Module 9 - Auditor Responsibilities: Legislation Flashcards
Auditors rights to receive info are:
Right of access at all times to company’s records
Right for employees and directors to provide necessary info and explanations
Right for subsidiaries to provide them with any information they need
Auditors rights in relation to resolutions and meetings:
Receive copies of all communications relating to any written resolution
Receive all notices of any general meetings and also to attend such meetings
Right to be heard at any general meeting which concerns them as auditor
Is it an offence to knowingly or recklessly give misleading, false or deceptive statements to an auditor?
Yes
According to CA 2006
Mnemonic for auditors requirements to form opinions beyond the key reporting responsibilities
RAPID
What does RAPID stand for?
Returns have been received from branches not visited by the auditor
Accounts agree with the underlying records
Proper accounting records have been kept
Info and explanations necessary for the purpose of the audit have been received
Directors emoluments (salary, bonuses etc) and other benefits disclosures are complete
Do LSE listed companies have to comply with more onerous disclosure requirements
Yes
Does the CA 2006 require an auditor to be appointed for each financial year that an audit is required?
Yes
How is the auditor usually appointed
By the shareholders via the passing of an ordinary resolution
(Over 50% of shareholders agree via a vote)
Are there any situations in which the directors are allowed to appoint the auditor?
Yes
What are the situations in which directors are allowed to appoint the auditor?
The first time a company requires an auditor
To fill a casual vacancy (eg an auditor resigns during the term of office)
If the company previously had audit exemption but have lost the exemption and now need an auditor
Where the auditor has been appointed by directors, what do they shareholders have to decide?
Whether that auditor should be reappointed next year
How does choosing an auditor work in a public company?
An auditor will be appointed / re-appointed at each annual general meeting (‘AGM’) by the shareholders
How does choosing an auditor work in a private company?
The auditor is deemed to be automatically reappointed unless 5% or more of shareholders object (or auditors first appointed by directors)
Some companies may have something which prohibits automatic re-appointment
Can the auditor be removed at any time by shareholders?
Yes
Does an auditor have rights to protect against unwarranted dismissal?
Yes
What are the auditor rights to protect against unwarranted dismissal?
Copy of motion to remove auditors must be sent to auditors
Auditor has right to make written statements regarding their removal and have these passed to shareholders
Auditor retains the right to attend the normal AGM of the company in the year they were removed
Does an auditor have to be notified if they are to be removed / not reappointed?
Yes
In order for an auditor to resign, what must they do?
Letter of resignation
If the company is public - a statement of circumstances to the registered office of the company
Do auditors on non-public interest companies have to provide a statement of circumstances?
Yes (there are exemptions though)
What exemptions may mean that an auditor of a non-public company does have to provide a statement of circumstances?
Company being exempt from audit
Being wound-up due to insolvency
Auditor ceasing to hold office at the end of their term
Where a statement of circumstances is deposited with a company, the auditor may request what?
That a General meeting is called to consider the circumstances connected with the registration
A statement of circumstances must either:
Assert there are no circumstances connected with the departure from office that shareholders should be made aware of
Disclose details of such circumstances
Is it an offence for an auditor to not deposit a statement of circumstances in a situation where they are required to?
Yes
In most cases, the statement of circumstances must be sent to who?
The company’s shareholders and debenture holders
The appropriate audit authority (the FRC) / the auditors RSB
Companies house - unless company obtains a court order to prevent this
Is it an offence for the auditor to cease to hold office without sending a statement of compliance to the relevant places?
Yes
What is money laundering?
Involves possessing, concealing or dealing with the proceeds of any crime
Examples of money laundering?
Tax evasion and other financial crimes
Drug dealing
Terrorism
Where is the guidance for accountants on money laundering?
The CCAB Anti-Money Laundering (AML) Guidance
The AML Guidance incorporates and interprets the main legislation applicable to accountants such as:
the Proceeds of Crime Act (‘POCA’)
ML Regulations
the Serious and Organised Crime and Police act 2005 (‘SCOPA’)
Any accountant, or their clients may conduct money laundering by:
Knowingly and / or actively becoming involved in money laundering
Inadvertently becoming involved - being used by an employee, client/customer, or third party, so that they do not know that a transaction involves money laundering
POCA sets out three principal offences in relation to money laundering:
Concealing or transferring the proceeds of criminal conduct
Arrangement to facilitate the acquisition, retention, use or control of criminal property
Acquiring, using or possessing criminal property
Penalties for offences laid out in POCA:
Up to 14 years in prison
A fine
Or both
ML Regulations identify a specific group of businesses that are termed regulated sectors:
Credit institutions Auditors Financial institutions Independent or legal professionals Trust or company service providers Estate agents and letting agents High value dealers Casinos Art market participants Crypto asset exchange providers Custodian wallet providers
Potential additional offence for those in regulated sectors under the POCA include:
Failure to report
Tipping off
When does an MLRO commit an offence?
If they fail to report to the NCA in a timely fashion
ML Regulations cover some key areas:
Risk assessment and controls
Customer due diligence
Registration and Supervision of relevant businesses
Within ML Regulations, Risk assessment and controls is covered. Policies and procedures in this include:
Risk assessment
Policies, controls and procedures
Internal controls
Training
Within ML Regulations, customer due diligence is covered. How does a firm deal with this?
Seek satisfactory evidence from a reliable and independent source. Eg passports of directors / companies house search (for the company itself) / beneficial owners
Accounts should obtain more evidence when there is a higher degree of risk
How long should records of any client identification procedures and risk assessment (ML Regulations) be kept for?
Five years
How soon after should records relating to client identity be deleted after completion of a relationship / transaction?
Five years
With supervision and registration (ML Regulations), is it a criminal offence to provide accountancy services within the regulated sector without being supervised by an appropriate AML supervisory body:
Yes
Circumstances where the auditor must be cautious not to tip off the client:
Instances of non-compliance
Communication with those charged with governance
Resigning unexpectedly from the audit engagement
Issuing a modified audit report
Delaying the audit report
Is there any obligation for those working outside the regulated sectors to make a money laundering report?
No
Unless it relates to terrorism
