Regulatory Framework in the UK

Question 1

Main sources of audit regulation in UK?

Answer 1

The Companies Act 2006
Statutory Auditors and Third Country Auditors Regulations 2017
UK - ensure that good practice in ARD forms retained EU law under EU Act 2018 - this converted existing law into UK domestic law at end of transition period
This ensures law operates in UK only context
Provides continuity for businesses operating in audit sector and can benefit from global trade and investment

Question 2

PIE?

Answer 2

Public Interest Entity
Listed entity
credit institution
Insurance undertaking

Question 3

Appointment of auditor

Answer 3

Qualification
Independence
Remuneration

Question 4

Qualification requirement?

Answer 4

Member of RSB - recognised supervised body

Eligible for appointment under the rules of this body

Question 5

Independance requirement?

Answer 5

CA identifies who is ineligible - for example an officer or employee of audited person

Question 6

RQB?

Answer 6

Recognised Qualifying Body
Issues appropriate qualifications - suitable standards for entry, examination and training
ACCA, ICAEW, CAI, AIA

Question 7

RSB?

Answer 7

Recognised Supervised Body

recognises rules to the eligibility for auditor appointment and conduct of audit work

Question 8

Auditors must…

Answer 8

qualify with RQB and be registered with RSB

Question 9

Who appoints the auditor?

Answer 9

Members…..but directors can if -
it is before first period for appointing auditors
a period where there is no auditor
filling a casual vacancy for auditor

Question 10

Auditors remuneration?

Answer 10

If appointed by members - must be fixed by the members

If appointed by directors - must be fixed by directors

Question 11

Term of office of auditor?

Answer 11

Requirement - audit of PIE must be put out to tender at least every 10 years and auditor rotated every 20 years

Question 12

Requirements for appointment in PIEs?

Answer 12

Before appointment…
Audit committee recommends two auditors to directors

Directors must propose auditor for appointment

• must include recommendation by audit committee in connection with appointment
• if proposal departs from preference of audit committee, must have a recommendation for a candidate appointed drawn from those in selection procedure, must have reasons for not agreeing with audit committee

Question 13

Auditors report?

Answer 13

true and fair view
- in the balance sheet - of the state of affairs of company at end of FY
- in P&L - of profit or loss of company for financial year
Properly in accordance with relevant financial reporting framework and CA

Question 14

The auditors report must…

Answer 14

be either unqualified or qualified
include reference to matters auditor wishes to draw attention to without qualifying report
include a statement on material uncertainty relating to doubt
identify auditors place of establishment

Question 15

In the company’s annual accounts, the auditor must…

Answer 15

State in their opinion whether the information in strategic and director’s report is consistent with accounts and prepared with legal requirements

State whether identified material misstatements and nature of those

Question 16

In the case of a quoted company the auditor must…

Answer 16

Report to the members on the auditable part of the directors’ remuneration report

State whether in their opinion that part of the directors’ remuneration report has been properly prepared in accordance with the Act

Question 17

Where more than one person is appointed as auditor…

Answer 17

report must include statement as to whether all persons agree on indications given - and where cannot agree - must include opinions of each person and reason for disagreement

Question 18

Rights and duties?

Answer 18

Section 498-502 CA

Question 19

s498 Duties?

Answer 19

Auditor must state if they are of the opinion

that adequate records have not been kept

that the company’s accounts are not in agreement with accounting records and returns

if fail to obtain all info necessary - must state in report

Question 20

s499 right to information?

Answer 20

has right of access at all time to company’s books, accounts etc

can require employees to provide them with information or explanation necessary for duties

Question 21

s501 right to information offences?

Answer 21

If person knowingly or recklessly provides misleading/false/deceptive info, or fails to provide info auditor needs - offence

Question 22

s502 rights in relation to resolutions and meetings?

Answer 22

Auditor is entitled to receive notice of all general meetings, to attend these meetings and to be heard at these meetings which concern them

Question 23

s503 signature of auditor’s report?

Answer 23

Report must state name of auditor and must be signed and dated by them
Where auditor is a firm - must be signed by senior statutory auditor
Where more than one person is appointed as auditor - must be signed by all appointed

Question 24

s507-509 offence in connection with Auditor’s report?

Answer 24

Person commits offence if knowingly or recklessly causes auditor’s report to include any misleading, false or deceptive info

Question 25

s510 resolution removing auditor from office?

Answer 25

Members may remove auditor from office at any time by ordinary resolution and where special notice (21 days) has been given

Where requested y shareholders - companies required to publish statement of concern about audit which is discussed at next AGM

Question 26

s511 special notice for resolution removing auditor from office?

Answer 26

Company must send a copy immediately to auditor proposed to be removed

Question 27

An auditor who has been removed still has the right to…

Answer 27

receive all notices relating to, attend, and be heard at any GM at which the terms of office have expired, at which it is proposed to fill vacancy caused by removal

Question 28

s516 resignation of auditor?

Answer 28

May resign by notice in writing
Not effective unless accompanied by statement of circumstances
Term of office ends on date specified in notice
Auditor who fails to comply with this = offence
s522 - auditor required to send copy of statement to appropriate audit authority - FRC for PIE and RSB for non PIE

Question 29

s518 rights of resigning auditor?

Answer 29

May give notice by signed requisition calling on directors for a general meeting to receive explanation for resignation
Company must state fact of resignation to members and send a copy of statement to to every member at meeting

Question 30

Duties under common law?

Answer 30

Re Kingston Cotton Mill Co - reasonable skill care and caution
A watchdog not a bloodhound

Question 31

s 442 Period allowed for filing accounts?

Answer 31

Period allowed for directors
private company - nine months after end of accounting period
public company - six months after period