The Statutory Auditors and Third Country Auditors Regulations 2016

• (a) complies with any request by the competent authority for relevant documentation retained by the group auditor and concerning the audit work performed by the respective statutory auditors ... or third country auditors for the purposes of the group audit (including any working papers relevant to the group audit);

• (b) in cases where the competent authority is unable to obtain documentation from the relevant competent authorities of a third country, complies with any request for additional documentation relating to audit work performed by third country auditors for the purposes of the group audit (including working papers relevant to the group audit);

• (c) in order to comply with any request under sub-paragraph (2)(b), the group auditor—

• (i) retains copies of such documentation,

• (ii) obtains the agreement of third country auditors to the group auditor having unrestricted access to such documentation on request,

• (iii) retains documentation to show that the group auditor has undertaken the appropriate procedures in order to gain access to the audit documentation and evidence supporting the existence of any impediments to access, or

• (iv) takes any other appropriate action.

16

• (1) In relation to the audit of public interest entities, standards must ensure that A keeps key audit documents and information for at least five years following the creation of such documents and information.

• (2) In this paragraph, “key audit documents and information” means—

• (a) the documents and information referred to, as appropriate, in—

• (i) articles 4(3), 6, 7, 8(4) to (7), 10, 11, 14 and 16(3) of the Audit Regulation,

• (ii) any rules made under section 340 of the Financial Services and Markets Act 2000,

• (iii) the Financial Services and Markets Act 2000 (Communications by Auditors) Regulations 2001,

• (iv) sections 485A to 485C, 489A to 489C and 494ZA of the Companies Act 2006,

• (v) paragraphs 3B to 3E of Schedule 11 to the Building Societies Act 1986,

• (vi) paragraphs 2 to 5 of Schedule 14A to the Friendly Societies Act 1992,

• (vii) sections 485A to 485C and 494ZA of the Companies Act, as applied to—

• (aa) limited liability partnerships by the Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008 (see in particular regulation 36 and 38A), or

• (bb) insurance undertakings by the Insurance Accounts Directive (Miscellaneous Insurance Undertakings) Regulations 2008 (see in particular regulation 6(1A)) (“insurance undertaking” has the meaning given by regulation 2 of those Regulations),

• (b) information recorded in accordance with the requirements of paragraphs 8, 10, 12 and 15 of this Schedule, and

• (c) the audit report.

SCHEDULE 2 — Investigation Powers

1

• (1) The competent authority may for any purpose related to inspecting or investigating statutory audit work give notice to any statutory auditor (“A”) requiring A to provide information specified in the notice.

• (2) Information may be specified in a notice under sub-paragraph (1) only if it is information relating to the statutory audit of the annual accounts or the consolidated accounts of any audited person.

• (3) The competent authority may give notice to any person mentioned in sub-paragraph (4) requiring that person to provide information relating to the statutory audit of the annual accounts or the consolidated accounts of any public interest entity.

• (4) The persons to whom notice may be given under sub-paragraph (3) are—

• (a) any person involved in the activities of a statutory auditor (including any person to whom a statutory auditor has outsourced such activities),

• (b) any public interest entity,

• (c) any subsidiary or parent of a public interest entity or any other subsidiary of a company of which a public interest entity is a subsidiary,

• (d) any person otherwise having a connection to a statutory auditor carrying out the statutory audit of the annual accounts or consolidated accounts of a public interest entity.

• (5) A notice under sub-paragraph (1) or (3) must be in writing and specify the purposes for which the information is required.

• (6) A notice under sub-paragraph (1) or (3) may—

• (a) specify the time within which and the manner in which the person to whom it is given must comply with it,

• (b) require the creation of documents, or documents of a description, specified in the notice, and

• (c) require the provision of those documents to the competent authority.

• (7) A requirement to provide information or create a document is a requirement to do so in a legible form.

• (8) A notice under sub-paragraph (1) or (3) does not require a person to provide any information or create any documents which the person would be entitled to refuse to provide or produce—

• (a) in proceedings in the High Court on the grounds of legal professional privilege, or

• (b) in proceedings in the Court of Session on the grounds of confidentiality of communications.

• (9) In sub-paragraph (8) “communications” means—

• (a) communications between a professional legal adviser and his client, or

• (b) communications made in connection with or in contemplation of legal proceedings or for the purposes of those proceedings.

2

• (1) If a person fails to comply with a notice under paragraph 1, the competent authority may make an application to the court.

• (2) If it appears to the court that the person has failed to comply with the notice, it may make an order requiring the person to do anything that the court thinks it is reasonable for the person to do, for any of the purposes for which the notice was given, to ensure that the notice is complied with.

• (3) Where the court makes an order under sub-paragraph (2)—

• (a) it may require the person to meet the costs or expenses of the competent authority's application, or

• (b) if the person is a company, partnership or unincorporated association, the court may require an officer who is responsible for the failure to meet those costs or expenses.

• (4) In this paragraph—

• “the court” means—the High Court,in relation to England and Wales, the county court,in relation to Northern Ireland, a county court,the Court of Session, orthe sheriff;

• “officer” means—in the case of a company, a director, manager, secretary or other similar officer,in the case of a limited liability partnership, a member,in the case of a partnership other than a limited liability partnership, a partner, andin the case of an unincorporated association, a person who is concerned in the management or control of its affairs.

3

• (1) This paragraph applies if a person provides information (including information contained in a document created by the person) in response to a notice under paragraph 1.

• (2) In any criminal proceedings against the person—

• (a) no evidence relating to the information may be adduced by or on behalf of the prosecution, and

• (b) no question relating to the information may be asked by or on behalf of the prosecution.

• (3) Sub-paragraph (2) does not apply if, in the proceedings—

• (a) evidence relating to the information is adduced by or on behalf of the person providing it, or

• (b) a question relating to the information is asked by or on behalf of that person.

• (4) Sub-paragraph (2) does not apply if the proceedings are for—

• (a) an offence under paragraph 5 (obstruction),

• (b) an offence under section 5 of the Perjury Act 1911 (false statutory declarations and other false statements without oath),

• (c) an offence under section 44(2) of the Criminal Law (Consolidation)(Scotland) Act 1995 (false statements or declarations),

• (d) an offence under Article 10 of the Perjury (Northern Ireland) Order 1979 (false statutory declarations and other false unsworn statements).

4

• (1) An officer of the competent authority may, for the purposes of inspecting or investigating the statutory audit of a public interest entity, enter relevant premises at any reasonable time if—

• (a) the requirements of sub-paragraph (3) are satisfied, or

• (b) the occupier of the premises has waived those requirements.

• (2) In this paragraph “relevant premises” means premises—

• (a) in which a statutory auditor is carrying out a statutory audit, or

• (b) where documents related to a statutory audit are kept,

and does not include premises used wholly or mainly as a dwelling.

• (3) The requirements of this sub-paragraph are that—

• (a) a notice in writing is given to the occupier of the premises by an officer of the competent authority,

• (b) the notice sets out why entry is necessary and gives details of the statutory audit work subject to inspection (including the name of the audited person and the accounting years in question) and indicates the nature of the offence under paragraph 5, and

• (c) there are at least two working days between the date the occupier of the premises receives the notice and the date of entry.

• (4) An officer of the competent authority who enters premises under this paragraph must produce evidence of the officer's identity and authority to the occupier of the premises.

• (5) An officer of the competent authority entering premises under this paragraph may—

• (a) be accompanied by such persons and may take onto the premises such equipment as the officer thinks necessary,

• (b) require a statutory auditor or any person acting on behalf of a statutory auditor to produce any documents relating to the statutory audit of the annual or consolidated accounts of a public interest entity to which the statutory auditor has access,

• (c) require a statutory auditor or any person acting on behalf of a statutory auditor to give an explanation of any document produced under paragraph (b).

• (6) Where a document required to be produced under sub-paragraph (5)(b) contains information recorded electronically, the power in that sub-paragraph includes power to require the production of a copy of the document in a form in which it can easily be taken away and in which it is visible and legible.

• (7) This paragraph does not permit an officer of the competent authority to require a person to produce any document which the person would be entitled to refuse to produce—

• (a) in proceedings in the High Court on the grounds of legal professional privilege, or

• (b) in proceedings in the Court of Session on grounds of confidentiality of communications.

• (8) In this paragraph—

• “communications” means—communications between a professional legal adviser and the adviser's client, orcommunications made in connection with or in contemplation of legal proceedings or for the purposes of those proceedings.

• “give”, in relation to the giving of a notice to the occupier of premises, includes delivering it or leaving it at the premises or sending it there by post;

• “working day” means a day other than—Saturday or Sunday,Christmas Day or Good Friday, ora day which is a bank holiday under the Banking and Financial Dealings Act 1971 in that part of the United Kingdom in which the premises are situated.

5

• (1) A person commits an offence if the person—

• (a) intentionally obstructs the competent authority or an officer of the competent authority in exercising or seeking to exercise a power under and in accordance with this Schedule,

• (b) intentionally fails to comply with a requirement properly imposed by the competent authority or an officer of the competent authority under this Schedule,

• (c) without reasonable excuse fails to give the competent authority or an officer of the competent authority any other assistance or information which the competent authority or officer may reasonably require for a purpose for which the competent authority or officer may exercise a power under this Schedule.

• (2) A person commits an offence if, in giving information of a kind mentioned in sub-paragraph (1)(c), the person—

• (a) makes a statement which the person knows is false or misleading in a material respect, or

• (b) recklessly makes a statement which is false or misleading in a material respect.

• (3) A person who is guilty of an offence under sub-paragraph (1) or (2) is liable on summary conviction to a fine not exceeding level 3 on the standard scale.

• (4) Nothing in this paragraph requires a person to answer any question or give any information if to do so might incriminate that person.

SCHEDULE 3 — Amendments to the Companies Act 2006

PART 1 — Introductory

1

The Act is amended as set out in Parts 2 to 5 of this Schedule.

2

In this Schedule—

• (a) a reference to a numbered section is a reference to that section of the Act; and

• (b) a reference to a numbered Schedule is a reference to that Schedule to the Act.

PART 2 — Amendment to Part 15 of the Companies Act 2006

3

• (1) Section 461 (permitted disclosure of information obtained under compulsory powers) is amended as follows.

• (2) In subsection (4), for paragraph (aa) substitute—

(aa) for the purpose of assisting the competent authority to exercise its functions under the Statutory Auditors and Third Country Auditors Regulations 2016 and under the Audit Regulation;

PART 3 — Amendments to Chapters 2 to 4 of Part 16 of the Companies Act 2006

4

After section 485 (appointment of auditors of private company: general) insert—

(485A) (1) This section applies to the appointment under section 485(4) of an auditor or auditors of a private company— (a) which is also a public interest entity; and (b) which has an audit committee. (2) But it does not apply to the appointment of an Auditor General as auditor or one of the auditors of the company. (3) Before an appointment to which this section applies is made— (a) the audit committee of the company must make a recommendation to the directors in connection with the appointment, and (b) the directors must propose an auditor or auditors for appointment, including the following information in the proposal— (i) the recommendation made by the audit committee in connection with the appointment, or (ii) if the directors' proposal departs from the preference of the audit committee, the reasons for not following the recommendation. (4) Before the audit committee makes a recommendation or the directors make a proposal under subsection (3), the committee or directors must carry out a selection procedure in accordance with Article 16(3) of the Audit Regulation, unless the company is a small or medium sized enterprise within the meaning in Article 2(1)(f) of Directive 2003/71/EC . (5) The audit committee must in its recommendation— (a) identify its first and second choice candidates for appointment, (b) give reasons for the choices so identified, (c) state that— (i) the recommendation is free from influence by a third party, and (ii) no contractual term of the kind mentioned in Article 16(6) of the Audit Regulation has been imposed on the company. (6) Subsections (4) and (5) do not apply in relation to a recommendation or proposal for appointment of an auditor or auditors for a financial year (“the relevant financial year”)— (a) if the relevant financial year begins during a transitional period mentioned in subsection (7); or (b) if— (i) a selection procedure mentioned in subsection (8) has been carried out in respect of the appointment of the auditor or auditors in relation to a financial year beginning less than ten years before the first day of the relevant financial year; and (ii) the auditor or auditors were appointed for the financial year before the relevant financial year. (7) The transitional periods are— (a) in the case of an auditor who was first appointed for a financial year beginning before 17th June 1994 and who continues to hold office on 17th June 2016, the period which begins on 17th June 2016 and ends on the day before the first day of the first financial year of the company that begins on or after 17th June 2020; (b) in the case of an auditor who was first appointed for a financial year beginning on or after 17th June 1994 and before 17th June 2003 and who continues to hold office on 17th June 2016, the period which begins on 17th June 2016 and ends on the day before the first day of the first financial year of the company that begins on or after 17th June 2023. (8) The selection procedures are— (a) a selection procedure which is in accordance with subsections (4) and (5); (b) a selection procedure which substantially meets the requirements of Article 16(2) to (5) of the Audit Regulation, having regard to the circumstances at the time (including whether the company had an audit committee), which was carried out in relation to a financial year which began before 17th June 2016. (485B) (1) This section applies to the appointment under section 485(4) of an auditor or auditors of a private company— (a) which is also a public interest entity; and (b) which does not have an audit committee. (2) But it does not apply to the appointment of an Auditor General as auditor or one of the auditors of the company. (3) Before an appointment to which this section applies is made the directors must propose an auditor or auditors for appointment. (4) Before the directors make a proposal under subsection (3), they must carry out a selection procedure in accordance with Article 16(3) of the Audit Regulation, unless the company is a small or medium sized enterprise within the meaning in Article 2(1)(f) of Directive 2003/71/EC. (5) Subsection (4) does not apply in relation to a proposal for appointment of an auditor or auditors for a financial year (“the relevant financial year”)— (a) if the relevant financial year begins during a transitional period mentioned in subsection (6); or (b) if— (i) a selection procedure mentioned in subsection (7) has been carried out in respect of the appointment of the auditor or auditors in relation to a financial year beginning less than ten years before the first day of the relevant financial year; and (ii) the auditor or auditors were appointed for the financial year before the relevant financial year. (6) The transitional periods are— (a) in the case of an auditor who was first appointed in respect of a financial year beginning before 17th June 1994 and who continues to hold office on 17th June 2016, the period which begins on 17th June 2016 and ends on the day before the first day of the first financial year of the company that begins on or after 17th June 2020; (b) in the case of an auditor who was first appointed in respect of a financial year beginning on or after 17th June 1994 and before 17th June 2003 and who continues to hold office on 17th June 2016, the period which begins on 17th June 2016 and ends on the day before the first day of the first financial year of the company that begins on or after 17th June 2023. (7) The selection procedures are— (a) a selection procedure which is in accordance with subsection (4); (b) a selection procedure which substantially meets the requirements of Article 16(2) to (5) of the Audit Regulation, having regard to the circumstances at the time (including whether the company had an audit committee), which was carried out in relation to a financial year which began before 17th June 2016.

5

• (1) Section 486 (appointment of auditors or private company: default power of Secretary of State) is amended as follows.

• (2) In subsection (1), after “section 485,” insert “ 485A or 485B ”.

6

• (1) Section 487 (term of office of auditors of private company) is amended as follows.

• (2) After subsection (1) insert—

(1A) The terms of appointment of an auditor or auditors of a private company which is also a public interest entity are subject to the additional requirement that the auditor or auditors cease to hold office on the expiry of the period for appointing auditors in respect of the first complete financial year that follows the expiry of the maximum engagement period. (1B) But subsection (1A) does not apply to an Auditor General. (1C) In this section— - “the maximum engagement period” means, subject to subsection (1D) and section 487A (which makes transitional provision in relation to auditors appointed before 17th June 2016), whichever of the following periods is longest— 1. the period of ten years beginning with the first day of the first financial year in respect of which the auditor was appointed, 2. the period of twenty years beginning with the first day of the first financial year in respect of which the auditor was appointed, if the selection requirements are satisfied for at least one financial year which begins every ten years in that period, or 3. such other period of no more than twenty years beginning with the first day of the first financial year in respect of which the auditor was appointed and ending on the last day of the relevant ten year period; - “the relevant ten year period” means the period of ten years beginning with the first day of the last financial year— 1. which begins within ten years of the first day of the first financial year in respect of which the auditor was appointed, and 2. in respect of which the auditor was reappointed following the carrying out of a selection procedure in accordance with the selection requirements; and - “the selection requirements” means— 1. the requirements of section 485A(4) and (5) if the company has an audit committee, or 2. the requirements of section 485B(4) if the company does not have an audit committee. (1D) The maximum engagement period may be extended by a period of up to two years with the approval of the competent authority, provided that— (a) in a case where the period within paragraph (a) of the definition of “the maximum engagement period” is being extended, the appointment of the auditor for the first complete financial year following the end of that period is made following the carrying out of a selection procedure in accordance with the selection requirements; and (b) in all cases, the competent authority is satisfied that exceptional circumstances exist. (1E) An auditor is ineligible for appointment as auditor of a private company which is also a public interest entity if— (a) within the four years preceding the start of the financial year to which that appointment relates the auditor has ceased by virtue of subsection (1A) to hold office as auditor of that company, or (b) the auditor is a member of the same network as an auditor who within the four years preceding the start of the financial year to which that appointment relates has ceased by virtue of that subsection to hold office as auditor of that company.

• (3) In subsection (2), at the end of paragraph (e) insert—

, or (f) the auditor has ceased to hold office by virtue of subsection (1A).

7

After section 487 insert—

(487A) (1) In the case of an auditor who was first appointed in respect of a financial year beginning before 17th June 1994 and who continues to hold office on 17th June 2016, “the maximum engagement period” means the period ending on the day before the first day of the first financial year of the company that begins on or after 17th June 2020. (2) In the case of an auditor who was first appointed in respect of a financial year beginning on or after 17th June 1994 and before 17th June 2003 and who continues to hold office on 17th June 2016, “the maximum engagement period” means the period ending on the day before the first day of the first financial year of the company that begins on or after 17th June 2023. (3) In the case of an auditor who was first appointed in respect of a financial year beginning on or after 17th June 2003 and before 17th June 2016 and who continues to hold office on 17th June 2016, “the maximum engagement period” means whichever of the following periods is longest— (a) the period ending on whichever is the later of— (i) the day before the first day of the first financial year of the company that begins on or after 17th June 2016; (ii) the last day of the period of ten years beginning with the first day of the first financial year of the company in respect of which the auditor was appointed, (b) the period of twenty years beginning with the first day of the first financial year in respect of which the auditor was appointed, if the selection requirements are satisfied for at least one financial year which begins every ten years in the period beginning on 17th June 2007, or (c) such other period of no more than twenty years beginning with the first day of the first financial year in respect of which the auditor was appointed and ending on the last day of the relevant ten year period. (4) In this section— - “the relevant ten year period” means the period of ten years beginning with the first day of the last financial year— 1. which begins either within ten years of the first day of the first financial year in respect of which the auditor was appointed or, if later, on or before 16th June 2017, and 2. in respect of which the auditor was reappointed following the carrying out of a selection procedure in accordance with the selection requirements; - “the selection requirements” means— 1. in relation to an accounting year beginning on or after 17th June 2016— 1. the requirements of section 485A(4) and (5), if the company has an audit committee, 2. the requirements of section 485B(4) if the company does not have an audit committee, 2. in relation to an accounting year beginning before 17th June 2016, the requirement that the company carries out a tender process which substantially meets the requirements of Article 16(2) to (5) of the Audit Regulation, having regard to the circumstances at the time (including whether the company had an audit committee). (5) The maximum engagement period may be extended by a period of up to two years with the approval of the competent authority, provided that— (a) in a case where the period under subsection (3)(a) is being extended, the appointment of the auditor for the first complete financial year following the end of that period is made following the carrying out of a selection procedure in accordance with the selection requirements; and (b) in all cases, the competent authority is satisfied that exceptional circumstances exist.

8

After section 489 (appointment of auditors of public company: general) insert—

(489A) (1) This section applies to the appointment under section 489(4) of an auditor or auditors of a public company— (a) which is also a public interest entity; and (b) which has an audit committee. (2) But it does not apply to the appointment of an Auditor General as auditor or one of the auditors of the company. (3) Before an appointment to which this section applies is made— (a) the audit committee of the company must make a recommendation to the directors in connection with the appointment, and (b) the directors must propose an auditor or auditors for appointment, including the following information in the proposal— (i) the recommendation made by the audit committee in connection with the appointment, or (ii) if the directors' proposal does not accord with that recommendation, the reasons for not following the recommendation. (4) Before the audit committee makes a recommendation or the directors make a proposal under subsection (3), the committee or directors must carry out a selection procedure in accordance with Article 16(3) of the Audit Regulation, unless the company is— (a) a small or medium sized enterprise within the meaning in Article 2(1)(f) of Directive 2003/71/EC; or (b) a company with reduced market capitalisation within the meaning in Article 2(1)(t) of that Directive . (5) The audit committee must in its recommendation— (a) identify its first and second choice candidates for appointment, (b) give reasons for the choices so identified, (c) state that— (i) the recommendation is free from influence by a third party, and (ii) no contractual term of the kind mentioned in Article 16(6) of the Audit Regulation has been imposed on the company. (6) Subsections (4) and (5) do not apply in relation to a recommendation or proposal for appointment of an auditor or auditors for a financial year (“the relevant financial year”)— (a) if the relevant financial year begins during a transitional period mentioned in subsection (7); or (b) if— (i) a selection procedure mentioned in subsection (8) has been carried out in respect of the appointment of the auditor or auditors in relation to a financial year beginning less than ten years before the first day of the relevant financial year ; and (ii) the auditor or auditors were appointed for the financial year before the relevant financial year. (7) The transitional periods are— (a) in the case of an auditor who was first appointed in respect of a financial year beginning before 17th June 1994 and who continues to hold office on 17th June 2016, the period which begins on 17th June 2016 and ends on the day before the first day of the first financial year of the company that begins on or after 17 June 2020; (b) in the case of an auditor who was first appointed in respect of a financial year beginning on or after 17th June 1994 and before 17th June 2003 and who continues to hold office on 17th June 2016, the period which begins on 17th June 2016 and ends on the day before the first day of the first financial year of the company that begins on or after 17th June 2023. (8) The selection procedures are— (a) a selection procedure which is in accordance with subsections (4) and (5); (b) a selection procedure which substantially meets the requirements of Article 16(2) to (5) of the Audit Regulation, having regard to the circumstances at the time (including whether the company had an audit committee), which was carried out in relation to a financial year which began before 17th June 2016. (489B) (1) This section applies to the appointment under section 489(4) of an auditor or auditors of a public company— (a) which is also a public interest entity; and (b) which does not have an audit committee. (2) But it does not apply to the appointment of an Auditor General as auditor or one of the auditors of the company. (3) Before an appointment to which this section applies is made the directors must propose an auditor or auditors for appointment. (4) Before the directors make a proposal under subsection (3), the directors must carry out a selection procedure in accordance with Article 16(3) of the Audit Regulation, unless the company is— (a) a small or medium sized enterprise within the meaning in Article 2(1)(f) of Directive 2003/71/EU ; or (b) a company with reduced market capitalisation within the meaning in Article 2(1)(t) of that Directive. (5) Subsection (4) does not apply in relation to a recommendation or proposal for appointment of an auditor or auditors for a financial year (“the relevant financial year”)— (a) if the relevant financial year begins during a transitional period mentioned in subsection (6); or (b) if— (i) a selection procedure mentioned in subsection (7) has been carried out in respect of the appointment of the auditor or auditors in relation to a financial year beginning less than ten years before the first day of the relevant financial year ; and (ii) the auditor or auditors were appointed for the financial year before the relevant financial year. (6) The transitional periods are— (a) in the case of an auditor who was first appointed in respect of a financial year beginning before 17th June 1994 and who continues to hold office on 17th June 2016, the period which begins on 17th June 2016 and ends on the day before the first day of the first financial year of the company that begins on or after 17th June 2020; (b) in the case of an auditor who was first appointed in respect of a financial year beginning on or after 17th June 1994 and before 17th June 2003 and who continues to hold office on 17th June 2016, the period which begins on 17th June 2016 and ends on the day before the first day of the first financial year of the company that begins on or after 17th June 2023. (7) The selection procedures are— (a) a selection procedure which is in accordance with subsection (4); (b) a selection procedure which substantially meets the requirements of Article 16(2) to (5) of the Audit Regulation, having regard to the circumstances at the time (including whether the company had an audit committee), which was carried out in relation to a financial year which began before 17th June 2016.

9

• (1) Section 490 (appointment of auditors of public company: default power of Secretary of State) is amended as follows.

• (2) In subsection (1), after “section 489,” insert “ 489A or 489B ”.

10

• (1) Section 491 (term of office of auditors of public company) is amended as follows.

• (2) After subsection (1) insert—

(1A) The terms of appointment of an auditor or auditors of a public company which is also a public interest entity are subject to the additional requirement that the auditor or auditors cease to hold office at the end of the accounts meeting in respect of the first financial year which ends after the expiry of the maximum engagement period. (1B) But subsection (1) does not apply to an Auditor General. (1C) In this section— - “the maximum engagement period” means, subject to subsection (1D) and section 491A (which makes transitional provision in relation to auditors appointed before 17th June 2016) whichever of the following periods is longest— 1. the period of ten years beginning with the first day of the first financial year in respect of which the auditor was appointed, or 2. the period of twenty years beginning with the first day of the first financial year in respect of which the auditor was appointed if the selection requirements are satisfied for at least one financial year which begins every ten years in that period, or 3. such other period of no more than twenty years beginning with the first day of the first financial year in respect of which the auditor was appointed and ending on the last day of the relevant ten year period, - “the relevant ten year period” means the period of ten years beginning with the first day of the last financial year— 1. which begins within ten years of the first day of the first financial year in respect of which the auditor was appointed, and 2. in respect of which the auditor was reappointed following the carrying out of a selection procedure in accordance with the selection requirements; and - “the selection requirements” means— 1. the requirements of section 489A(4) and (5) if the company has an audit committee, or 2. the requirements of section 489B(4) if the company does not have an audit committee. (1D) The maximum engagement period may be extended by a period of up to two years with the approval of the competent authority, provided that— (a) in a case where the period within paragraph (a) of the definition of “the maximum engagement period” is being extended, the appointment of the auditor for the first complete financial year following the end of that period is made following the carrying out of a selection procedure in accordance with the selection requirements; and (b) in all cases, the competent authority is satisfied that exceptional circumstances exist. (1E) An auditor is ineligible for appointment as auditor of a public company which is also a public interest entity if— (a) within the four years preceding the start of the financial year to which that appointment relates the auditor has ceased by virtue of subsection (1A) to hold office as auditor of that company, or (b) the auditor is a member of the same network as an auditor who within the four years preceding the start of the financial year to which that appointment relates has ceased by virtue of that subsection to hold office as auditor of that company.

11

After section 491 insert—

(491A) (1) In the case of an auditor who was first appointed in respect of a financial year beginning before 17th June 1994 and who continues to hold office on 17th June 2016, “the maximum engagement period” means the period ending on the day before the first day of the first financial year of the company that begins on or after 17th June 2020. (2) In the case of an auditor who was first appointed in respect of a financial year beginning on or after 17th June 1994 and before 17th June 2003 and who continues to hold office on 17th June 2016, “the maximum engagement period” means the period ending on the day before the first day of the first financial year of the company that begins on or after 17th June 2023. (3) In the case of an auditor who was first appointed in respect of a financial year beginning on or after 17th June 2003 and before 17th June 2016 and who continues to hold office on 17th June 2016, “the maximum engagement period” means whichever of the following periods is longest— (a) the period ending on whichever is the later of— (i) the day before the first day of the first financial year of the company that begins on or after 17th June 2016; or (ii) the last day of the period of ten years beginning with the first day of the first financial year of the company in respect of which the auditor was appointed, (b) the period of twenty years beginning with the first day of the first financial year in respect of which the auditor was appointed if the selection requirements are satisfied for at least one financial year which begins every ten years in the period beginning on 17th June 2007, (c) such other period of no more than twenty years beginning with the first day of the first financial year in respect of which the auditor was appointed and ending on the last day of the relevant ten year period. (4) In this section— - “the relevant ten year period” means the period of ten years beginning with the first day of the last financial year— 1. which begins either within ten years of the first day of the first financial year in respect of which the auditor was appointed or, if later, on or before 16th June 2017, and 2. in respect of which the auditor was reappointed following the carrying out of a selection procedure in accordance with the selection requirements; and - “the selection requirements” means— 1. in relation to an accounting year beginning on or after 17th June 2016— 1. the requirements of section 489A(4) and (5), if the company has an audit committee, 2. the requirements of section 489B(4) if the company does not have an audit committee, 2. in relation to an accounting year beginning before 17th June 2016, the requirement that the company carries out a tender process which substantially meets the requirements of Article 16(2) to (5) of the Audit Regulation, having regard to the circumstances at the time (including whether the company had an audit committee). (5) The maximum engagement period may be extended by a period of up to two years with the approval of the competent authority, provided that— (a) in a case where the period under subsection (3)(a) is being extended, the appointment of the auditor for the first complete financial year following the end of that period is made following the carrying out of a selection procedure in accordance with the selection requirements; and (b) in all cases, the competent authority is satisfied that exceptional circumstances exist.

12

After section 494 (disclosure of services provided by auditor or associates and related remuneration) insert—

(494A) In this Chapter— - “audit committee” means a body which performs the functions referred to in Article 39(6) of the Audit Directive or equivalent functions; - “Audit Directive” means Directive 2006/43/EC of the European Parliament and of the Council on statutory audits of annual accounts and consolidated accounts, amending Council Directives 78/660/EEC and 83/349/EEC and repealing Council Directive 84/253/EEC ; - “Auditor General” means— 1. the Comptroller and Auditor General, 2. the Auditor General for Scotland, 3. the Auditor General for Wales, or 4. the Comptroller and Auditor General for Northern Ireland; - “issuer” has the same meaning as in Part 6 of the Financial Services and Markets Act 2000 (see section 102A(6) ); - “network” means an association of persons other than a firm co-operating in audit work by way of— 1. profit-sharing; 2. cost sharing; 3. common ownership, control or management; 4. common quality control policies and procedures; 5. common business strategy; or 6. use of a common name; - “public interest company” means— 1. an issuer whose transferable securities are admitted to trading on a regulated market; 2. a credit institution within the meaning given by Article 4(1)(1) of Regulation (EU) No. 575/2013 of the European Parliament and of the Council , other than one listed in Article 2 of Directive 2013/36/EU of the European Parliament and of the Council on access to the activity of credit institutions and investment firms ; 3. an insurance undertaking within the meaning given by Article 2(1) of Council Directive 1991/674/EEC of the European Parliament and of the Council on the annual accounts and consolidated accounts of insurance undertakings ; - “regulated market” has the same meaning as in Part 6 of the Financial Services and Markets Act 2000 (see section 103(1) ); - “transferable securities” means anything which is a transferable security for the purposes of Directive 2004/39/EC of the European Parliament and of the Council on markets in financial instruments .

13

• (1) Section 495 (auditor's report on company's annual accounts) is amended as follows.

• (2) For subsection (2) substitute—

(2) The auditor's report must include— (a) the identity of the company whose annual accounts are the subject of the audit, (b) a description of the annual accounts that are the subject of the audit (including the period covered by those accounts), (c) a description of the financial reporting framework that has been applied in the preparation of those accounts, and (d) a description of the scope of the audit identifying the auditing standards in accordance with which the audit was conducted.

• (3) For subsection (4) substitute—

(4) The auditor's report— (a) must be either unqualified or qualified, (b) must include a reference to any matters to which the auditor wishes to draw attention by way of emphasis without qualifying the report, (c) must include a statement on any material uncertainty relating to events that may cast significant doubt about the company's ability to continue to adopt the going concern basis of accounting, and (d) must identify the auditor's place of establishment.

• (4) After subsection (4) insert—

(5) Where more than one person is appointed as an auditor— (a) all the persons appointed must jointly make a report under this section and the report must include a statement as to whether all the persons appointed agree on the matters contained in the report, and (b) if all the persons appointed cannot agree on the matters contained in the report, the report must include the opinions of each person appointed and give reasons for the disagreement.

14

• (1) Section 496 (auditor's report on strategic report and director's report) is amended as follows.

• (2) The existing words become subsection (1) and after that subsection, insert—

(2) Where more than one person is appointed as auditor, the report must include a statement as to whether all the persons appointed agree on the statements and indications given under subsection (1) and, if they cannot agree on those statements and indications, the report must include the opinions of each person appointed and give reasons for the disagreement.

15

• (1) Section 497A (auditor's report on separate corporate governance statement) is amended as follows.

• (2) The existing words become subsection (1) and after that subsection, insert—

(2) Where more than one person is appointed as auditor, the report must include a statement as to whether all the persons appointed agree on the statements and indications given under subsection (1) and, if they cannot agree on those statements and indications, the report must include the opinions of each person appointed and give reasons for the disagreement.

16

• (1) Section 498 (duties of auditor) is amended as follows.

• (2) After subsection (5) insert—

(6) Where more than one person is appointed as auditor, the report must include a statement as to whether all the persons appointed agree on the statements given under subsections (2) to (5) and, if they cannot agree on those statements, the report must include the opinions of each person appointed and give reasons for the disagreement.

17

• (1) Section 503 (signature of auditor's report) is amended as follows.

• (2) After subsection (3) insert—

(4) Where more than one person is appointed as auditor, the report must be signed by all those appointed.

18

• (1) Section 505 (names to be stated in published copies of auditor's report) is amended as follows.

• (2) After subsection (1) insert—

(1A) If more than one person is appointed as auditor, the reference in subsection (1)(a) to the name of the auditor is to be read as a reference to the names of all the auditors.

19

• (1) Section 508 (guidance for regulatory and prosecuting authorities: England, Wales and Northern Ireland) is amended as follows.

• (2) For subsection (1)(b), substitute—

(b) has been, is being or may be investigated— (i) pursuant to arrangements under paragraph 15 of Schedule 10 (investigation of complaints against auditors and supervisory bodies), or (ii) by the competent authority under the Statutory Auditors and Third Country Auditors Regulations 2016.

20

• (1) Section 509 (guidance for regulatory authorities: Scotland) is amended as follows.

• (2) For subsection (1)(b), substitute—

(b) has been, is being or may be investigated— (i) pursuant to arrangements under paragraph 15 of Schedule 10 (investigation of complaints against auditors and supervisory bodies), or (ii) by the competent authority under the Statutory Auditors and Third Country Auditors Regulations 2016.

21

• (1) Section 510 (resolution removing auditors from office) is amended as follows.

• (2) For subsection (4) substitute—

(4) An auditor may not be removed from office before the expiration of his term of office except— (a) by resolution under this section, or (b) in accordance with section 511A.

22

• (1) After section 511 (special notice required for resolution removing auditor from office) insert—

(511A) (1) This section applies only to a public interest company. (2) The competent authority may apply to the court for an order removing an auditor of a company from office if the authority considers that there are proper grounds for removing the auditor from office. (3) The members of a company may apply to the court for an order removing an auditor of the company from office if the applicant or applicants consider that there are proper grounds for removing the auditor from office. (4) If the court is satisfied, on hearing an application under subsection (2), that there are proper grounds for removing the auditor from office, it may make an order removing the auditor from office. (5) If the court is satisfied, on hearing an application under subsection (3), that— (a) the applicants represent in total— (i) not less than 5% of the voting rights of all the members having a right to vote at a general meeting of the company, or (ii) not less than 5% in nominal value of the company's share capital, and (b) there are proper grounds for removing the auditor from office, the court may make an order removing the auditor from office. (6) For the purposes of this section, divergence of opinions on accounting treatments or audit procedures are not to be taken to be proper grounds for removing an auditor from office. (7) In this section the competent authority means the body designated under section 1252 of this Act.

23

• (1) Section 513 (rights of auditor who has been removed from office) is amended as follows.

• (2) In subsection (1), after the words “under section 510” insert “ or by order of the court under section 511A ”.

24

• (1) Section 514 (failure to re-appoint auditor: special procedure required for written resolution) is amended as follows.

• (2) In subsections (1) and (2A)(b) after the words “section 510”, insert “ , 511A ”.

25

• (1) Section 515 (failure to re-appoint auditor: special notice required for resolution at general meeting) is amended as follows.

• (2) In subsections (1), (1A) and (2A)(b), after “section 510” insert “ , 511A ”.

26

• (1) Section 519A (meaning of “public interest company”, “non-public interest company” and “exempt reasons”) is amended as follows.

• (2) In subsection (1) for the definition of “public interest company” substitute—

“public interest company” means a company which is— (a) an issuer whose transferable securities are admitted to trading on a regulated market; (b) a credit institution within the meaning given by Article 4(1)(1) of Regulation (EU) No. 575/2013 of the European Parliament and of the Council , other than one listed in Article 2 of Directive 2013/36/EU of the European Parliament and of the Council on access to the activity of credit institutions and investment firms ; or (c) an insurance undertaking within the meaning given by Article 2(1) of Council Directive 1991/674/EEC of the European Parliament and of the Council on the annual accounts and consolidated accounts of insurance undertakings ;

• (3) For subsection (2) substitute—

(2) For the purposes of the definition of “public interest company”— - “issuer” has the same meaning as in Part 6 of the Financial Services and Markets Act 2000 (see section 102A(6) ); - “regulated market” has the same meaning as in Part 6 of the Financial Services and Markets Act 2000 (see section 103(1) ); - “transferable securities” means anything which is a transferable security for the purposes of Directive 2004/39/EC of the European Parliament and of the Council on markets in financial instruments .

PART 4 — Amendments to Part 38 of the Companies Act 2006

27

• (1) Section 1173 (minor definitions: general) is amended as follows.

• (2) In subsection (1) at the appropriate places insert—

“the Audit Regulation” means Regulation 537/2014 of the European Parliament and of the Council on specific requirements regarding statutory audit of public interest entities ;

; and

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

28

• (1) Schedule 8 (index of defined expressions) is amended as follows.

• (2) At the appropriate places insert—

the Audit Regulation	section 1173(1)
the competent authority	section 1173(1)
---	---

PART 5 — Amendments to Part 42 of the Companies Act 2006

29

• (1) Section 1217 (supervisory bodies) is amended as follows.

• (2) In subsection (1A), for the words from “paragraphs 9(3)(b)” to “other officer)” substitute “ paragraphs 9(1A) and 10C(3) (bar on appointment as director or other officer) and paragraph 9(3)(b) (confidentiality of information) ”.

• (3) In subsection (3), after “which the body” insert, “ or the competent authority ”.

30

• (1) Section 1218 (exemption from liability for damages) is amended as follows.

• (2) In subsection (3)—

• (a) in paragraph (d), after “this Part” insert “ or by or by virtue of the Statutory Auditors and Third Country Auditors Regulations 2016; ”;

• (b) after paragraph (d) insert—

(e) the obligations imposed on the body by or by virtue of the Audit Regulation.

• (3) In subsection (4)—

• (a) in paragraph (b), after “this Part” insert “ , the Statutory Auditors and Third Country Auditors Regulations 2016 or the Audit Regulation ”;

• (b) in the closing words, after “this Part” insert “ , the Statutory Auditors and Third Country Auditors Regulations 2016 or the Audit Regulation ”.

31

After section 1223 (matters to be notified to the Secretary of State), insert—

(1223ZA) (1) The competent authority may require a recognised supervisory body— (a) to notify the competent authority immediately of the occurrence of such events as the competent authority may specify in writing and to give the competent authority such information in respect of those events as is so specified; (b) to give the competent authority, at such times or in respect of such periods as the competent authority may specify in writing, such information as is so specified. (2) The notices and information required to be given must be such as the competent authority may reasonably require for the exercise of its functions under this Part, the Statutory Auditors and Third Country Auditors Regulations 2016 or the Audit Regulation. (3) The competent authority 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 given in writing unless the competent authority specifies or approves some other manner.

32

• (1) Section 1223A (notification of matters relevant to other EEA states) is amended as follows.

• (2) For subsection (1), substitute—

(1) A recognised supervisory body must notify the Secretary of State— (a) if a notifiable person becomes eligible for appointment as a statutory auditor, unless the notifiable person is an individual; (b) if a notifiable person's eligibility for appointment as a statutory auditor is withdrawn; (c) of the reasons for any such withdrawal.

33

After section 1224 (Secretary of State's power to call for information), insert—

(1224ZA) (1) The competent authority may by notice in writing require any recognised supervisory body to give the competent authority such information as it may reasonably require for the exercise of its functions under this Part, the Statutory Auditors and Third Country Auditors Regulations 2016 or the Audit Regulation. (2) The competent authority may require that any information which it requires under this section is to be given within such reasonable time and verified in such manner as it may specify.

34

• (1) Section 1224A (restrictions on disclosure) is amended as follows.

• (2) In subsection (1), for the words from “or sections 522 to 524” to the end substitute “ sections 522 to 524 (notification to appropriate audit authority of resignation or removal of auditor), the Statutory Auditors and Third Country Auditors Regulations 2016 or the Audit Regulation. ”.

• (3) In subsection (2), for paragraph (c) substitute—

(c) the competent authority,

35

• (1) Section 1225 (enforcement: general) is amended as follows.

• (2) In subsection (1)—

• (a) in paragraph (b) omit “or”;

• (b) at the end of paragraph (c) insert “ or ” and after that paragraph insert—

(d) that a recognised supervisory body has not complied with an obligation imposed on it by or by virtue of the Statutory Auditors and Third Country Auditors Regulations 2016.

• (3) In subsection (3), after “Schedule 11 (revocation of recognition orders)” insert “ or the powers of the competent authority under regulation 3 of the Statutory Auditors and Third Country Auditors Regulations 2016. ”.

36

• (1) Section 1229 (supervision of Auditors General by the Independent Supervisor) is amended as follows.

• (2) In subsection (2)(b), for “bodies” substitute “ recognised supervisory bodies ”.

• (3) In subsection (3A), for “paragraphs 9 to 10A and 12 to 15” substitute “ paragraphs 9 to 10C and 12 to 16 ”.

37

• (1) Section 1239 (register of auditors) is amended as follows.

• (2) In subsection (5), omit paragraph (e) and after paragraph (f) insert—

(g) the competent authority

38

• (1) Section 1251A (duty of Secretary of State to report on inspections) is amended as follows.

• (2) In paragraph (b) for “paragraph 13(9)”, substitute “ paragraph 13(12) ”.

39

• (1) Section 1252 (delegation of Secretary of State's functions) is amended as follows.

• (2) In subsection (2)(b), for “(whether” substitute “ (including the competent authority, and whether ”.

40

• (1) Section 1253 (delegation of functions to an existing body) is amended as follows.

• (2) In subsection (5) omit the words “paragraph 21 to 22B, 23(1) , 23A(1) or 24(1) of Schedule 10 or”.

41

• (1) Section 1253B (requests from EEA competent authorities) is amended as follows.

• (2) For subsection (1) substitute—

(1) The Secretary of State must take all necessary steps to— (a) ensure that an investigation is carried out, or (b) provide any other assistance or information, if requested to do so by an EEA competent authority or a European supervisory authority (“the requesting authority”), in accordance with Article 36 of the Audit Directive (regulatory co-operation between Member States) or Article 31, 32 or 33 of the Audit Regulation.

• (3) In subsection (2)—

• (a) in paragraph (a), for “the EEA competent authority” substitute “ the requesting authority ”, and

• (b) in paragraph (b), for “the EEA competent authority which made the request” substitute “ the requesting authority ”.

• (4) After subsection (3) insert—

(4) In this section “European supervisory authority” means— (a) the European Securities and Markets Authority; (b) the European Banking Authority; (c) the European Insurance and Occupational Pensions Authority.

42

• (1) Section 1253C (notification to competent authorities of other EEA states) is amended as follows.

• (2) For subsection (1) substitute—

(1) If the Secretary of State receives notice from a recognised supervisory body under section 1223A(1) (notification of matters relevant to other EEA States) that— (a) a person has become eligible for appointment as a statutory auditor, or (b) a person's eligibility for appointment as a statutory auditor has been withdrawn, the Secretary of State must notify the relevant EEA competent authority.

• (3) In subsection (3), for the words from “the reasons” to the end substitute, “, in a case where a person's eligibility for appointment as a statutory auditor has been withdrawn, the reasons for the withdrawal”.

43

• (1) Section 1253D (restriction on transfer of audit working papers to third countries) is amended as follows.

• (2) In subsection (1), for “Audit working papers” substitute “ Audit working papers and investigation reports ”.

44

• (1) Section 1253DA (transfer by Secretary of State) is amended as follows.

• (2) For the words “audit working papers” wherever they appear substitute “ audit working papers and investigation reports ”.

45

• (1) Section 1253DB (transfer by statutory auditor with approval of Secretary of State) is amended as follows.

• (2) For the words “audit working papers” wherever they appear substitute “ audit working papers and investigation reports ”.

46

In section 1253DC (transfer by statutory auditor for purposes of investigation of auditor), for “audit working papers” substitute “ audit working papers and investigation reports ”.

47

• (1) Section 1253DD (agreement of EEA competent authority) is amended as follows.

• (2) For the words “audit working papers” wherever they appear substitute “ audit working papers and investigation reports ”.

48

• (1) Section 1253DE (transfer by means of inspection) is amended as follows.

• (2) In subsection (1) for “audit working papers” substitute “ audit working papers and investigation reports ”.

49

• (1) Section 1253E (working arrangements for transfer of papers) is amended as follows.

• (2) For the words “audit working papers” wherever they appear, substitute “ audit working papers and investigation reports ”.

• (3) In subsection (5)—

• (a) omit the word “and” at the end of paragraph (a);

• (b) at the end of paragraph (b), insert “ and ” and after that paragraph, insert—

(c) ensure that the protection of the commercial interests of any audited person, including its industrial and intellectual property, is not undermined.

• (4) After subsection (7) insert—

(7A) The arrangements must— (a) provide that the Secretary of State may only disclose confidential information received from the third country competent authority— (i) with the agreement of that authority or for purposes for which that authority has given its agreement, (ii) where disclosure is required by law, or (iii) where disclosure is necessary in connection with legal proceedings, and (b) provide that the third country competent authority may only disclose confidential information received from the Secretary of State— (i) with the Secretary of State's agreement or for purposes for which the Secretary of State has given agreement, (ii) where disclosure is required by law, or (iii) where disclosure is necessary in connection with legal proceedings.

50

• (1) Section 1254 (directions to comply with international obligations) is amended as follows.

• (2) In subsection (1)(a), after “the Independent Supervisor” insert “ , the competent authority ”.

• (3) In subsection (3), after “the Independent Supervisor” insert “ , the competent authority ”.

51

• (1) Section 1261 (minor definitions) is amended as follows.

• (2) In subsection (1)—

• (a) at the appropriate places, insert the following definitions—

• “audit working papers and investigation reports” means—
• any documents which are or have been held by a statutory auditor, an EEA auditor or a third country auditor and which are related to the conduct of an audit conducted by that auditor;
• any report of an inspection of the conduct of an audit by a statutory auditor, an EEA auditor or a third country auditor, or
• any report of an investigation into the conduct of a statutory auditor, an EEA auditor or a third country auditor,

“the Audit Regulation” means Regulation 537/2014 of the European Parliament and of the Council on specific requirements regarding statutory audit of public interest entities;

“the competent authority” means the Financial Reporting Council Limited

• (b) in the definition of “the Audit Directive” omit the words “ as amended at any time before 1st January 2009”;

• (c) omit the definition of “audit working papers”;

• (d) in the definition of “third country auditor” after “other than” insert “ an EEA auditor or ”;

• (e) in the definition of “transfer” after “audit working papers” insert “ and investigation reports ”.

52

• (1) Section 1262 (index of defined expressions) is amended as follows.

• (2) At the appropriate places insert the following entries in the Table—

Audit Regulation	section 1261(1)
audit working papers and investigation reports	section 1261(1)
---	---
competent authority	section 1261(1)
---	---

• (3) Omit the entry relating to “audit working papers”.

53

Schedule 10 (recognised supervisory bodies) is amended as follows.

54

• (1) Paragraph 2 is amended as follows.

• (2) For sub-paragraph (2) substitute—

(2) The Secretary of State may make a recognition order only if it appears to him, from the information furnished by the body and having regard to other information in his possession, that— (a) the requirements of Part 2 of this Schedule are satisfied in the case of that body, (b) the body is able to perform all of the tasks which can be delegated by the competent authority under regulation 3 of the Statutory Auditors and Third Country Auditors Regulations 2016, and (c) the body is organised in such a way that conflicts of interest are avoided.

55

• (1) Paragraph 3 is amended as follows.

• (2) For sub-paragraph (1) substitute—

(1) A recognition order in respect of a body may be revoked by a further order made by the Secretary of State if at any time it appears to him— (a) that any requirement of Part 2 of this Schedule, other than a requirement relating to a task delegated to the body under regulation 3 of the Statutory Auditors and Third Country Auditors Regulations 2016, is not satisfied in the case of the body, (b) that the body has failed to comply with any obligation imposed on it by or by virtue of this Part of this Act, other than an obligation relating to a task delegated to the body under regulation 3 of the Statutory Auditors and Third Country Auditors Regulations 2016, or (c) that the continued recognition of the body is undesirable having regard to the existence of one or more other bodies which have been or are to be recognised.

• (3) After subparagraph (1), insert—

(1A) A recognition order in respect of a body may be revoked by a further order made by the Secretary of State if at any time— (a) one or more tasks delegated to the body under regulation 3 of the Statutory Auditors and Third Country Auditors Regulations 2016 has been reclaimed by the competent authority, and (b) it appears to the Secretary of State that the continued recognition of the body is undesirable having regard to the circumstances in which the task or tasks were reclaimed.

• (4) In sub-paragraph (10)(a), after “(1)” insert “ , (1A) ”.

56

In Part 2, before paragraph 6, insert—

(5A) The body (“B”) must have rules providing that— (a) in circumstances where and to the extent that a task delegated to B is reclaimed by the competent authority under regulation 3 of the Statutory Auditors and Third Country Auditors Regulations 2016, the competent authority may apply rules (and may vary the rules it applies) made by B in accordance with the requirements of this Part of this Schedule, (b) in circumstances where and to the extent that a task delegated to B is reclaimed by the competent authority under regulation 3 of the Statutory Auditors and Third Country Auditors Regulations 2016 and is delegated to another recognised supervisory body, the other recognised supervisory body may apply rules (and may vary the rules it applies) made by B in accordance with the requirements of this Part of the Schedule, and (c) in circumstances where and to the extent that a task is not delegated to B by the competent authority under regulation 3 of the Statutory Auditors and Third Country Auditors Regulations 2016, the competent authority may apply rules (and may vary the rules it applies) made by B in accordance with the requirements of paragraphs 12 to 16 of this Schedule. (5B) The body must consult with the competent authority and with other recognised supervisory bodies in making or varying rules in accordance with the requirements of this Schedule.

57

• (1) Paragraph 6 is amended as follows.

• (2) In sub-paragraph (1) for paragraph (aa)(iii), substitute—

(iii) he meets the requirements of sub-paragraph (1A).

• (3) In sub-paragraph (1)(b), after “case of a firm” insert “ which is not an EEA auditor ”.

• (4) After sub-paragraph (1)(b) insert—

(c) in the case of a firm which is an EEA auditor— (i) each individual responsible for statutory audit work on behalf of the firm is eligible for appointment as a statutory auditor, (ii) the firm would be eligible for appointment as a statutory auditor if it were not an EEA auditor or is eligible for a corresponding appointment as an auditor under the law of an EEA State or part of an EEA State, other than the United Kingdom, and (iii) if the firm is eligible for a corresponding appointment as an auditor under the law of an EEA State or part of an EEA State other than the United Kingdom, the firm provides proof of its eligibility in the form of a certificate, dated not more than three months before it is provided by the firm, from the competent authority of the EEA State concerned.

• (5) After sub-paragraph (1) insert—