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Company Law Reform Bill [HL] (562-568)


Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 42 — Statutory Auditors
Chapter 2 — Individuals and firms

562

 

Supervisory bodies

1181    

Supervisory bodies

(1)   

In this Part a “supervisory body” means a body established in the United

Kingdom (whether a body corporate or an unincorporated association) which

maintains and enforces rules as to—

5

(a)   

the eligibility of persons for appointment as a statutory auditor, and

(b)   

the conduct of statutory audit work,

   

which are binding on persons seeking appointment or acting as a statutory

auditor either because they are members of that body or because they are

otherwise subject to its control.

10

(2)   

In this Part references to the members of a supervisory body are to the persons

who, whether or not members of the body, are subject to its rules in seeking

appointment or acting as a statutory auditor.

(3)   

In this Part references to the rules of a supervisory body are to the rules

(whether or not laid down by the body itself) which the body has power to

15

enforce and which are relevant for the purposes of this Part.

   

This includes rules relating to the admission or expulsion of members of the

body, so far as relevant for the purposes of this Part.

(4)   

Schedule 10 has effect with respect to the recognition of supervisory bodies for

the purposes of this Part.

20

1182    

Exemption from liability for damages

(1)   

No person within subsection (2) is to be liable in damages for anything done or

omitted in the discharge or purported discharge of functions to which this

subsection applies.

(2)   

The persons within this subsection are—

25

(a)   

any recognised supervisory body,

(b)   

any officer or employee of a recognised supervisory body, and

(c)   

any member of the governing body of a recognised supervisory body.

(3)   

Subsection (1) applies to the functions of a recognised supervisory body so far

as relating to, or to matters arising out of, any of the following—

30

(a)   

rules, practices, powers and arrangements of the body to which the

requirements of Part 2 of Schedule 10 apply;

(b)   

the obligations with which paragraph 20 of that Schedule requires the

body to comply;

(c)   

any guidance issued by the body;

35

(d)   

the obligations imposed on the body by or by virtue of this Part.

(4)   

The reference in subsection (3)(c) to guidance issued by a recognised

supervisory body is a reference to any guidance or recommendation which is—

(a)   

issued or made by it to all or any class of its members or persons

seeking to become members, and

40

(b)   

relevant for the purposes of this Part,

   

including any guidance or recommendation relating to the admission or

expulsion of members of the body, so far as relevant for the purposes of this

Part.

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 42 — Statutory Auditors
Chapter 2 — Individuals and firms

563

 

(5)   

Subsection (1) does not apply—

(a)   

if the act or omission is shown to have been in bad faith, or

(b)   

so as to prevent an award of damages in respect of the act or omission

on the ground that it was unlawful as a result of section 6(1) of the

Human Rights Act 1998 (c. 42) (acts of public authorities incompatible

5

with Convention rights).

Professional qualifications

1183    

Appropriate qualifications

(1)   

A person holds an appropriate qualification for the purposes of this Chapter if

and only if—

10

(a)   

he holds a recognised professional qualification obtained in the United

Kingdom,

(b)   

immediately before the commencement of this Chapter, he—

(i)   

held an appropriate qualification for the purposes of Part 2 of

the Companies Act 1989 (c. 40) (eligibility for appointment as

15

company auditor) by virtue of section 31(1)(a) or (c) of that Act,

or

(ii)   

was treated as holding an appropriate qualification for those

purposes by virtue of section 31(2), (3) or (4) of that Act,

(c)   

immediately before the commencement of this Chapter, he—

20

(i)   

held an appropriate qualification for the purposes of Part III of

the Companies (Northern Ireland) Order 1990 (S.I. 1990/593

(N.I. 5)) by virtue of Article 34(1)(a) or (c) of that Order, or

(ii)   

was treated as holding an appropriate qualification for those

purposes by virtue of Article 34(2), (3) or (4) of that Order,

25

(d)   

he is within subsection (2),

(e)   

he has been authorised to practise the profession of statutory auditor

pursuant to the European Communities (Recognition of Professional

Qualifications) (First General System) Regulations 2005 (S.I. 2005/18)

and has fulfilled any requirements imposed pursuant to regulation 6 of

30

those Regulations, or

(f)   

subject to any direction under section 1185(5), he is regarded for the

purposes of this Chapter as holding an approved overseas

qualification.

(2)   

A person is within this subsection if—

35

(a)   

before 1st January 1990, he began a course of study or practical training

leading to a professional qualification in accountancy offered by a body

established in the United Kingdom,

(b)   

he obtained that qualification on or after 1st January 1990 and before 1st

January 1996, and

40

(c)   

the Secretary of State approves his qualification as an appropriate

qualification for the purposes of this Chapter.

(3)   

The Secretary of State may approve a qualification under subsection (2)(c) only

if he is satisfied that, at the time the qualification was awarded, the body

concerned had adequate arrangements to ensure that the qualification was

45

awarded only to persons educated and trained to a standard equivalent to that

required, at that time, in the case of a recognised professional qualification

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 42 — Statutory Auditors
Chapter 2 — Individuals and firms

564

 

under Part 2 of the Companies Act 1989 (eligibility for appointment as

company auditor).

1184    

Qualifying bodies and recognised professional qualifications

(1)   

In this Part a “qualifying body” means a body established in the United

Kingdom (whether a body corporate or an unincorporated association) which

5

offers a professional qualification in accountancy.

(2)   

In this Part references to the rules of a qualifying body are to the rules (whether

or not laid down by the body itself) which the body has power to enforce and

which are relevant for the purposes of this Part.

   

This includes, so far as so relevant, rules relating to—

10

(a)   

admission to or expulsion from a course of study leading to a

qualification,

(b)   

the award or deprivation of a qualification, or

(c)   

the approval of a person for the purposes of giving practical training or

the withdrawal of such approval.

15

(3)   

Schedule 11 has effect with respect to the recognition for the purposes of this

Part of a professional qualification offered by a qualifying body.

1185    

Approval of overseas qualifications

(1)   

The Secretary of State may declare that the following are to be regarded for the

purposes of this Chapter as holding an approved overseas qualification—

20

(a)   

persons who are qualified to audit accounts under the law of a specified

foreign country, or

(b)   

persons who hold a specified professional qualification in accountancy

obtained in a specified foreign country.

(2)   

A declaration under subsection (1)(b) may be expressed to be subject to the

25

satisfaction of any specified requirement or requirements.

(3)   

The Secretary of State may make a declaration under subsection (1) only if he

is satisfied that—

(a)   

in the case of a declaration under subsection (1)(a), the fact that the

persons in question are qualified to audit accounts under the law of the

30

specified foreign country, or

(b)   

in the case of a declaration under subsection (1)(b), the specified

professional qualification taken with any requirement or requirements

to be specified under subsection (2),

   

affords an assurance of professional competence equivalent to that afforded by

35

a recognised professional qualification.

(4)   

The Secretary of State may make a declaration under subsection (1) only if he

is satisfied that the treatment that the persons who are the subject of the

declaration will receive as a result of it is comparable to the treatment which is,

or is likely to be, afforded in the specified foreign country or a part of it to—

40

(a)   

in the case of a declaration under subsection (1)(a), some or all persons

who are eligible to be appointed as a statutory auditor, and

(b)   

in the case of a declaration under subsection (1)(b), some or all persons

who hold a corresponding recognised professional qualification.

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 42 — Statutory Auditors
Chapter 2 — Individuals and firms

565

 

(5)   

The Secretary of State may direct that persons holding an approved overseas

qualification are not to be treated as holding an appropriate qualification for

the purposes of this Chapter unless they hold such additional educational

qualifications as the Secretary of State may specify for the purpose of ensuring

that such persons have an adequate knowledge of the law and practice in the

5

United Kingdom relevant to the audit of accounts.

(6)   

The Secretary of State may give different directions in relation to different

approved overseas qualifications.

(7)   

The Secretary of State may, if he thinks fit, having regard to the considerations

mentioned in subsections (3) and (4), withdraw a declaration under subsection

10

(1) in relation to—

(a)   

persons becoming qualified to audit accounts under the law of the

specified foreign country after such date as he may specify, or

(b)   

persons obtaining the specified professional qualification after such

date as he may specify.

15

(8)   

The Secretary of State may, if he thinks fit, having regard to the considerations

mentioned in subsections (3) and (4), vary or revoke a requirement specified

under subsection (2) from such date as he may specify.

(9)   

In this section “foreign country”, in relation to any time, means a country or

territory that, at that time, is not a “relevant State” within the meaning of the

20

European Communities (Recognition of Professional Qualifications) (First

General System) Regulations 2005 (S.I. 2005/18) or part of such a State.

1186    

Eligibility of individuals retaining only 1967 Act authorisation

(1)   

A person whose only appropriate qualification is based on his retention of an

authorisation originally granted by the Board of Trade or the Secretary of State

25

under section 13(1) of the Companies Act 1967 (c. 81) is eligible only for

appointment as auditor of an unquoted company.

(2)   

A company is “unquoted” if, at the time of the person’s appointment, neither

the company, nor any parent undertaking of which it is a subsidiary

undertaking, is a quoted company within the meaning of section 391(2).

30

(3)   

References to a person eligible for appointment as a statutory auditor by virtue

of this Part in enactments relating to eligibility for appointment as auditor of a

person other than a company do not include a person to whom this section

applies.

Information

35

1187    

Matters to be notified to the Secretary of State

(1)   

The Secretary of State may require a recognised supervisory body or a

recognised qualifying body—

(a)   

to notify him immediately of the occurrence of such events as he may

specify in writing and to give him such information in respect of those

40

events as is so specified;

(b)   

to give him, at such times or in respect of such periods as he may

specify in writing, such information as is so specified.

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 42 — Statutory Auditors
Chapter 2 — Individuals and firms

566

 

(2)   

The notices and information required to be given must be such as the Secretary

of State may reasonably require for the exercise of his functions under this Part.

(3)   

The Secretary of State may require information given under this section to be

given in a specified form or verified in a specified manner.

(4)   

Any notice or information required to be given under this section must be

5

given in writing unless the Secretary of State specifies or approves some other

manner.

1188    

The Secretary of State’s power to call for information

(1)   

The Secretary of State may by notice in writing require a person within

subsection (2) to give him such information as he may reasonably require for

10

the exercise of his functions under this Part.

(2)   

The persons within this subsection are—

(a)   

any recognised supervisory body,

(b)   

any recognised qualifying body, and

(c)   

any person eligible for appointment as a statutory auditor by virtue of

15

this Chapter.

(3)   

The Secretary of State may require that any information which he requires

under this section is to be given within such reasonable time and verified in

such manner as he may specify.

Enforcement

20

1189    

Compliance orders

(1)   

If at any time it appears to the Secretary of State—

(a)   

in the case of a recognised supervisory body, that any requirement of

Schedule 10 is not satisfied,

(b)   

in the case of a recognised professional qualification, that any

25

requirement of Schedule 11 is not satisfied, or

(c)   

that a recognised supervisory body or a recognised qualifying body has

failed to comply with an obligation to which it is subject under or by

virtue of this Part,

   

he may, instead of revoking the relevant recognition order, make an

30

application to the court under this section.

(2)   

If on an application under this section the court decides that the requirement

in question is not satisfied or, as the case may be, that the body has failed to

comply with the obligation in question, it may order the body to take such

steps as the court directs for securing that the requirement is satisfied or that

35

the obligation is complied with.

(3)   

In this section “the court” means the High Court or, in Scotland, the Court of

Session.

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 42 — Statutory Auditors
Chapter 3 — Auditors General

567

 

Chapter 3

Auditors General

Eligibility for appointment

1190    

Auditors General: eligibility for appointment as a statutory auditor

(1)   

In this Part “Auditor General” means—

5

(a)   

the Comptroller and Auditor General,

(b)   

the Auditor General for Scotland,

(c)   

the Auditor General for Wales, or

(d)   

the Comptroller and Auditor General for Northern Ireland.

(2)   

An Auditor General is eligible for appointment as a statutory auditor.

10

(3)   

Subsection (2) is subject to any suspension notice having effect under section

1198 (notices suspending eligibility for appointment as a statutory auditor).

Conduct of audits

1191    

Individuals responsible for audit work on behalf of Auditors General

An Auditor General must secure that each individual responsible for statutory

15

audit work on behalf of that Auditor General is eligible for appointment as a

statutory auditor by virtue of Chapter 2.

The Independent Supervisor

1192    

Appointment of the Independent Supervisor

(1)   

The Secretary of State must appoint a body (“the Independent Supervisor”) to

20

discharge the function mentioned in section 1193(1) (“the supervision

function”).

(2)   

An appointment under this section must be made by order.

(3)   

A body may be appointed under this section only if it is a body corporate or an

unincorporated association which appears to the Secretary of State—

25

(a)   

to be willing and able to discharge the supervision function, and

(b)   

to have arrangements in place relating to the discharge of that function

which are such as to be likely to ensure that the conditions in subsection

(4) are met.

(4)   

The conditions are—

30

(a)   

that the supervision function will be exercised effectively, and

(b)   

where the order is to contain any requirements or other provisions

specified under subsection (5), that that function will be exercised in

accordance with any such requirements or provisions.

(5)   

An order under this section may contain such requirements or other provisions

35

relating to the exercise of the supervision function by the Independent

Supervisor as appear to the Secretary of State to be appropriate.

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 42 — Statutory Auditors
Chapter 3 — Auditors General

568

 

(6)   

An order under this section is subject to negative resolution procedure.

Supervision of Auditors General

1193    

Supervision of Auditors General by the Independent Supervisor

(1)   

The Independent Supervisor must supervise the performance by each Auditor

General of his functions as a statutory auditor.

5

(2)   

The Independent Supervisor must discharge that duty by—

(a)   

entering into supervision arrangements with one or more bodies, and

(b)   

overseeing the effective operation of any supervision arrangements

entered into by it.

(3)   

For this purpose “supervision arrangements” are arrangements entered into by

10

the Independent Supervisor with a body, for the purposes of this section, in

accordance with which the body does one or more of the following—

(a)   

determines standards relating to professional integrity and

independence which must be applied by an Auditor General in

statutory audit work;

15

(b)   

determines technical standards which must be applied by an Auditor

General in statutory audit work and the manner in which those

standards are to be applied in practice;

(c)   

monitors the performance of statutory audits carried out by an Auditor

General;

20

(d)   

investigates any matter arising from the performance by an Auditor

General of a statutory audit;

(e)   

holds disciplinary hearings in respect of an Auditor General which

appear to be desirable following the conclusion of such investigations;

(f)   

decides whether (and, if so, what) disciplinary action should be taken

25

against an Auditor General to whom such a hearing related.

(4)   

The Independent Supervisor may enter into supervision arrangements with a

body despite any relationship that may exist between the Independent

Supervisor and that body.

(5)   

The Independent Supervisor must notify each Auditor General in writing of

30

any supervision arrangements that it enters into under this section.

(6)   

Supervision arrangements within subsection (3)(f) may, in particular, provide

for the payment by an Auditor General of a fine to any person.

(7)   

Any fine received by the Independent Supervisor under supervision

arrangements is to be paid into the Consolidated Fund.

35

1194    

Duties of Auditors General in relation to supervision arrangements

(1)   

Each Auditor General must—

(a)   

comply with any standards of the kind mentioned in subsection (3)(a)

or (b) of section 1193 determined under the supervision arrangements,

(b)   

take such steps as may be reasonably required of that Auditor General

40

to enable his performance of statutory audits to be monitored by means

of inspections carried out under the supervision arrangements, and

 
 

 
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