the UNIVERSITY of GREENWICH 1 September 2009 L2b Audit and assurance J. E. Spencer-Wood Lecture 2b The auditor and companies legislation – UK campus students: English law – Hong Kong: UK or HK law (refer to local course leader) – Malaysia: Refer to local course leader – Singapore: Refer to local course leader Auditing and assurance

the UNIVERSITY of GREENWICH 2 September 2009 L2b Audit and assurance J. E. Spencer-Wood CA 2006 and other statutes Limited companies CA 06 Similar provisions apply to many other bodies An example: The audit of Registered Social Landlords, mainly under the Housing Act, Terminology Statutory audit ‘Registered Auditor’ (RA) (UK) ‘Senior statutory auditor’ (UK) = ‘Engagement partner’ in international ISA terminology

the UNIVERSITY of GREENWICH 3 September 2009 L2b Audit and assurance J. E. Spencer-Wood No exemption plc’s Banks Insurance companies and brokers FSA authorised firms TU’s Employers’ organisations When members (10% holding) demand an audit Limited companies: Exemption from audit

the UNIVERSITY of GREENWICH 4 September 2009 L2b Audit and assurance J. E. Spencer-Wood Exemption granted when the company: Qualifies as a small company  Defined by CA 06 s477 –Turnover £6.5m (or less) –Balance sheet total £3.26m (or less) –Fifty employees (or less) Limited companies Exemption from audit (cont.)

the UNIVERSITY of GREENWICH 5 September 2009 L2b Audit and assurance J. E. Spencer-Wood COMPETENCE INDEPENDENCE TO DEFINE DUTIES TO DEFINE RIGHTS Reasons for auditor-related sections in statutes

the UNIVERSITY of GREENWICH 6 September 2009 L2b Audit and assurance J. E. Spencer-Wood Stewardship accounting and the auditor Owners … statutory appointment of… DirectorsAuditors FS’s

the UNIVERSITY of GREENWICH 7 September 2009 L2b Audit and assurance J. E. Spencer-Wood Stewardship accounting and the auditor (cont.) FS’s Laid and presentedReport on FS’s to owners DIRECTORS, AUDITORS, MANAGERS / STAFF

the UNIVERSITY of GREENWICH 8 September 2009 L2b Audit and assurance J. E. Spencer-Wood Appointment of auditors: CA06 ss For a NEW company For period to first GM, by DIRECTORS 2.For an ESTABLISHED company By MEMBERS at (A)GM

the UNIVERSITY of GREENWICH 9 September 2009 L2b Audit and assurance J. E. Spencer-Wood Appointment of auditors (cont.) Period of appointment: From the end of the GM (in which appointed) till the end of the next GM. y/e A y/e B y/e C FS’s AGM 12

the UNIVERSITY of GREENWICH 10 September 2009 L2b Audit and assurance J. E. Spencer-Wood Appointment of auditors (cont.) CASUAL VACANCIES Directors may appoint (otherwise Secretary of State - 7 days) ELECTIVE RESOLUTION Private coys. Deemed re-election

the UNIVERSITY of GREENWICH 11 September 2009 L2b Audit and assurance J. E. Spencer-Wood Appointment of auditors (cont.) FEES Fixed by MEMBERS at the GM (or directors or the Secretary of State in special circumstances if appointed by them) Paid by company (legal entity) not its members. AUDIT fee must be disclosed (in FS’s) Fees paid for NON-AUDIT services must be disclosed Note: In practice the directors select the auditor(s) for election and negotiate fees

the UNIVERSITY of GREENWICH 12 September 2009 L2b Audit and assurance J. E. Spencer-Wood Resignation: CA06 ss CA06 REQUIRE an auditor to give a reason(s) for resigning Upon resignation the auditor must send to the registered office -  WRITTEN NOTICE of resignation  A STATEMENT OF CIRCUMSTANCES The company must send a copy of the resignation to Registrar (14 days)

the UNIVERSITY of GREENWICH 13 September 2009 L2b Audit and assurance J. E. Spencer-Wood Resignation: CA06 ss (cont.) The RA and company must…  Notify the POB* if a ‘major’ company –Major broadly - UK listed or turnover exceeding £500m  Notify the RSB** if a small company and before the end of term *Public Oversight Board ** Recognised Supervisory Body  More about these bodies in following lectures

the UNIVERSITY of GREENWICH 14 September 2009 L2b Audit and assurance J. E. Spencer-Wood Resignation: The ‘Statement’ Copy to be sent by auditor to the Registrar of Companies Must state: There are no circumstances of the resignation that need to be drawn to the attention of members or creditors OR

the UNIVERSITY of GREENWICH 15 September 2009 L2b Audit and assurance J. E. Spencer-Wood Resignation: The ‘Statement’ (cont.) The circumstances of the resignation that need to be drawn to the attention of members or creditors. In this case the COMPANY must send a copy to all those entitled to receive the FS’s. (Or apply for a court order where the matter is defamatory). 14 days. If not seeking re-election a ‘statement’ is still required.

the UNIVERSITY of GREENWICH 16 September 2009 L2b Audit and assurance J. E. Spencer-Wood Resignation: Auditor’s rights The auditor may require… an EGM written statement to be sent to members The right to have notice of, attend and speak at the (A)GM at which their term of office would have ended.

the UNIVERSITY of GREENWICH 17 September 2009 L2b Audit and assurance J. E. Spencer-Wood Removal of auditors CA06 provides mechanisms that allows clear communication channels between the auditor and all Members Removal at the end of term by ORDINARY RESOLUTION (despite of any contract to the contrary) Registrar to be notified within 14 days

the UNIVERSITY of GREENWICH 18 September 2009 L2b Audit and assurance J. E. Spencer-Wood Removal of auditors (cont.) Removal before the end of term By ORDINARY RESOLUTION with SPECIAL NOTICE Copy to auditor The notice must contain the fact that representations by the auditor have been made (if such representations have been made)

the UNIVERSITY of GREENWICH 19 September 2009 L2b Audit and assurance J. E. Spencer-Wood Removal of auditors (cont.) If resolution passed: The COMPANY must give notice of the resolution to the Registrar (14 days) and The AUDITOR must send the ‘statement’ to the Registrar (28 days after depositing ‘statement’ with company).

the UNIVERSITY of GREENWICH 20 September 2009 L2b Audit and assurance J. E. Spencer-Wood Removal of auditors (cont.) Auditor’s rights To make representations in writing To require that these representations are circulated to members To speak at the GM

the UNIVERSITY of GREENWICH 21 September 2009 L2b Audit and assurance J. E. Spencer-Wood Removal of auditors (cont.) Further rights 1 To receive notice, attend and speak at the (A)GM when term would have expired 2 To receive notice, attend and speak at the GM called to fill vacancy

the UNIVERSITY of GREENWICH 22 September 2009 L2b Audit and assurance J. E. Spencer-Wood ‘GAAS’ Generally accepted auditing standards The audit equivalent to GAAP Therefore the framework of GAAS consists of legislation, standards, RSB (or national body) rules, current practice, worldwide practice and so forth.