479A Subsidiary companies: conditions for exemption from audit
(1) A company is exempt from the requirements of this Act relating to the audit of individual accounts for a financial year if—
(a) it is itself a subsidiary undertaking, and
(b) its parent undertaking is established under the law of any part of the United Kingdom.
(2) Exemption is conditional upon compliance with all of the following conditions—
(a) all members of the company must agree to the exemption in respect of the financial year in question,
(b) the parent undertaking must give a guarantee under section 479C in respect of that year,
(c) the company must be included in the consolidated accounts drawn up for that year or to an earlier date in that year by the parent undertaking in accordance with—
(i) if the undertaking is a company, the requirements of Part 15 of this Act, or, if the undertaking is not a company, the legal requirements which apply to the drawing up of consolidated accounts for that undertaking, or
(ii) UK-adopted international accounting standards (within the meaning given by section 474(1)),
(d) the parent undertaking must disclose in the notes to the consolidated accounts that the company is exempt from the requirements of this Act relating to the audit of individual accounts by virtue of this section, and
(e) the directors of the company must deliver to the registrar on or before the date that they file the accounts for that year—
(i) a written notice of the agreement referred to in subsection (2)(a),
(ii) the statement referred to in section 479C(1),
(iii) a copy of the consolidated accounts referred to in subsection (2)(c),
(iv) a copy of the auditor's report on those accounts, and
(v) a copy of the consolidated annual report drawn up by the parent undertaking.
(3) This section has effect subject to—
section 475(2) and (3) (requirements as to statements contained in balance sheet), and
section 476 (right of members to require audit).
479B Companies excluded from the subsidiary companies audit exemption
A company is not entitled to the exemption conferred by section 479A (subsidiary companies) if it was at any time within the financial year in question—
(a) a traded company as defined in section 474(1),
(b) a company that—
(i) is an authorised insurance company, a banking company, an e-money issuer, a MiFID investment firm or a UCITS management company, or
(ii) carries on insurance market activity, or
(iii) is a scheme funder of a Master Trust scheme within the meanings given by section 39(1) of the Pension Schemes Act 2017 or section 39(1) of the Pension Schemes Act (Northern Ireland) 2021 (interpretation of Part 1), or
(c) a special register body as defined in section 117(1) of the Trade Union and Labour Relations (Consolidation) Act 1992 (c 52) or an employers' association as defined in section 122 of that Act or Article 4 of the Industrial Relations (Northern Ireland) Order 1992 (S.I. 1992/807) (NI 5).
479C Subsidiary companies audit exemption: parent undertaking declaration of guarantee
(1) A guarantee is given by a parent undertaking under this section when the directors of the subsidiary company deliver to the registrar a statement by the parent undertaking that it guarantees the subsidiary company under this section.
(2) The statement under subsection (1) must be authenticated by the parent undertaking and must specify—
(a) the name of the parent undertaking,
(b) the registered number (if any) of the parent undertaking,
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(d) the name and registered number of the subsidiary company in respect of which the guarantee is being given,
(e) the date of the statement, and
(f) the financial year to which the guarantee relates.
(3) A guarantee given under this section has the effect that—
(a) the parent undertaking guarantees all outstanding liabilities to which the subsidiary company is subject at the end of the financial year to which the guarantee relates, until they are satisfied in full, and
(b) the guarantee is enforceable against the parent undertaking by any person to whom the subsidiary company is liable in respect of those liabilities.
480 Dormant companies: conditions for exemption from audit
(1) A company is exempt from the requirements of this Act relating to the audit of accounts in respect of a financial year if—
(a) it has been dormant since its formation, or
(b) it has been dormant since the end of the previous financial year and the following conditions are met.
(2) The conditions are that the company—
(a) as regards its individual accounts for the financial year in question—
(i) is entitled to prepare accounts in accordance with the small companies regime (see sections 381 to 384), or
(ii) would be so entitled but for having been a public company or a member of an ineligible group, and
(b) is not required to prepare group accounts for that year.
(3) This section has effect subject to—
section 475(2) and (3) (requirements as to statements to be contained in balance sheet),
section 476 (right of members to require audit), and
section 481 (companies excluded from dormant companies exemption).
481 Companies excluded from dormant companies exemption
A company is not entitled to the exemption conferred by section 480 (dormant companies) if it was at any time within the financial year in question a company that—
(za) is a traded company as defined in section 474(1),
(a) is an authorised insurance company, a banking company, an e-money issuer, a MiFID investment firm or a UCITS management company, or
(b) carries on insurance market activity.
482 Non-profit-making companies subject to public sector audit
(1) The requirements of this Part as to audit of accounts do not apply to a company for a financial year if it is non-profit-making and its accounts—
(a) are subject to audit by the Comptroller and Auditor General by virtue of an order under section 25(6) of the Government Resources and Accounts Act 2000;
(ab) are subject to audit by the Auditor General for Wales by virtue of—
(i) an order under section 144 of the Government of Wales Act 1998, or
(ii) paragraph 18 of Schedule 8 to the Government of Wales Act 2006;
(b) are accounts—
(i) in relation to which section 21 of the Public Finance and Accountability (Scotland) Act 2000 (asp 1) (audit of accounts: Auditor General for Scotland) applies, or
(ii) that are subject to audit by the Auditor General for Scotland by virtue of an order under section 483 (Scottish public sector companies: audit by Auditor General for Scotland); or
(c) are subject to audit by the Comptroller and Auditor General for Northern Ireland by virtue of an order under Article 5(3) of the Audit and Accountability (Northern Ireland) Order 2003 (S.I. 2003/418 (N.I. 5)).
(2) In the case of a company that is a parent company or a subsidiary undertaking, subsection (1) applies only if every group undertaking is non-profit-making.
(3) In this section “non-profit-making” has the same meaning as in Article 54 of the Treaty on the Functioning of the European Union.
(4) This section has effect subject to section 475(2) (balance sheet to contain statement that company entitled to exemption under this section).
483 Scottish public sector companies: audit by Auditor General for Scotland
(1) The Scottish Ministers may by order provide for the accounts of a company having its registered office in Scotland to be audited by the Auditor General for Scotland.
(2) An order under subsection (1) may be made in relation to a company only if it appears to the Scottish Ministers that the company—
(a) exercises in or as regards Scotland functions of a public nature none of which relate to reserved matters (within the meaning of the Scotland Act 1998 (c. 46)), or
(b) is entirely or substantially funded from a body having accounts falling within paragraph (a) or (b) of subsection (3).
(3) Those accounts are—
(a) accounts in relation to which section 21 of the Public Finance and Accountability (Scotland) Act 2000 (asp 1) (audit of accounts: Auditor General for Scotland) applies,
(b) accounts which are subject to audit by the Auditor General for Scotland by virtue of an order under this section.
(4) An order under subsection (1) may make such supplementary or consequential provision (including provision amending an enactment) as the Scottish Ministers think expedient.
(5) An order under subsection (1) shall not be made unless a draft of the statutory instrument containing it has been laid before, and approved by resolution of, the Scottish Parliament.
(1) The Secretary of State may by regulations amend this Chapter or section 539 (minor definitions) so far as applying to this Chapter by adding, altering or repealing provisions.
(2) The regulations may make consequential amendments or repeals in other provisions of this Act, or in other enactments.
(3) Regulations under this section imposing new requirements, or rendering existing requirements more onerous, are subject to affirmative resolution procedure.
(4) Other regulations under this section are subject to negative resolution procedure.
485 Appointment of auditors of private company: general
(1) An auditor or auditors of a private company must be appointed for each financial year of the company, unless the directors reasonably resolve otherwise on the ground that audited accounts are unlikely to be required.
(2) For each financial year for which an auditor or auditors is or are to be appointed (other than the company's first financial year), the appointment must be made before the end of the period of 28 days beginning with—
(a) the end of the time allowed for sending out copies of the company's annual accounts and reports for the previous financial year (see section 424), or
(b) if earlier, the day on which copies of the company's annual accounts and reports for the previous financial year are sent out under section 423.
This is the “period for appointing auditors”.
(3) The directors may appoint an auditor or auditors of the company—
(a) at any time before the company's first period for appointing auditors,
(b) following a period during which the company (being exempt from audit) did not have any auditor, at any time before the company's next period for appointing auditors, or
(c) to fill a casual vacancy in the office of auditor.
(4) The members may appoint an auditor or auditors by ordinary resolution—
(a) during a period for appointing auditors,
(b) if the company should have appointed an auditor or auditors during a period for appointing auditors but failed to do so, or
(c) where the directors had power to appoint under subsection (3) but have failed to make an appointment.
(5) An auditor or auditors of a private company may only be appointed—
(a) in accordance with this section, or
(b) in accordance with section 486 or 486A (default power of Secretary of State).
This is without prejudice to any deemed re-appointment under section 487.
485A Appointment of auditors of private company: additional requirements for public interest entities with audit committees
(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 ...
(4) Before the audit committee makes a recommendation or the directors make a proposal under subsection (3), the committee ... 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, drawn from those auditors who have participated in a selection procedure under subsection (4),
(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) The directors must include in their proposal—
(a) the recommendation made by the audit committee in connection with the appointment, and
(b) if the proposal of the directors departs from the preference of the audit committee—
(i) a recommendation for a candidate or candidates for appointment drawn from those auditors who have participated in a selection procedure under subsection (4), and
(ii) the reasons for not following the audit committee’s recommendation.
(7) Where the audit committee recommends re-appointment of the company’s existing auditor or auditors, and the directors are in agreement, subsections (4) and (5)(a) and (b) do not apply.
485B Appointment of auditors of private company: additional requirements for public interest entities without audit committees
(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 , from which their proposed auditor or auditors must be drawn, 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 to re-appoint the company’s existing auditor or auditors.
485C Restriction on appointment of auditor of private company which is a public interest entity
(1) A person who has been, or will have been, auditor of a private company which is a public interest entity for every financial year comprised in the maximum engagement period (see section 494ZA) may not be appointed as auditor of the company for any financial year which begins within the period of 4 years beginning with the day after the last day of the last financial year of the maximum engagement period.
(2) A person who is a member of the same network as the auditor mentioned in subsection (1) may not be appointed as auditor of the company for any financial year which begins within the period of 4 years mentioned in that subsection.
(3) This section does not apply in relation to an Auditor General.
486 Appointment of auditors of private company: default power of Secretary of State
(1) If a private company fails to appoint an auditor or auditors in accordance with section 485... the Secretary of State may appoint one or more persons to fill the vacancy.
(2) Where subsection (2) of section 485 applies and the company fails to make the necessary appointment before the end of the period for appointing auditors, the company must within one week of the end of that period give notice to the Secretary of State of his power having become exercisable.
(3) If a company fails to give the notice required by this section, an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(4) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.
486A Defective appointments: default power of Secretary of State
(1) If—
(a) a private company appoints, or purports to appoint, an auditor or auditors, and
(b) the appointment or purported appointment is made in breach of section 485A, 485B or 485C (requirements applying to appointment of auditors by public interest entities),
the Secretary of State may appoint another auditor or auditors in place of the auditor or auditors referred to in paragraph (a).
(2) The breach of section 485A, 485B or 485C does not invalidate any report made under Chapter 3 of this Part by the auditor or auditors on the company’s annual reports or accounts before the auditor or auditors are replaced under subsection (1) of this section.
(3) But where the breach in question is a breach of section 485C, sections 1248 and 1249 (Secretary of State’s power to require second audit) apply as if the auditor was not an appropriate person, or the auditors were not appropriate persons, for the period during which the audit was conducted.
(4) Within one week of becoming aware of the breach of section 485A, 485B or 485C, the company must give notice to the Secretary of State that the power under subsection (1) of this section has become exercisable.
(5) If the company fails to give the notice required by subsection (4), an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(6) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.
(1) An auditor or auditors of a private company hold office in accordance with the terms of their appointment, subject to the requirements that—
(a) they do not take office until any previous auditor or auditors cease to hold office, and
(b) they cease to hold office at the end of the next period for appointing auditors unless re-appointed.
(1A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1C) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1D) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1E) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2) Where no auditor has been appointed by the end of the next period for appointing auditors, any auditor in office immediately before that time is deemed to be re-appointed at that time, unless—
(a) he was appointed by the directors, or
(b) the company's articles require actual re-appointment, or
(c) the deemed re-appointment is prevented by the members under section 488, or
(d) the members have resolved that he should not be re-appointed, or
(e) the directors have resolved that no auditor or auditors should be appointed for the financial year in question or
(f) the auditor’s appointment would be in breach of section 485C.
(3) This is without prejudice to the provisions of this Part as to removal and resignation of auditors.
(4) No account shall be taken of any loss of the opportunity of deemed re-appointment under this section in ascertaining the amount of any compensation or damages payable to an auditor on his ceasing to hold office for any reason.
488 Prevention by members of deemed re-appointment of auditor
(1) An auditor of a private company is not deemed to be re-appointed under section 487(2) if the company has received notices under this section from members representing at least the requisite percentage of the total voting rights of all members who would be entitled to vote on a resolution that the auditor should not be re-appointed.
(2) The “requisite percentage” is 5%, or such lower percentage as is specified for this purpose in the company's articles.
(3) A notice under this section—
(a) may be in hard copy or electronic form,
(b) must be authenticated by the person or persons giving it, and
(c) must be received by the company before the end of the accounting reference period immediately preceding the time when the deemed re-appointment would have effect.
489 Appointment of auditors of public company: general
(1) An auditor or auditors of a public company must be appointed for each financial year of the company, unless the directors reasonably resolve otherwise on the ground that audited accounts are unlikely to be required.
(2) For each financial year for which an auditor or auditors is or are to be appointed (other than the company's first financial year), the appointment must be made before the end of the accounts meeting of the company at which the company's annual accounts and reports for the previous financial year are laid.
(3) The directors may appoint an auditor or auditors of the company—
(a) at any time before the company's first accounts meeting;
(b) following a period during which the company (being exempt from audit) did not have any auditor, at any time before the company's next accounts meeting;
(c) to fill a casual vacancy in the office of auditor.
(4) The members may appoint an auditor or auditors by ordinary resolution—
(a) at an accounts meeting;
(b) if the company should have appointed an auditor or auditors at an accounts meeting but failed to do so;
(c) where the directors had power to appoint under subsection (3) but have failed to make an appointment.
(5) An auditor or auditors of a public company may only be appointed—
(a) in accordance with this section, or
(b) in accordance with section 490 or 490A (default power of Secretary of State).
489A Appointment of auditors of public company: additional requirements for public interest entities with audit committees
(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 ...
(4) Before the audit committee makes a recommendation or the directors make a proposal under subsection (3), the committee ... 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, drawn from those auditors who have participated in a selection procedure under subsection (4),
(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) The directors must include in their proposal—
(a) the recommendation made by the audit committee in connection with the appointment, and
(b) if the proposal of the directors departs from the preference of the audit committee—
(i) a recommendation for a candidate or candidates for appointment drawn from those auditors who have participated in a selection procedure under subsection (4), and
(ii) the reasons for not following the audit committee’s recommendation.
(7) Where the audit committee recommends re-appointment of the company’s existing auditor or auditors, and the directors are in agreement, subsections (4) and (5)(a) and (b) do not apply.
489B Appointment of auditors of public company: additional requirements for public interest entities without audit committees
(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 , from which their proposed auditor or auditors must be drawn, 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 proposal to re-appoint the company’s existing auditor or auditors.
489C Restriction on appointment of auditor of public company which is a public interest entity
(1) A person who has been, or will have been, auditor of a public company which is a public interest entity for every financial year comprised in the maximum engagement period (see section 494ZA) may not be appointed as auditor of the company for any financial year which begins within the period of 4 years beginning with the day after the last day of the last financial year of the maximum engagement period.
(2) A person who is a member of the same network as the auditor mentioned in subsection (1) may not be appointed as auditor of the company for any financial year which begins within the period of 4 years mentioned in that subsection.
(3) This section does not apply in relation to an Auditor General.
490 Appointment of auditors of public company: default power of Secretary of State
(1) If a public company fails to appoint an auditor or auditors in accordance with section 489... the Secretary of State may appoint one or more persons to fill the vacancy.
(2) Where subsection (2) of section 489 applies and the company fails to make the necessary appointment before the end of the accounts meeting, the company must within one week of the end of that meeting give notice to the Secretary of State of his power having become exercisable.
(3) If a company fails to give the notice required by this section, an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(4) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.
490A Defective appointments: default power of Secretary of State
(1) If—
(a) a public company appoints, or purports to appoint, an auditor or auditors, and
(b) the appointment or purported appointment is made in breach of section 489A, 489B or 489C (requirements applying to appointment of auditors by public interest entities),
the Secretary of State may appoint another auditor or auditors in place of the auditor or auditors referred to in paragraph (a).
(2) The breach of section 489A, 489B or 489C does not invalidate any report made under Chapter 3 of this Part by the auditor or auditors on the company’s annual reports or accounts before the auditor or auditors are replaced under subsection (1) of this section.
(3) But where the breach in question is a breach of section 489C, sections 1248 and 1249 (Secretary of State’s power to require second audit) apply as if the auditor was not an appropriate person, or the auditors were not appropriate persons, for the period during which the audit was conducted.
(4) Within one week of becoming aware of the breach of section 489A, 489B or 489C, the company must give notice to the Secretary of State that the power under subsection (1) of this section has become exercisable.
(5) If the company fails to give the notice required by subsection (4), an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(6) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.
(1) The remuneration of an auditor appointed by the members of a company must be fixed by the members by ordinary resolution or in such manner as the members may by ordinary resolution determine.
(2) The remuneration of an auditor appointed by the directors of a company must be fixed by the directors.
(3) The remuneration of an auditor appointed by the Secretary of State must be fixed by the Secretary of State.
(4) For the purposes of this section “remuneration” includes sums paid in respect of expenses.
(5) This section applies in relation to benefits in kind as to payments of money.
(1) The Secretary of State may make provision by regulations for securing the disclosure of the terms on which a company's auditor is appointed, remunerated or performs his duties.
Nothing in the following provisions of this section affects the generality of this power.
(2) The regulations may—
(a) require disclosure of—
(i) a copy of any terms that are in writing, and
(ii) a written memorandum setting out any terms that are not in writing;
(b) require disclosure to be at such times, in such places and by such means as are specified in the regulations;
(c) require the place and means of disclosure to be stated—
(i) in a note to the company's annual accounts (in the case of its individual accounts) or in such manner as is specified in the regulations (in the case of group accounts),
(ii) inthe strategic report or the directors' report, or
(iii) in the auditor's report on the company's annual accounts.
(3) The provisions of this section apply to a variation of the terms mentioned in subsection (1) as they apply to the original terms.
(4) Regulations under this section are subject to affirmative resolution procedure.
494 Disclosure of services provided by auditor or associates and related remuneration
(1) The Secretary of State may make provision by regulations for securing the disclosure of—
(a) the nature of any services provided for a company by the company's auditor (whether in his capacity as auditor or otherwise) or by his associates;
(b) the amount of any remuneration received or receivable by a company's auditor, or his associates, in respect of any such services.
Nothing in the following provisions of this section affects the generality of this power.
(2) The regulations may provide—
(a) for disclosure of the nature of any services provided to be made by reference to any class or description of services specified in the regulations (or any combination of services, however described);
(b) for the disclosure of amounts of remuneration received or receivable in respect of services of any class or description specified in the regulations (or any combination of services, however described);
(c) for the disclosure of separate amounts so received or receivable by the company's auditor or any of his associates, or of aggregate amounts so received or receivable by all or any of those persons.
(3) The regulations may—
(a) provide that “remuneration” includes sums paid in respect of expenses;
(b) apply to benefits in kind as well as to payments of money, and require the disclosure of the nature of any such benefits and their estimated money value;
(c) apply to services provided for associates of a company as well as to those provided for a company;
(d) define “associate” in relation to an auditor and a company respectively.
(4) The regulations may provide that any disclosure required by the regulations is to be made—
(a) in a note to the company's annual accounts (in the case of its individual accounts) or in such manner as is specified in the regulations (in the case of group accounts),
(b) inthe strategic report or the directors' report, or
(c) in the auditor's report on the company's annual accounts.
(5) If the regulations provide that any such disclosure is to be made as mentioned in subsection (4)(a) or (b), the regulations may require the auditor to supply the directors of the company with any information necessary to enable the disclosure to be made.
(6) Regulations under this section are subject to negative resolution procedure.
(1) Where a person is auditor of a company for consecutive financial years, the maximum engagement period of the person as auditor of the company—
(a) begins with the first of those years (see the appropriate entry in the first column of the following Table), and
(b) ends with the financial year specified in the corresponding entry in the second column of the Table:
First financial year of the maximum engagement period | Last financial year of the maximum engagement period
A financial year of the company beginning before 17 June 1994 | The last financial year of the company to begin before 17 June 2020.
A financial year of the company beginning— (a) on or after 17 June 1994, and (b) before 17 June 2003 | The last financial year of the company to begin before 17 June 2023.
A financial year of the company beginning— (a) on or after 17 June 2003, and (b) before 17 June 2016 | No qualifying selection procedure Where neither the first financial year of the maximum engagement period nor any subsequent financial year is one for which the auditor has been appointed following the carrying out of a qualifying selection procedure, the later of- (a) the last financial year of the company to begin before 17 June 2016, and (b) the last financial year of the company to begin within the period of 10 years beginning with the first day of the first financial year of the maximum engagement period. No qualifying selection procedure within 10 years Where the last day of the last financial year of the company to begin within the period of 10 years beginning with the first day of the last financial year of the company for which the auditor was appointed following a qualifying selection procedure is before 17 June 2016— (a) the last financial year of the company to begin before 17 June 2016, unless (b) the auditor is appointed following a qualifying selection procedure for the first financial year of the company to begin on or after 17 June 2016, in which case it is the last financial year of the company to begin within the period of 20 years beginning with the first day of the first financial year of the maximum engagement period. Qualifying selection procedure within 10 years In any other case, the earlier of- (a) the last financial year of the company to begin within the period of 10 years beginning with the first day of the last financial year of the company for which the auditor was appointed following a qualifying selection procedure, and (b) the last financial year of the company to begin within the period of 20 years beginning with the first day of the first financial year of the maximum engagement period.
A financial year of the company beginning on or after 17 June 2016 | The earlier of— (a) the last financial year of the company to begin within the period of 10 years beginning with the first day of the last financial year of the company for which the auditor was appointed following a qualifying selection procedure, and (b) the last financial year of the company to begin within the period of 20 years beginning with the first day of the first financial year of the maximum engagement period.
(2) Where the first financial year of the maximum engagement period begins on or after 17 June 2003, the maximum engagement period may be extended by a period of no more than 2 years with the approval of the competent authority.
(3) Such approval may be given by the competent authority only if it is satisfied that exceptional circumstances exist.
(4) Where the competent authority gives its approval as mentioned in subsection (2)—
(a) the second column of the Table in subsection (1) has effect with the necessary modifications, and
(b) the first appointment to be made after the end of the period as so extended must be made following a qualifying selection procedure.
(5) In this section “qualifying selection procedure” means—
(a) in the case of an appointment for a financial year beginning on or after 17 June 2016 made after the Statutory Auditors and Third Country Auditors Regulations 2017 come into force—
(i) if the company is a private company and has an audit committee, a selection procedure that complies with the requirements of section 485A(4) and (5)(a) and (b),
(ii) if the company is a public company and has an audit committee, a selection procedure that complies with the requirements of subsections 489A(4) and (5)(a) and(b), ...
(iii) if the company is a private company and does not have an audit committee, a selection procedure that complies with the requirements of section 485B(4),
(iv) if the company is a public company and does not have an audit committee, a selection procedure that complies with the requirements of section 489B(4),
(b) in any other case, a selection procedure that substantially meets the requirements of Article 16(2) to (5) of the Audit Regulation as it had effect immediately before IP completion day, having regard to the circumstances at the time (including whether the company had an audit committee).
In this Chapter—
“audit committee” means a body which performs—
the functions referred to in—
rule 7.1.3 of the Disclosure Guidance and Transparency Rules sourcebook made by the Financial Conduct Authority (audit committees and their functions) under the Financial Services and Markets Act 2000, or
rule 2.4 of the Audit Committee Part of the Rulebook made by the Prudential Regulation Authority (audit committee) under that Act,
as they have effect on IP completion day, or
equivalent functions.
...
“Auditor General” means—
the Comptroller and Auditor General,
the Auditor General for Scotland,
the Auditor General for Wales, or
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—
profit-sharing;
cost sharing;
common ownership, control or management;
common quality control policies and procedures;
common business strategy; or
use of a common name;
“public interest entity ” means—
an issuer whose transferable securities are admitted to trading on a UK regulated market;
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, which is a CRR firm within the meaning of Article 4(1)(2A) of that Regulation;
a person who would be an insurance undertaking as defined in Article 2(1) of Council Directive 91/674/EEC of 19 December 1991 of the European Parliament and of the Council on the annual accounts and consolidated accounts of insurance undertakings as that Article had effect immediately before IP completion day, were the United Kingdom a member State;
...
...
(1) A company's auditor must make a report to the company's members on all annual accounts of the company of which copies are, during his tenure of office—
(a) in the case of a private company, to be sent out to members under section 423;
(b) in the case of a public company, to be laid before the company in general meeting under section 437.
(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) The report must state clearly whether, in the auditor's opinion, the annual accounts—
(a) give a true and fair view—
(i) in the case of an individual balance sheet, of the state of affairs of the company as at the end of the financial year,
(ii) in the case of an individual profit and loss account, of the profit or loss of the company for the financial year,
(iii) in the case of group accounts, of the state of affairs as at the end of the financial year and of the profit or loss for the financial year of the undertakings included in the consolidation as a whole, so far as concerns members of the company;
(b) have been properly prepared in accordance with the relevant financial reporting framework; and
(c) have been prepared in accordance with the requirements of this Act ....
Expressions used in this subsectionor subsection (3A) that are defined for the purposes of Part 15 (see sections 464, 471 and 474) have the same meaning as in that Part.
(3A) The following provisions apply to the auditors of a company which qualifies as a micro-entity in relation to a financial year (see sections 384A and 384B) in their consideration of whether the Companies Act individual accounts of the company for that year give a true and fair view as mentioned in subsection (3)(a)—
(a) where the accounts comprise only micro-entity minimum accounting items, the auditors must disregard any provision of an accounting standard which would require the accounts to contain information additional to those items,
(b) in relation to a micro-entity minimum accounting item contained in the accounts, the auditors must disregard any provision of an accounting standard which would require the accounts to contain further information in relation to that item, and
(c) where the accounts contain an item of information additional to the micro-entity minimum accounting items, the auditors must have regard to any provision of an accounting standard which relates to that item.
(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 or conditions 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.
(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.
496 Auditor's report on strategic report and on directors' report
(1) In his report on the company's annual accounts, the auditor must-
(a) state whether, in his opinion, based on the work undertaken in the course of the audit—
(i) the information given in the strategic report (if any) and the directors’ report for the financial year for which the accounts are prepared is consistent with those accounts, and
(ii) any such strategic report and the directors’ report have been prepared in accordance with applicable legal requirements,
(b) state whether, in the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, he has identified material misstatements in the strategic report (if any) and the directors’ report, and
(c) if applicable, give an indication of the nature of each of the misstatements referred to in paragraph (b).
(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.
497 Auditor's report on auditable part of directors' remuneration report
(1) If the company is a quoted company ..., the auditor, in his report on the company's annual accounts for the financial year, must—
(a) report to the company's members on the auditable part of the directors' remuneration report, and
(b) state whether in his opinion that part of the directors' remuneration report has been properly prepared in accordance with this Act.
(2) For the purposes of this Part, “the auditable part” of a directors' remuneration report is the part identified as such by regulations under section 421.
(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
497A Auditor's report on separate corporate governance statement
(1) Where the company prepares a separate corporate governance statement in respect of a financial year, the auditor must, in his report of the company’s annual accounts for that year—
(a) state whether, in his opinion, based on the work undertaken in the course of the audit, the information given in the statement in compliance with rules 7.2.5 and 7.2.6 in the Disclosure Rules and Transparency Rules sourcebook made by the Financial Conduct Authority (information about internal control and risk management systems in relation to financial reporting processes and about share capital structures)—
(i) is consistent with those accounts, and
(ii) has been prepared in accordance with applicable legal requirements,
(b) state whether, in the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, he has identified material misstatements in the information in the statement referred to in paragraph (a),
(c) if applicable, give an indication of the nature of each of the misstatements referred to in paragraph (b), and
(d) state whether, in his opinion, based on the work undertaken in the course of the audit, rules 7.2.2, 7.2.3 and 7.2.7 in the Disclosure Rules and Transparency Rules sourcebook made by the Financial Conduct Authority (information about the company’s corporate governance code and practices and about its administrative, management and supervisory bodies and their committees) have been complied with, if applicable.
(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.
(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 ..., 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 ..., 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.
(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 from 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.
(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.
(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
498A Auditor's duties in relation to separate corporate governance statement
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.
(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.
500 Auditor's right to information from overseas subsidiaries
(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.
(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.
502 Auditor's rights in relation to resolutions and meetings
(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.