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Lord McKenzie of Luton moved Amendment No. 495:
On Question, amendment agreed to.
Clause 778 [Minor definitions: general]:
Lord McKenzie of Luton moved Amendment No. 495A:
"( ) Until such date as may be appointed by order under section 884(2) for the definition in subsection (1) of "regulated market" to come into force, the following definition has effect for the purposes of the Companies Acts—
16 May 2006 : Column 236
""regulated market" has the same meaning as it has in Council Directive 93/22/EEC on investment services in the securities field;"."
On Question, amendment agreed to.
Schedule 9 [Index of defined expressions]:
Lord McKenzie of Luton moved Amendments Nos. 496 to 506:
| "allotted shares and allotted share capital | section (Companies having a share capital) (2) and (3)" |
Page 482, line 17, column 2, leave out "section 363 of the 1985 Act" and insert "section (Duty to deliver annual returns)"
| "appropriate audit authority (in sections (Duty of auditor to notify appropriate audit authority), (Duty of company to notify appropriate audit authority) and 514) | section (Meaning of "appropriate audit authority" and "major audit")(1)" |
| "issued shares and issued share capital | section (Companies having a share capital) (2) and (3)" |
| "major audit (in sections (Duty of auditor to notify appropriate audit authority), and (Meaning of "appropriate audit authority" and "major audit")) | section (Meaning of "appropriate audit authority" and "major audit")(2)" |
| "offer to the public (in Chapter 1 of Part 17) | section 530 |
Page 488, line 21, column 2, leave out "477" and insert "(Appointment of auditors of private company: general)(2)"
| "protected information (in Chapter 8 of Part 10) | section (Protected information)" |
| "—in Chapter 5 of Part 16 | section (Meaning of "quoted company") (and section 363)" |
| "register of directors | section 146 |
| register of directors' residential addresses | section (Register of directors' residential addresses) |
| register of secretaries (in case of public company) | section 254" |
On Question, amendments agreed to.
Baroness Noakes moved Amendment No. 507:
On Question, amendment agreed to.
Lord McKenzie of Luton moved Amendments Nos. 508 to 511:
| "service address | section 758" |
| "—in section 771 and Schedule 8 | section 771(7)" |
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| "share capital (company having a) | section (Companies having a share capital) (1)" |
On Question, amendments agreed to.
Schedule 11 [Recognised professional qualifications]:
Baroness Noakes moved Amendment No. 511A:
The noble Baroness said: My Lords, Amendment No. 511A proposes a small amendment to paragraph 9 in Schedule 11.
In Grand Committee we debated the issue covered by this amendment; namely, the practical issues that arise in order that overseas audit experience may qualify as part of the requisite practical training for an auditor under Schedule 11. Paragraph 9 applies to all practical training, but I would like to tease out the significance of the paragraph by reference to overseas audit training. Put simply, paragraph 9 allows one of the UK recognised supervisory bodies to count overseas training by members of an overseas body if the UK body has approved them to carry out the training. In approving them, the UK body has to be satisfied, in the light of undertakings and the local supervision arrangements, that they will provide adequate training—that is, the paragraph is predicated on approval before the provision of the training.
With my amendment the UK body has to be satisfied that the overseas persons,
adequate training, so approval may be granted in arrear.
The practical issue that this amendment addresses is that it is not always possible to recognise the training on an ex ante basis. The Institute of Chartered Accountants in England and Wales has said that it receives a small number of applications each year for the approval for individuals who find that they need to rely on the overseas component of their qualification period to satisfy the rules. At present, the institute cannot do so because it cannot approve such training ex post.
The amendment would not diminish the quality of training that an individual received before he was entitled to practise as an auditor, but it would make it easier for all relevant training to be validated. The alternative to this is a costly network of approved overseas training organisations set up by each RSB. I beg to move.
Lord McKenzie of Luton: My Lords, the eighth company law directive on auditing sets out clear requirements for practical training in Article 10. It requires that member states ensure that all training is carried out by persons,
This requirement is not new and reflects the practical training provisions of the 1984 eighth directive, which the 1989 Act implemented.
Paragraph 9 of Schedule 11 reflects these requirements and, indeed, is a restatement of the provisions in the 1989 Act. It requires persons who wish to qualify as a statutory auditor to carry out at least three years' practical training under supervision of persons approved by the body offering the qualification.
In practice, these requirements are met through the recognised qualifying bodies—those professional bodies that offer audit qualifications—operating a system of approved training offices. This means that those firms which are hosting practical training experience for audit students have provided guarantees to the qualifying body on the standard of training and supervision being provided. That is important. The practical training requirement for auditors is a vital part of their professional development, providing them with a range and depth of technical experience as well as developing their technical, commercial and ethical awareness skills. It is vital to the quality of the future stock of UK auditors that the practical training that auditors receive is structured, supervised and up to date.
In considering whether a firm is suitable to provide adequate training, a number of criteria are considered, including the firm-wide procedures, the number of audit clients, the number of statutory auditors in the firm, the provision of training records, the setting of competencies and the number of assessments carried out on individuals. Although this amendment may be aimed at alleviating a practical difficulty for a handful of individuals it is not, in practice, the small matter that the noble Baroness, Lady Noakes, indicated. It runs a coach and horses through the UK qualifying system and would allow the retrospective approval of both overseas and UK practical training. That would fundamentally undermine the framework I have just described, which exists to ensure the quality of UK audit qualifications.
7.30 pm
I find it difficult to see how retrospective approval would operate in assessing the adequacy of firms' training and supervision arrangements, or their suitability for training individuals, since—after a period of time has elapsed—records may not have been kept, changes in audit clients will have taken place, firm-wide systems may have changed and staff will have left. That is likely to mean that adequate guarantees could not be assured, in the spirit of the directive. I understand the practical issue for those relatively few people operating overseas, but on balance this is not the right way to go. I urge the noble Baroness to withdraw the amendment.
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