Legal Update for Accountants - Deregulation Act 2015

Article

23 April, 2015

The Deregulation Act 2015 has been passed as part of the government's Red Tape Challenge. In particular, section 18 of the Act seeks to simplify the rules regarding auditors' notification requirements. The section will be brought into force by the Secretary of State, though the date is currently unknown.

The new provisions mean that an auditor is not required to provide a non-listed company with a statement of reasons for leaving where:

  • The auditor's term of office has ended; or
  • The reasons for leaving are "exempt reasons", if leaving before the end of the term of office; and
  • There is no information which ought to be brought to the attention of the company's shareholders or creditors.

The following are "exempt reasons":

  • The auditor is ceasing to practise as an auditor;
  • The company the auditor is ceasing to act for qualifies for one of the exemptions from audit under the Companies Act 2006
  • The auditor is ceasing to act for a "subsidiary" company because the accounts of the subsidiary are to be audited as part of the audit of the group accounts by the parent's auditor; and
  • The company the auditor is ceasing to act for is being liquidated through an insolvency procedure.

Similarly, an auditor is not required to notify the appropriate audit authority of its reasons for leaving where an "exempt reason" applies and there is no additional attention to be brought to the authority's attention.

Auditors of a listed company are still required to provide a statement of reasons for leaving office.

A company is not required to send an outgoing auditor a copy of the written resolution which proposes to appoint a new auditor where:

  • The outgoing auditor was removed by a resolution
  • The outgoing auditor resigned

Where an auditor is providing a statement of its reasons for leaving, it must include information which it considers should be brought to the attention of the company's shareholders and creditors. If there is no such information, then a statement should be included to that effect.

For further information please contact Pauline Rigby, Head of Corporate and Restructuring at Forbes Solicitors on 01254 222399 or please email Pauline Rigby

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