14. Corporate transparency

Question 1

What constitutes company’s annual report and accounts?

Answer 1

S.471 of the CA2006 provide that the co ARA consists of:

• Annual accounts
• Strategic report (small co are exempt)
• Directors report
• Auditor’s report
• Rem report

Question 2

What is the difference between individual accounts and group accounts?

Answer 2

Directors of company are under duty to prepare accounts for each financial year - co’s individual accounts.

A parent co (except small s.399) must also prepare group accounts that need to cover the accounts of the parent and subsidiaries.

Question 3

What is narrative reporting?

Answer 3

Narrative reporting refers to the inclusion of non-fin info in co’s annual reports and other reports (except fin reports)

Question 4

Are all companies required to prepare a strategic and directors’ remuneration report?

Answer 4

All, except small companies.

Question 5

What is the difference between statutory audit and an internal audit?

Answer 5

The legally mandated auditing of the co’s accounts is STATUTORY audit.

INTERNAL audit is performed by company internally, where the co’s processes and systems that aims to determine how effectively the co manages the risk, whether the internal control systems are operating well. and whether the co is complying with the relevant laws and best practice recommendations.

Question 6

Do all companies need to appoint an auditor?

Answer 6

An Auditor must be appointed for each financial year of the company, unless the directors resolve otherwise on the grounds that audited accounts are unlikely to be required (CA2006, 485, 489).
In other words, the co must appoint an auditor unless it does not need to have its accounts audited.

Question 7

Which types of person may not be appointed as an auditor?

Answer 7

Co must make sure that the auditor is eligible to act as an auditor, who is, under CA 2006 s.1213 satisfies the following 2 conditions:

1. member of recognised supervisory body (ACCA, ICA)
2. Eligible for appointment under the supervisory board

Question 8

Does an auditor owe a duty of care to third parties (e.g. members of the company)

Answer 8

An auditor will only owe a duty of care to third parties if the third party can show that the auditor assumed responsibility to them

Question 9

How can the auditor vacate the office?

Answer 9

Resignation
Removal
Replacement
Rotation