Part 16U.K.Audit

Chapter 3U.K.Functions of auditor

Duties and rights of auditorsU.K.

498Duties of auditorU.K.

(1)A company's auditor, in preparing his report, must carry out such investigations as will enable him to form an opinion as to—

(a)whether adequate accounting records have been kept by the company and returns adequate for their audit have been received from branches not visited by him, and

(b)whether the company's individual accounts are in agreement with the accounting records and returns, and

(c)in the case of a quoted company [F1or unquoted traded company], whether the auditable part of the company's directors' remuneration report is in agreement with the accounting records and returns.

(2)If the auditor is of the opinion—

(a)that adequate accounting records have not been kept, or that returns adequate for their audit have not been received from branches not visited by him, or

(b)that the company's individual accounts are not in agreement with the accounting records and returns, or

(c)in the case of a quoted company [F2or unquoted traded company], that the auditable part of its directors' remuneration report is not in agreement with the accounting records and returns,

the auditor shall state that fact in his report.

(3)If the auditor fails to obtain all the information and explanations which, to the best of his knowledge and belief, are necessary for the purposes of his audit, he shall state that fact in his report.

(4)If—

(a)the requirements of regulations under section 412 (disclosure of directors' benefits: remuneration, pensions and compensation for loss of office) are not complied with in the annual accounts, or

(b)in the case of a quoted company, the requirements of regulations under section 421 as to information forming the auditable part of the directors' remuneration report are not complied with in that report,

the auditor must include in his report, so far as he is reasonably able to do so, a statement giving the required particulars.

[F3(5)If the directors of the company—

(a)have prepared accounts in accordance with the small companies regime, or

(b)have taken advantage of small companies exemption [F4from the requirement to prepare a strategic report or] in preparing the directors' report,

and in the auditor's opinion they were not entitled to do so, the auditor shall state that fact in his report.]

[F5(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.]

[F6(7)In this section “unquoted traded company” means a traded company (as defined by section 360C) that is not a quoted company.]

[F7 498A Auditor's duties in relation to separate corporate governance statementU.K.

Where the company is required to prepare a corporate governance statement in respect of a financial year and no such statement is included in the directors' report—

(a)the company's auditor, in preparing his report on the company's annual accounts for that year, must ascertain whether a corporate governance statement has been prepared, and

(b)if it appears to the auditor that no such statement has been prepared, he must state that fact in his report.]

499Auditor's general right to informationU.K.

(1)An auditor of a company—

(a)has a right of access at all times to the company's books, accounts and vouchers (in whatever form they are held), and

(b)may require any of the following persons to provide him with such information or explanations as he thinks necessary for the performance of his duties as auditor.

(2)Those persons are—

(a)any officer or employee of the company;

(b)any person holding or accountable for any of the company's books, accounts or vouchers;

(c)any subsidiary undertaking of the company which is a body corporate incorporated in the United Kingdom;

(d)any officer, employee or auditor of any such subsidiary undertaking or any person holding or accountable for any books, accounts or vouchers of any such subsidiary undertaking;

(e)any person who fell within any of paragraphs (a) to (d) at a time to which the information or explanations required by the auditor relates or relate.

(3)A statement made by a person in response to a requirement under this section may not be used in evidence against him in criminal proceedings except proceedings for an offence under section 501.

(4)Nothing in this section compels a person to disclose information in respect of which a claim to legal professional privilege (in Scotland, to confidentiality of communications) could be maintained in legal proceedings.

500Auditor's right to information from overseas subsidiariesU.K.

(1)Where a parent company has a subsidiary undertaking that is not a body corporate incorporated in the United Kingdom, the auditor of the parent company may require it to obtain from any of the following persons such information or explanations as he may reasonably require for the purposes of his duties as auditor.

(2)Those persons are—

(a)the undertaking;

(b)any officer, employee or auditor of the undertaking;

(c)any person holding or accountable for any of the undertaking's books, accounts or vouchers;

(d)any person who fell within paragraph (b) or (c) at a time to which the information or explanations relates or relate.

(3)If so required, the parent company must take all such steps as are reasonably open to it to obtain the information or explanations from the person concerned.

(4)A statement made by a person in response to a requirement under this section may not be used in evidence against him in criminal proceedings except proceedings for an offence under section 501.

(5)Nothing in this section compels a person to disclose information in respect of which a claim to legal professional privilege (in Scotland, to confidentiality of communications) could be maintained in legal proceedings.

501Auditor's rights to information: offencesU.K.

(1)A person commits an offence who knowingly or recklessly makes to an auditor of a company a statement (oral or written) that—

(a)conveys or purports to convey any information or explanations which the auditor requires, or is entitled to require, under section 499, and

(b)is misleading, false or deceptive in a material particular.

(2)A person guilty of an offence under subsection (1) is liable—

(a)on conviction on indictment, to imprisonment for a term not exceeding two years or a fine (or both);

(b)on summary conviction—

(i)in England and Wales, to imprisonment for a term not exceeding twelve months or to a fine not exceeding the statutory maximum (or both);

(ii)in Scotland or Northern Ireland, to imprisonment for a term not exceeding six months or to a fine not exceeding the statutory maximum (or both).

(3)A person who fails to comply with a requirement under section 499 without delay commits an offence unless it was not reasonably practicable for him to provide the required information or explanations.

(4)If a parent company fails to comply with section 500, an offence is committed by—

(a)the company, and

(b)every officer of the company who is in default.

(5)A person guilty of an offence under subsection (3) or (4) is liable on summary conviction to a fine not exceeding level 3 on the standard scale.

(6)Nothing in this section affects any right of an auditor to apply for an injunction (in Scotland, an interdict or an order for specific performance) to enforce any of his rights under section 499 or 500.

502Auditor's rights in relation to resolutions and meetingsU.K.

(1)In relation to a written resolution proposed to be agreed to by a private company, the company's auditor is entitled to receive all such communications relating to the resolution as, by virtue of any provision of Chapter 2 of Part 13 of this Act, are required to be supplied to a member of the company.

(2)A company's auditor is entitled—

(a)to receive all notices of, and other communications relating to, any general meeting which a member of the company is entitled to receive,

(b)to attend any general meeting of the company, and

(c)to be heard at any general meeting which he attends on any part of the business of the meeting which concerns him as auditor.

(3)Where the auditor is a firm, the right to attend or be heard at a meeting is exercisable by an individual authorised by the firm in writing to act as its representative at the meeting.