Commentary on Sections Part 1:  Auditors, Accounts, Directors' Liabilities and Investigations Auditing of accounts Section 8 - Auditors' rights to information
44.Under previous legislation (section 389A of the Companies Act 1985) a company's auditors were entitled to require from the company's officers such information and explanations as they thought necessary for the performance of their duties as auditors.  It was a criminal offence for an officer of the company to provide misleading, false or deceptive information or explanations.  However, it was not an offence for them to fail to provide any information or explanation that the auditors required of them.
45.This section is intended to help auditors to carry out their duties by strengthening their right to require information or explanations, with the aim of increasing the reliability of, and confidence in, company accounts.
46.It does this in two ways:
	it entitles the auditor to require information and explanations from a wider group of people. Specifically, it reflects a recommendation in the Company Law Review that those required to provide information and explanations to auditors should include employees (Modern Company Law for a Competitive Economy, Final Report July 2001, URN 01/942, paragraph 8.119 first bullet);
	it makes it a criminal offence to fail to provide information or explanations required by the auditor.
47.Section 8 substitutes new sections 389A and 389B for the previous section 389A in the Companies Act 1985.
48.In new section 389A, subsections (1) and (2):
	re-enact the auditor’s right to access relevant material; and
	add to the category of people from whom the auditor may require information. Auditors previously had the right to require "officers" of the company (which includes directors, managers and company secretaries) to provide information and explanations necessary for their work. However, others, in particular employees who are not “managers”, may hold relevant information. Those to whom the requirement to provide information applies are set out in subsection (2).
49.Subsections (3)-(5) in new section 389A re-enact previous provisions dealing with information and explanations concerning non-GB subsidiaries, extended to include employees and certain others.  It is neither desirable nor effective to place a direct responsibility on a non-GB subsidiary and those associated with it to give information and explanations to a UK auditor.  The responsibility is therefore placed on the parent company to do what is reasonable to obtain the required information and explanations from the subsidiaries.
50.New section 389B sets out criminal offences relating to the provision of information to auditors.  Subsection (1) re-enacts the previous offence in section 389A(2) of the Companies Act 1985 of providing false or misleading information or explanations to an auditor.  The subsection also applies this offence to the new categories of people from whom the auditor may require information under new section 389A.
51.There has previously been no criminal sanction where an officer of the company is required to give information but fails to do so altogether.  Subsection (2) of new section 389B therefore introduces a new criminal offence for such a failure by an officer of the company or by the other persons from whom the auditor is entitled to require information or explanations.
52.Subsection (3) of new section 389B provides a person with a defence if he can prove that it was not reasonably practicable to provide the information or explanations required.  Subsection (4) makes it an offence for a parent company to fail to take all steps reasonably open to it to obtain the information or explanations which the auditor has required it to obtain from its non-GB subsidiary and those associated with it; and the offence applies also to any officer of the company who knowingly and wilfully authorises or permits the failure.