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Local Democracy, Economic Development and Construction Bill [HL]


Local Democracy, Economic Development and Construction Bill [HL]
Part 2 — Local authorities: governance and audit
Chapter 2 — Audit of entities connected with local authorities

29

 

(i)   

the end of that financial year, and

(ii)   

the end of the period of three months beginning with the day on

which the audit authority receives notification in relation to the

entity under section 34(1)(a) or (2)(a).

(4)   

The Audit Commission may make an appointment under this section if (and

5

only if) it appears to the Audit Commission that—

(a)   

the entity will be a qualifying English local authority entity at the start

of the financial year for which the appointment is made, or

(b)   

in the case of an appointment for the first financial year of the entity, the

entity is a qualifying English local authority entity when the

10

appointment is made.

(5)   

The Auditor General for Wales may make an appointment under this section

if (and only if) it appears to the Auditor General that—

(a)   

the entity will be a qualifying Welsh local authority entity at the start of

the financial year for which the appointment is made, or

15

(b)   

in the case of an appointment for the first financial year of the entity, the

entity is a qualifying Welsh local authority entity when the

appointment is made.

(6)   

Before making an appointment under this section in relation to an entity the

appointing audit authority must consult the entity.

20

(7)   

Where one audit authority (“the first audit authority”) proposes to appoint a

person under this section in relation to an entity for a financial year in

circumstances where the other audit authority could also make an

appointment under this section in relation to that entity for that year—

(a)   

the first audit authority must consult the other audit authority, and

25

(b)   

the first audit authority may not make the appointment for that entity

for that year if the other audit authority has already done so.

(8)   

After making an appointment under this section in relation to an entity the

appointing audit authority must notify the local authority with which the

entity is connected.

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36      

Power to appoint replacement auditor

(1)   

Where a person appointed by an audit authority under this Chapter in relation

to an entity for a financial year dies, is dismissed or is unable or unwilling to

act, the audit authority may (subject to this Chapter) appoint a replacement in

relation to that entity for that financial year.

35

(2)   

Before making an appointment under this section the audit authority must

consult the entity.

(3)   

After making an appointment under this section the audit authority must

notify the local authority with which the entity is connected.

37      

Exclusions

40

(1)   

An audit authority may not make an appointment under this Chapter in

relation to an entity for a financial year if, by virtue of this section, the entity is

exempt from audit for that year.

 
 

Local Democracy, Economic Development and Construction Bill [HL]
Part 2 — Local authorities: governance and audit
Chapter 2 — Audit of entities connected with local authorities

30

 

(2)   

A company is exempt from audit under this Chapter for a financial year if it

appears to the appointing audit authority that, for the purposes of Part 16 of

the Companies Act 2006 (c. 46), the company is or will be exempt from audit

under that Part for that year.

(3)   

A limited liability partnership is exempt from audit under this Chapter for a

5

financial year if it appears to the appointing audit authority that, for the

purposes of Part 16 of the Companies Act 2006 (as that Part applies to limited

liability partnerships), the partnership is or will be exempt from audit under

that Part for that year.

(4)   

An industrial and provident society is exempt from audit under this Chapter

10

for a financial year if it appears to the appointing audit authority that

subsection (1) of section 4 of the Friendly and Industrial and Provident

Societies Act 1968 (c. 55) does not or will not apply to the society for that year

by virtue of subsection (2) of that section or section 4A(1) of that Act.

(5)   

Subsection (1) does not apply if the entity requests the audit authority to make

15

the appointment.

Auditors

38      

Eligibility for appointment

(1)   

A person appointed under this Chapter may be—

(a)   

a member of staff of the appointing audit authority;

20

(b)   

an individual who is not a member of staff of that authority;

(c)   

a firm.

(2)   

The following may not be appointed under this Chapter in relation to an

entity—

(a)   

an individual or firm who for the purposes of section 1212 of the

25

Companies Act 2006 is not eligible for appointment as a statutory

auditor, or

(b)   

an individual or firm who by virtue of section 1214 of that Act

(independence requirement) may not act as statutory auditor in

relation to that entity.

30

(3)   

In this section “firm” means any entity, whether or not a legal person, which is

not an individual, and includes a body corporate, a corporation sole and a

partnership or other unincorporated association.

39      

Terms of appointment

(1)   

Subject to this Chapter, a person appointed under this Chapter holds office

35

under this Chapter in accordance with the terms of their appointment.

(2)   

Subject to subsection (3), an appointment under this Chapter begins on the first

day of the financial year for which the appointment is made.

(3)   

An appointment under this Chapter which—

(a)   

is for the first financial year of an entity, or

40

(b)   

is made under section 36 after the start of the financial year for which it

is made,

   

begins on the day on which the appointment is made.

 
 

Local Democracy, Economic Development and Construction Bill [HL]
Part 2 — Local authorities: governance and audit
Chapter 2 — Audit of entities connected with local authorities

31

 

(4)   

An appointment under this Chapter, unless terminated earlier, ends when the

person appointed has discharged their functions under this Chapter.

(5)   

A person appointed under this Chapter may not be dismissed by the

appointing audit authority for divergence of opinion on accounting treatments

or audit procedures.

5

(6)   

If it appears to the Audit Commission that an entity in relation to which it has

appointed a person under this Chapter is not, or has ceased to be, a qualifying

English local authority entity, the Commission may terminate the appointment

(but is not required to do so).

(7)   

If it appears to the Auditor General for Wales that an entity in relation to which

10

the Auditor General has appointed a person under this Chapter is not, or has

ceased to be, a qualifying Welsh local authority entity, the Auditor General

may terminate the appointment (but is not required to do so).

Audit of accounts

40      

Right of entity to appoint auditor to conduct statutory audit

15

(1)   

Where a person is appointed under this Chapter in relation to an entity for a

financial year, the entity may, under and in accordance with the relevant

statutory provision, appoint that person as auditor of the entity for the

purposes of that provision for the financial year.

(2)   

An appointment pursuant to subsection (1) is to be—

20

(a)   

on the standard terms and conditions, or

(b)   

on the standard terms and conditions subject to such modifications as

may be agreed between the entity and the person appointed.

(3)   

The audit authority must notify the entity of its right under subsection (1).

(4)   

Notification under subsection (3) must be before the beginning of the financial

25

year (except in the case of an appointment for the first financial year of the

entity or which is made under section 36).

(5)   

Termination by the audit authority of the appointment under this Chapter

does not terminate an appointment made pursuant to subsection (1).

(6)   

In subsection (1) “the relevant statutory provision”—

30

(a)   

in relation to a company, means Part 16 of the Companies Act 2006

(c. 46);

(b)   

in relation to a limited liability partnership, means that Part of that Act

as it applies to limited liability partnerships;

(c)   

in relation to an industrial and provident society, means—

35

(i)   

section 4 of the Friendly and Industrial and Provident Societies

Act 1968 (c. 55), or

(ii)   

in the case of an industrial and provident society to which

regulation 3 of the Insurance Accounts Directive (Miscellaneous

Insurance Undertakings) Regulations 2008 (SI 2008/565)

40

applies, that regulation.

(7)   

In subsection (2), “standard terms and conditions” means terms and conditions

(including terms and conditions as to payment of fees) published for the

purposes of that subsection by the audit authority from time to time.

 
 

Local Democracy, Economic Development and Construction Bill [HL]
Part 2 — Local authorities: governance and audit
Chapter 2 — Audit of entities connected with local authorities

32

 

(8)   

Before publishing terms and conditions under subsection (7) an audit authority

must consult—

(a)   

such associations of local authorities, and such bodies of accountants,

as the audit authority considers appropriate, and

(b)   

the Secretary of State (in the case of the Audit Commission) or the

5

Welsh Ministers (in the case of the Auditor General for Wales).

41      

Functions of auditor not appointed to conduct statutory audit

(1)   

This section applies to an entity in relation to which a person is appointed

under this Chapter for a financial year if—

(a)   

the entity does not appoint that person pursuant to section 40(1), or

10

(b)   

the entity does so appoint that person but terminates the appointment

before the discharge of the person’s functions pursuant to the

appointment.

(2)   

Where this section applies to an entity which is a company—

(a)   

the person appointed under this Chapter must make a report to the

15

company on the annual accounts of the company for the financial year,

and

(b)   

sections 495(2) to (4) and 496 to 501 of the Companies Act 2006 (c. 46)

apply as if—

(i)   

that report were a report under section 495(1) of that Act, and

20

(ii)   

the person appointed under this Chapter were the company’s

auditor under Part 16 of that Act.

(3)   

Where this section applies to an entity which is a limited liability partnership—

(a)   

the person appointed under this Chapter must make a report to the

partnership on the annual accounts of the partnership for the financial

25

year, and

(b)   

sections 495(2) to (4) and 498 to 501 of the Companies Act 2006 apply as

if—

(i)   

that report were a report under section 495(1) of that Act, and

(ii)   

the person appointed under this Chapter were the partnership’s

30

auditor under Part 16 of that Act.

(4)   

Where this section applies to an entity which is an industrial and provident

society—

(a)   

the person appointed under this Chapter must audit the revenue

account or accounts and balance sheet of the society for the financial

35

year and make a report to the society on them,

(b)   

section 9(2) to (7) of the Friendly and Industrial and Provident Societies

Act 1968 (c. 55) applies in relation to that report as in relation to a report

under section 9(1) of that Act,

(c)   

section 18 of that Act applies in relation to any contravention of section

40

9(5) of that Act (as applied by paragraph (b)), and

(d)   

in a case where the society has caused group accounts for that year to

be prepared as specified in section 13 of that Act, the person appointed

under this Chapter must make a report to the society on the group

accounts, stating the matters referred to in subsection (5) of that section.

45

(5)   

The person appointed under this Chapter must send a copy of the report made

under this section to—

 
 

Local Democracy, Economic Development and Construction Bill [HL]
Part 2 — Local authorities: governance and audit
Chapter 2 — Audit of entities connected with local authorities

33

 

(a)   

the local authority with which the entity is connected, and

(b)   

the appointing audit authority.

(6)   

In subsection (3) references to the Companies Act 2006 (c. 46) are to that Act as

it applies in relation to limited liability partnerships.

Public interest reports

5

42      

Public interest reports

(1)   

A person appointed under this Chapter in relation to an entity must make a

report about any relevant matter—

(a)   

which comes to their attention in discharging their functions arising

under or pursuant to the preceding provisions of this Chapter, and

10

(b)   

which they consider that it would be in the public interest to bring to

the attention of the entity, the local authority with which it is connected

or the public.

(2)   

In subsection (1) “relevant matter” means—

(a)   

a matter relating to the financial affairs of the entity for the financial

15

year, or

(b)   

a matter relating to the corporate governance of the entity.

(3)   

A report under this section must be sent to the entity before the end of the

period of 14 days starting with the day on which the report is made.

(4)   

A copy of a report under this section must be sent before the end of that period

20

to—

(a)   

the local authority with which the entity is connected, and

(b)   

the audit authority.

(5)   

The person appointed under this Chapter may—

(a)   

notify any person of the fact that the report has been made, and

25

(b)   

supply a copy of it or of any part of it to any person.

43      

Codes of practice

(1)   

A code of practice under section 4 of the Audit Commission Act 1998 (c. 18)

must include provision prescribing the way in which persons appointed under

this Chapter by the Audit Commission are to carry out their functions under

30

section 42.

(2)   

A person so appointed must, in the exercise of their functions under section 42,

comply with such provision of such a code as is for the time being in force.

(3)   

Where provision under subsection (1) is included in a code of practice under

section 4 of the Audit Commission Act 1998 for the first time, the inclusion is

35

to be regarded as an alteration for the purposes of subsection (5) of that section.

(4)   

A code of practice under section 16 of the Public Audit (Wales) Act 2004 (c. 23)

must include provision prescribing the way in which persons appointed under

this Chapter by the Auditor General for Wales are to carry out their functions

under section 42.

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(5)   

A person so appointed must, in the exercise of their functions under section 42,

comply with such provision of such a code as is for the time being in force.

 
 

 
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