and of the profit or loss for the financial

year of the undertakings included in the consolidation as a

whole, so far as concerns members of the company;

(b)   

have been properly prepared in accordance with the relevant financial

20

reporting framework; and

(c)   

have been prepared in accordance with the requirements of this Act

(and, where applicable, Article 4 of the IAS Regulation).

   

Expressions used in this subsection that are defined for the purposes of Part 15

(see section 458) have the same meaning as in that Part.

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(4)   

The auditor’s report—

(a)   

must be either unqualified or qualified, and

(b)   

must include a reference to any matters to which the auditor wishes to

draw attention by way of emphasis without qualifying the report.

486     

Auditor’s report on directors’ report

30

   

The auditor must state in his report on the company’s annual accounts whether

in his opinion the information given in the directors’ report for the financial

year for which the accounts are prepared is consistent with those accounts.

487     

Auditor’s report on auditable part of directors’ remuneration report

(1)   

If the company is a quoted company, the auditor, in his report on the

35

company’s annual accounts for the financial year, must—

(a)   

report to the company’s members on the auditable part of the directors’

remuneration report, and

(b)   

state whether in his opinion that part of the directors’ remuneration

report has been properly prepared in accordance with this Act.

40

(2)   

For the purposes of this Part, “the auditable part” of a directors’ remuneration

report is the part identified as such by regulations under section 403.

 
 

Company Law Reform Bill [HL]
Part 16 — Audit
Chapter 3 — Functions of auditor

234

 

Duties and rights of auditors

488     

Duties of auditor

(1)   

A company’s auditor, in preparing his report, must carry out such

investigations as will enable him to form an opinion as to—

(a)   

whether adequate accounting records have been kept by the company

5

and returns adequate for their audit have been received from branches

not visited by him, and

(b)   

whether the company’s individual accounts are in agreement with the

accounting records and returns, and

(c)   

in the case of a quoted company, whether the auditable part of the

10

company’s directors’ remuneration report is in agreement with the

accounting records and returns.

(2)   

If the auditor is of opinion—

(a)   

that adequate accounting records have not been kept, or that returns

adequate for their audit have not been received from branches not

15

visited by him, or

(b)   

that the company’s individual accounts are not in agreement with the

accounting records and returns, or

(c)   

in the case of a quoted company, that the auditable part of its directors’

remuneration report is not in agreement with the accounting records

20

and returns,

   

the auditor shall state that fact in his report.

(3)   

If the auditor fails to obtain all the information and explanations which, to the

best of his knowledge and belief, are necessary for the purposes of his audit, he

shall state that fact in his report.

25

(4)   

If—

(a)   

the requirements of regulations under section 394 (disclosure of

directors’ benefits: remuneration, pensions and compensation for loss

of office) are not complied with in the annual accounts, or

(b)   

in the case of a quoted company, the requirements of regulations under

30

section 403 as to information forming the auditable part of the

directors’ remuneration report are not complied with in that report,

   

the auditor must include in his report, so far as he is reasonably able to do so,

a statement giving the required particulars.

(5)   

If the directors of the company have prepared accounts and reports in

35

accordance with the small companies regime and in the auditor’s opinion they

were not entitled so to do, the auditor shall state that fact in his report.

489     

Auditor’s general right to information

(1)   

An auditor of a company—

(a)   

has a right of access at all times to the company’s books, accounts and

40

vouchers (in whatever form they are held), and

(b)   

may require any of the following persons to provide him with such

information or explanations as he thinks necessary for the performance

of his duties as auditor.

(2)   

Those persons are—

45

 
 

Company Law Reform Bill [HL]
Part 16 — Audit
Chapter 3 — Functions of auditor

235

 

(a)   

any officer or employee of the company;

(b)   

any person holding or accountable for any of the company’s books,

accounts or vouchers;

(c)   

any subsidiary undertaking of the company which is a body corporate

incorporated in the United Kingdom;

5

(d)   

any officer, employee or auditor of any such subsidiary undertaking or

any person holding or accountable for any books, accounts or vouchers

of any such subsidiary undertaking;

(e)   

any person who fell within any of paragraphs (a) to (d) at a time to

which the information or explanations required by the auditor relates

10

or relate.

(3)   

A statement made by a person in response to a requirement under this section

may not be used in evidence against him in criminal proceedings except

proceedings for an offence under section 491.

(4)   

Nothing in this section compels a person to disclose information in respect of

15

which a claim to legal professional privilege (in Scotland, to confidentiality of

communications) could be maintained in legal proceedings.

490     

Auditor’s right to information from overseas subsidiaries

(1)   

Where a parent company has a subsidiary undertaking that is not a body

corporate incorporated in the United Kingdom, the auditor of the parent

20

company may require it to obtain from any of the following persons such

information or explanations as he may reasonably require for the purposes of

his duties as auditor.

(2)   

Those persons are—

(a)   

the undertaking;

25

(b)   

any officer, employee or auditor of the undertaking;

(c)   

any person holding or accountable for any of the undertaking’s books,

accounts or vouchers;

(d)   

any person who fell within paragraph (b) or (c) at a time to which the

information or explanations relates or relate.

30

(3)   

If so required, the parent company must take all such steps as are reasonably

open to it to obtain the information or explanations from the person concerned.

(4)   

A statement made by a person in response to a requirement under this section

may not be used in evidence against him in criminal proceedings except

proceedings for an offence under section 491.

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(5)   

Nothing in this section compels a person to disclose information in respect of

which a claim to legal professional privilege (in Scotland, to confidentiality of

communications) could be maintained in legal proceedings.

491     

Auditor’s rights to information: offences

(1)   

A person commits an offence who knowingly or recklessly makes to an auditor

40

of a company a statement (oral or written) that—

(a)   

conveys or purports to convey any information or explanations which

the auditor requires, or is entitled to require, under section 489, and

(b)   

is misleading, false or deceptive in a material particular.

 
 

Company Law Reform Bill [HL]
Part 16 — Audit
Chapter 3 — Functions of auditor

236

 

(2)   

A person guilty of an offence under subsection (1) is liable—

(a)   

on conviction on indictment, to imprisonment for a term not exceeding

two years or a fine (or both);

(b)   

on summary conviction—

(i)   

in England and Wales, to imprisonment for a term not

5

exceeding twelve months or to a fine not exceeding the

statutory maximum (or both);

(ii)   

in Scotland or Northern Ireland, to imprisonment for a term not

exceeding six months or to a fine not exceeding the statutory

maximum (or both).

10

(3)   

A person who fails to comply with a requirement under section 489 without

delay commits an offence unless it was not reasonably practicable for him to

provide the required information or explanations.

(4)   

If a parent company fails to comply with section 490, an offence is committed

by—

15

(a)   

the company, and

(b)   

every officer of the company who is in default.

(5)   

A person guilty of an offence under subsection (3) or (4) is liable on summary

conviction to a fine not exceeding level 3 on the standard scale.

(6)   

Nothing in this section affects any right of an auditor to apply for an injunction

20

(in Scotland, an interdict or an order for specific performance) to enforce any

of his rights under section 489 or 490.

492     

Auditor’s rights in relation to resolutions and meetings

(1)   

In relation to a written resolution proposed to be agreed to by a private

company, the company’s auditor is entitled to receive all such communications

25

relating to the resolution as, by virtue of any provision of Chapter 2 of Part 13

of this Act, are required to be supplied to a member of the company.

(2)   

A company’s auditor is entitled—

(a)   

to receive all notices of, and other communications relating to, any

general meeting which a member of the company is entitled to receive,

30

(b)   

to attend any general meeting of the company, and

(c)   

to be heard at any general meeting which he attends on any part of the

business of the meeting which concerns him as auditor.

(3)   

Where the auditor is a firm, the right to attend or be heard at a meeting is

exercisable by an individual authorised by the firm in writing to act as its

35

representative at the meeting.

Signature of auditor’s report

493     

Signature of auditor’s report

(1)   

The auditor’s report must state the name of the auditor and be signed and

dated.

40

(2)   

Where the auditor is an individual, the report must be signed by him.

 
 

Company Law Reform Bill [HL]
Part 16 — Audit
Chapter 3 — Functions of auditor

237

 

(3)   

Where the auditor is a firm, the report must be signed by the senior statutory

auditor in his own name, for and on behalf of the auditor.

494     

Senior statutory auditor

(1)   

The senior statutory auditor means the individual identified by the firm as

senior statutory auditor in relation to the audit in accordance with—

5

(a)   

standards issued by the European Commission, or

(b)   

if there is no applicable standard so issued, any relevant guidance

issued by—

(i)   

the Secretary of State, or

(ii)   

a body appointed by order of the Secretary of State.

10

(2)   

The person identified as senior statutory auditor must be eligible for

appointment as auditor of the company in question (see Chapter 2 of Part 35 of

this Act).

(3)   

The senior statutory auditor is not, by reason of being named or identified as

senior statutory auditor or by reason of his having signed the auditor’s report,

15

subject to any civil liability to which he would not otherwise be subject.

(4)   

An order appointing a body for the purpose of subsection (1)(b)(ii) is subject to

negative resolution procedure.

495     

Names to be stated in published copies of auditor’s report

(1)   

Every copy of the auditor’s report that is published by or on behalf of the

20

company must—

(a)   

state the name of the auditor and (where the auditor is a firm) the name

of the person who signed it as senior statutory auditor, or

(b)   

if the conditions in section 496 (circumstances in which names may be

omitted) are met, state that a resolution has been passed and notified to

25

the Secretary of State in accordance with that section.

(2)   

For the purposes of this section a company is regarded as publishing the report

if it publishes, issues or circulates it or otherwise makes it available for public

inspection in a manner calculated to invite members of the public generally, or

any class of members of the public, to read it.

30

(3)   

If a copy of the auditor’s report is published without the statement required by

this section, an offence is committed by—

(a)   

the company, and

(b)   

every officer of the company who is in default.

(4)   

A person guilty of an offence under this section is liable on summary

35

conviction to a fine not exceeding level 3 on the standard scale.

496     

Circumstances in which names may be omitted

(1)   

The auditor’s name and, where the auditor is a firm, the name of the person

who signed the report as senior statutory auditor, may be omitted from—

(a)   

published copies of the report, and

40

(b)   

the copy of the report delivered to the registrar under Chapter 10 of

Part 15 (filing of accounts and reports),

   

if the following conditions are met.

 
 

 
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