Companies (Audit, Investigations and Community Enterprise) Act 2004

Part 1 — Auditors, accounts, directors' liabilities and investigations

Chapter 1 — Auditors

Recognised supervisory bodies

Minor and consequential amendments

1

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Arrangements to which additional requirements for recognition relate

2

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Delegation of Secretary of State’s functions in relation to auditors

Delegation of functions by Secretary of State to new or existing body

3

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Circumstances in which Secretary of State may delegate functions to existing body

4

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Supplementary provisions about delegation orders

5

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Auditors' qualifications

Approval of overseas qualifications for auditors

6

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Services provided by auditors

Disclosure of services provided by auditors and related remuneration

7

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 2 — Accounts and reports

Auditing of accounts

Auditors' rights to information

8

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Statement in directors' report as to disclosure of information to auditors

9

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Defective accounts

Persons authorised to apply to court in connection with defective accounts

10

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Disclosure of tax information by Inland Revenue to facilitate application for declaration that accounts are defective

11

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Power of person authorised to require documents, information and explanations

12

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Directors' reports

Power to specify bodies who may issue reporting standards

13

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Supervision of accounts and reports

Supervision of periodic accounts and reports of issuers of listed securities

14

• (1) The Secretary of State may make an order appointing a body (“the prescribed body”) to exercise the functions mentioned in subsection (2).

• (2) The functions are—

• (a) keeping under review periodic accounts and reports that are produced by issuers of transferable securities and are required to comply with any accounting requirements imposed by Part 6 rules; and

• (b) if the prescribed body thinks fit, informing the Financial Conduct Authority of any conclusions reached by the body in relation to any such accounts or report.

• (3) A body may be appointed under this section if it is a body corporate or an unincorporated association which appears to the Secretary of State—

• (a) to have an interest in, and to have satisfactory procedures directed to, monitoring compliance by issuers of transferable securities with accounting requirements imposed by Part 6 rules in relation to periodic accounts and reports produced by such issuers; and

• (b) otherwise to be a fit and proper body to be appointed.

• (4) But where the order is to contain any requirements or other provisions specified under subsection (8), the Secretary of State may not appoint a body unless, in addition, it appears to him that the body would, if appointed, exercise its functions as a prescribed body in accordance with any such requirements or provisions.

• (5) A body may be appointed either generally or in respect of any of the following, namely—

• (a) any particular class or classes of issuers,

• (b) any particular class or classes of periodic accounts or reports,

and different bodies may be appointed in respect of different classes within either or both of paragraphs (a) and (b).

• (6) In relation to the appointment of a body in respect of any such class or classes, subsections (2) and (3) are to be read as referring to issuers, or (as the case may be) to periodic accounts or reports, of the class or classes concerned.

• (7) Where—

• (a) a body is so appointed, but

• (b) the Financial Conduct Authority requests the body to exercise its functions under subsection (2) in relation to any particular issuer of transferable securities in relation to whom those functions would not otherwise be exercisable,

the body is to exercise those functions in relation to that issuer as well.

• (8) An order under this section may contain such requirements or other provisions relating to the exercise of functions by the prescribed body as appear to the Secretary of State to be appropriate.

• (9) If the prescribed body is an unincorporated association, any relevant proceedings may be brought by or against that body in the name of any body corporate whose constitution provides for the establishment of the body.

For this purpose “relevant proceedings” means proceedings brought in or in connection with the exercise of any function by the body as a prescribed body.

• (10) Where an appointment is revoked, the revoking order may make such provision as the Secretary of State thinks fit with respect to pending proceedings.

• (11) The power to make an order under this section is exercisable by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament.

• (12) In this section and sections 15A to 15E below —

• “Part 6 rules” has the meaning given by section 103(1) of the Financial Services and Markets Act 2000 (c. 8) (interpretation of Part 6);

• issuer” has the meaning given by section 102A(6) of that Act;

• “periodic” accounts and reports means accounts and reports which are required by Part 6 rules to be produced periodically.

• issuer” has the meaning given by section 102A(6) of that Act;

Application of provisions inserted by sections 11 and 12 to bodies appointed under section 14

15

• (1) The provisions of sections 15A to 15E have effect in relation to bodies appointed under section 14 (supervision of accounts and reports of issuers of transferable securities).

• (2) In those sections—

• (a) “prescribed body” means a body appointed under that section; and

• (b) references to the functions of a prescribed body are to its functions under that section.

Bodies concerned with accounting standards etc.

Grants to bodies concerned with accounting standards etc.

16

• (1) The Secretary of State may make grants to any body carrying on activities concerned with any of the matters set out in subsection (2).

• (2) The matters are—

• (a) issuing accounting standards;

• (b) issuing standards in respect of matters to be contained in reports required to be produced by auditors or company directors;

• (c) investigating departures from standards within paragraph (a) or (b) or from the accounting requirements of the Companies Act 2006 or any requirements of directly applicable EU legislation relating to company accounts;

• (d) taking steps to secure compliance with such standards or requirements;

• (e) keeping under review periodic accounts and reports that are produced by issuers of listed securities and are required to comply with any accounting requirements imposed by listing rules;

• (ea) exercising the functions of the competent authority under the Statutory Auditors and Third Country Auditors Regulations 2016 and under Regulation (EU) 537/2014 on specific requirements regarding statutory audit of public interest entities;

• (eb) assessing, and reporting to the Secretary of State on, the comparability of the audit regulatory regimes of third countries to the audit regulatory regime of the United Kingdom;

• (ec) assessing, and reporting to the Secretary of State on, the adequacy of third country competent authorities, in relation to their ability to co-operate with the competent authority on the exchange of audit working papers and investigation reports;

• (f) establishing, maintaining or carrying out arrangements within paragraph 21, 22, 23(1) , 23A(1) or 24(1) of Schedule 10 to the Companies Act 2006;

• (g) exercising functions of the Secretary of State under Part 42 of that Act ;

• (h) carrying out investigations into public interest cases arising in connection with the performance of accountancy functions by members of professional accountancy bodies;

• (i) holding disciplinary hearings relating to members of such bodies following the conclusion of such investigations;

• (j) deciding whether (and, if so, what) disciplinary action should be taken against members of such bodies to whom such hearings related;

• (k) supervising the exercise by such bodies of regulatory functions in relation to their members;

• (ka) exercising functions of the Independent Supervisor appointed under Chapter 3 of Part 42 of the Companies Act 2006;

• (kb) establishing, maintaining or carrying out arrangements within paragraph 1 or 2 of Schedule 12 to the Companies Act 2006;

• (l) issuing standards to be applied in actuarial work;

• (m) issuing standards in respect of matters to be contained in reports or other communications required to be produced or made by actuaries or in accordance with standards within paragraph (l);

• (n) investigating departures from standards within paragraph (l) or (m);

• (o) taking steps to secure compliance with standards within paragraph (l) or (m);

• (oa) exercising functions under regulations made under section 113(3A) of the Pension Schemes Act 1993 or section 109(3A) of the Pension Schemes (Northern Ireland) Act 1993 (preparing guidance for pensions illustrations);

• (p) carrying out investigations into public interest cases arising in connection with the performance of actuarial functions by members of professional actuarial bodies;

• (q) holding disciplinary hearings relating to members of professional actuarial bodies following the conclusion of investigations within paragraph (p);

• (r) deciding whether (and, if so, what) disciplinary action should be taken against members of professional actuarial bodies to whom hearings within paragraph (q) related;

• (s) supervising the exercise by professional actuarial bodies of regulatory functions in relation to their members;

• (t) overseeing or directing any of the matters mentioned above.

• (3) A grant may be made to a body within subsection (1) in respect of any of its activities.

• (4) For the purposes of this section—

• (a) a body is to be regarded as carrying on any subsidiary activities of the body; and

• (b) a body’s “subsidiary activities” are activities carried on by any of its subsidiaries or by any body established under its constitution or under the constitution of such a subsidiary.

• (5) In this section—

• “accountancy functions” means functions performed as an accountant, whether in the capacity of auditor or otherwise;

• “audit regulatory regime” in relation to a country or territory, means the system of public oversight, quality assurance, investigations and sanctions for auditors in that country or territory;

• “company” means a company as defined in section 1(1) of the Companies Act 2006;

• “the competent authority” means the Financial Reporting Council Limited;

• “listed securities” and “listing rules” have the meaning given by section 103(1) of the Financial Services and Markets Act 2000 (c. 8) (interpretation of Part 6);

• “issuer”, in relation to listed securities, has the meaning given by section 102A(6)(b) of the Financial Services and Markets Act 2000 (meaning of “securities” etc ,);

• “professional accountancy body” means—a supervisory body which is recognised for the purposes of Part 42 of the Companies Act 2006 , ora qualifying body, as defined by section 1220 of that Act, which enforces rules as to the performance of accountancy functions by its members,and references to the members of professional accountancy bodies include persons who, although not members of such bodies, are subject to their rules in performing accountancy functions;

• “ professional actuarial body” means— the Institute of Actuaries, orthe Faculty of Actuaries in Scotland,and the “members” of a professional actuarial body include persons who, although not members of the body, are subject to its rules in performing actuarial functions;

• “public interest cases” means matters which raise or appear to raise important issues affecting the public interest;

• “regulatory functions”, in relation to professional accountancy bodies, means any of the following functions—investigatory or disciplinary functions exercised by such bodies in relation to the performance by their members of accountancy functions,the setting by such bodies of standards in relation to the performance by their members of accountancy functions, andthe determining by such bodies of requirements in relation to the education and training of their members;

• “regulatory functions”, in relation to professional accountancy bodies, means any of the following functions— investigatory or disciplinary functions exercised by such bodies in relation to the performance by their members of actuarial functions,the setting by such bodies of standards in relation to the performance by their members of actuarial functions, andthe determining by such bodies of requirements in relation to the education and training of their members;

• “subsidiary” has the meaning given by section 1159 of the Companies Act 2006.

• “third country” means a country or territory other than the United Kingdom;

• “third country competent authority” means a body established in a third country exercising functions related to the regulation or oversight of auditors.

• ...

• (6) In their application to Scotland, subsection (2)(a) to (t) are to be read as referring only to matters provision relating to which would be outside the legislative competence of the Scottish Parliament.

• (6A) References in this section to Part 42 of the Companies Act 2006 or to paragraph 21, 22, 23(1) or 24(1) of Schedule 10 to that Act include that Part or paragraph as it has effect by virtue of Schedule 5 to the Local Audit and Accountability Act 2014 (which applies Part 42 with modifications in relation to audits of local authorities etc).

• (6B) The reference in the definition of “professional accountancy body” in subsection (5) to section 1220 of the Companies Act 2006 includes a reference to section 1219 of that Act as it has effect by virtue of Schedule 5 to the Local Audit and Accountability Act 2014.

• (7) Omit section 256(3) of the Companies Act 1985 (c. 6) (grants to bodies concerned with issuing accounting standards etc.), which is superseded by this section.

Levy to pay expenses of bodies concerned with accounting standards etc.

17

• (1) For the purpose of meeting any part of the expenses of a grant-aided body, the Secretary of State may by regulations provide for a levy to be payable to that body (“the specified recipient”) by bodies or persons which are specified, or are of a description specified, in the regulations.

• (2) For the purposes of this section—

• (a) “grant-aided body” means a body to whom the Secretary of State has paid, or is proposing to pay, grant under section 16; and

• (b) any expenses of any body carrying on subsidiary activities of the grant-aided body (within the meaning of that section) are to be regarded as expenses of the grant-aided body.

• (3) The power to specify (or to specify descriptions of) bodies or persons must be exercised in such a way that the levy is only payable by—

• (a) bodies corporate to which , or persons within subsection (3A) to whom, the Secretary of State considers that any of the activities of the specified recipient, or any of its subsidiary activities, are relevant to a significant extent, or

• (b) bodies or persons who the Secretary of State considers have a major interest in any of those activities being carried on.

• (3A) The following persons are within this subsection—

• (a) the administrators of a public service pension scheme (within the meaning of section 1 of the Pension Schemes Act 1993);

• (b) the trustees or managers of an occupational or personal pension scheme (within the meaning of that section).

• (4) Regulations under this section may in particular—

• (a) specify the rate of the levy and the period in respect of which it is payable at that rate;

• (b) make provision as to the times when, and the manner in which, payments are to be made in respect of the levy.

• (c) make different provision for different cases.

• (5) In determining the rate of the levy payable in respect of a particular period, the Secretary of State—

• (a) must take into account the amount of any grant which is to be or has been made to the specified recipient in respect of that period under section 16;

• (b) may take into account estimated as well as actual expenses of that body in respect of that period.

• (6) Any amount of levy payable by any body or person is a debt due from the body or person to the specified recipient, and is recoverable accordingly.

• (7) The specified recipient must—

• (a) keep proper accounts in respect of amounts of levy received, and

• (b) prepare in relation to each levy period a statement of account relating to such amounts in such form and manner as is specified in the regulations.

• (8) Those accounts must be audited, and the statement certified, by persons appointed by the Secretary of State.