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Company Law Reform Bill [HL] (247-253)


Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 17 — Audit
Chapter 3 — Functions of auditor

247

 

Duties and rights of auditors

512     

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

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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

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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

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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

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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.

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(4)   

If—

(a)   

the requirements of regulations under section 418 (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

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section 427 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

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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.

513     

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

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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—

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Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 17 — Audit
Chapter 3 — Functions of auditor

248

 

(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 515.

(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.

514     

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

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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;

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(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 515.

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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.

515     

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 513, and

(b)   

is misleading, false or deceptive in a material particular.

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 17 — Audit
Chapter 3 — Functions of auditor

249

 

(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 513 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 514, 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

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

of his rights under section 513 or 514.

516     

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 14

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,

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(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

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representative at the meeting.

Signature of auditor’s report

517     

Signature of auditor’s report

(1)   

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

dated.

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(2)   

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

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 17 — Audit
Chapter 3 — Functions of auditor

250

 

(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.

518     

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 42 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.

519     

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

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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 520 (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.

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(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.

520     

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

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(b)   

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

Part 16 (filing of accounts and reports),

   

if the following conditions are met.

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 17 — Audit
Chapter 3 — Functions of auditor

251

 

(2)   

The conditions are that the company—

(a)   

considering on reasonable grounds that statement of the name would

create or be likely to create a serious risk that the auditor or senior

statutory auditor, or any other person, would be subject to violence or

intimidation, has resolved that the name should not be stated, and

5

(b)   

has given notice of the resolution to the Secretary of State, stating—

(i)   

the name and registered number of the company,

(ii)   

the financial year of the company to which the report relates,

and

(iii)   

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

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name of the person who signed the report as senior statutory

auditor.

Offences in connection with auditor’s report

521     

Offences in connection with auditor’s report

(1)   

A person to whom this section applies commits an offence if he knowingly or

15

recklessly causes a report under section 509 (auditor’s report on company’s

annual accounts) to include any matter that is misleading, false or deceptive in

a material particular.

(2)   

A person to whom this section applies commits an offence if he knowingly or

recklessly causes such a report to omit a statement required by—

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(a)   

section 512(2)(b) (statement that company’s accounts do not agree with

accounting records and returns),

(b)   

section 512(3) (statement that necessary information and explanations

not obtained), or

(c)   

section 512(5) (statement that directors wrongly took advantage of

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exemption from obligation to prepare group accounts).

(3)   

This section applies to—

(a)   

where the auditor is an individual, that individual and any employee

or agent of his who is eligible for appointment as auditor of the

company;

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(b)   

where the auditor is a firm, any director, member, employee or agent of

the firm who is eligible for appointment as auditor of the company.

(4)   

A person guilty of an offence under this section is liable—

(a)   

on conviction on indictment, to a fine;

(b)   

on summary conviction, to a fine not exceeding the statutory

35

maximum.

522     

Guidance for regulatory and prosecuting authorities: England, Wales and

Northern Ireland

(1)   

The Secretary of State may issue guidance for the purpose of helping relevant

regulatory and prosecuting authorities to determine how they should carry out

40

their functions in cases where behaviour occurs that—

(a)   

appears to involve the commission of an offence under section 521

(offences in connection with auditor’s report), and

(b)   

has been, is being or may be investigated pursuant to arrangements—

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 17 — Audit
Chapter 3 — Functions of auditor

252

 

(i)   

under paragraph 15 of Schedule 10 (investigation of complaints

against auditors and supervisory bodies), or

(ii)   

of a kind mentioned in paragraph 24 of that Schedule

(independent investigation for disciplinary purposes of public

interest cases).

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(2)   

The Secretary of State must obtain the consent of the Attorney General before

issuing any such guidance.

(3)   

In this section “relevant regulatory and prosecuting authorities” means—

(a)   

supervisory bodies within the meaning of Part 42 of this Act,

(b)   

bodies to which the Secretary of State may make grants under section

10

16(1) of the Companies (Audit, Investigations and Community

Enterprise) Act 2004 (c. 27) (bodies concerned with accounting

standards etc),

(c)   

the Director of the Serious Fraud Office,

(d)   

the Director of Public Prosecutions or the Director of Public

15

Prosecutions for Northern Ireland, and

(e)   

the Secretary of State.

(4)   

This section does not apply to Scotland.

523     

Guidance for regulatory authorities: Scotland

(1)   

The Lord Advocate may issue guidance for the purpose of helping relevant

20

regulatory authorities to determine how they should carry out their functions

in cases where behaviour occurs that—

(a)   

appears to involve the commission of an offence under section 521

(offences in connection with auditor’s report), and

(b)   

has been, is being or may be investigated pursuant to arrangements—

25

(i)   

under paragraph 15 of Schedule 10 (investigation of complaints

against auditors and supervisory bodies), or

(ii)   

of a kind mentioned in paragraph 24 of that Schedule

(independent investigation for disciplinary purposes of public

interest cases).

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(2)   

The Lord Advocate must consult the Secretary of State before issuing any such

guidance.

(3)   

In this section “relevant regulatory authorities” means—

(a)   

supervisory bodies within the meaning of Part 42 of this Act,

(b)   

bodies to which the Secretary of State may make grants under section

35

16(1) of the Companies (Audit, Investigations and Community

Enterprise) Act 2004 (bodies concerned with accounting standards etc),

and

(c)   

the Secretary of State.

(4)   

This section applies only to Scotland.

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Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 17 — Audit
Chapter 4 — Removal, resignation, etc of auditors

253

 

Chapter 4

Removal, resignation, etc of auditors

Removal of auditor

524     

Resolution removing auditor from office

(1)   

The members of a company may remove an auditor from office at any time.

5

(2)   

This power is exercisable only—

(a)   

by ordinary resolution at a meeting, and

(b)   

in accordance with section 525 (special notice of resolution to remove

auditor).

(3)   

Nothing in this section is to be taken as depriving the person removed of

10

compensation or damages payable to him in respect of the termination—

(a)   

of his appointment as auditor, or

(b)   

of any appointment terminating with that as auditor.

(4)   

An auditor may not be removed from office before the expiration of his term of

office except by resolution under this section.

15

525     

Special notice required for resolution removing auditor from office

(1)   

Special notice is required for a resolution at a general meeting of a company

removing an auditor from office.

(2)   

On receipt of notice of such an intended resolution the company must

immediately send a copy of it to the person proposed to be removed.

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(3)   

The auditor proposed to be removed may make with respect to the intended

resolution representations in writing to the company (not exceeding a

reasonable length) and request their notification to members of the company.

(4)   

The company must (unless the representations are received by it too late for it

to do so)—

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(a)   

in any notice of the resolution given to members of the company, state

the fact of the representations having been made, and

(b)   

send a copy of the representations to every member of the company to

whom notice of the meeting is or has been sent.

(5)   

If a copy of any such representations is not sent out as required because

30

received too late or because of the company’s default, the auditor may (without

prejudice to his right to be heard orally) require that the representations be

read out at the meeting.

(6)   

Copies of the representations need not be sent out and the representations need

not be read at the meeting if, on the application either of the company or of any

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other person claiming to be aggrieved, the court is satisfied that the auditor is

using the provisions of this section to secure needless publicity for defamatory

matter.

   

The court may order the company’s costs (in Scotland, expenses) on the

application to be paid in whole or in part by the auditor, notwithstanding that

40

he is not a party to the application.

 
 

 
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