Schedule 5: Auditors ceasing to hold office Part 1: Notification requirements
545.Part 1 of Schedule 5 makes amendments to Chapter 4 of Part 16 of the Companies Act 2006 (the “2006 Act”) and, together with Part 2 of the Schedule, forms part of the law of England and Wales, Scotland and Northern Ireland (in line with the extent of the 2006 Act).
546.Paragraphs 2 and 4 omit sections 512 and 517 respectively of the 2006 Act and, in doing so, remove the requirements for a company to notify the registrar of companies if its auditor is removed from office by the company or resigns from office.
547.Paragraph 3 amends subsection (2) of section 516 of the 2006 Act. Currently section 516 provides that a notice of resignation sent by an auditor of a company is ineffective if that notice is not accompanied by the statement required by the current section 519. The effect of the amendment is that an auditor’s notice of resignation will only be ineffective if the auditor is resigning from a public interest company and that notice is not accompanied by a statement pursuant to the amended section 519.
548.Paragraphs 5, 7 and 8 make amendments to sections 518, 520 and 521 (respectively) of the 2006 Act consistent with the changes to section 519 made by section 18. In section 518, the effect is that, for a non-public interest company, a resigning auditor’s rights (to call a shareholders’ meeting to explain his or her (or its) reasons for resigning) do not apply where the auditor’s statement under new section 519(1) includes a declaration pursuant to new section 519(3B) that the auditor considers that none of his or her (or its) reasons for leaving, and no connected matters, need to be brought to the attention of shareholders or creditors.
549.Paragraphs 7 and 8 make similar amendments to sections 520 and 521 (respectively). The effect is that, where the auditor’s statement includes the declaration pursuant to new section 519(3B) described above, a non-public interest company does not need to circulate a copy of the auditor’s statement under new section 519(1) to its shareholders and creditors, and the auditor does not need to send a copy to the registrar of companies.
550.Currently section 522 provides that an auditor must in many cases notify the audit authority of his or her (or its) reasons for leaving office. Paragraph 9 amends this requirement such that only an auditor who must send a statement to the company in accordance with new section 519(1) must send a copy of that statement to the appropriate audit authority.
551.Paragraph 10 removes the mandatory duty in section 524 for an audit authority to inform the accounting authorities (the Financial Reporting Council’s conduct committee and the Secretary of State) about an auditor’s departure. However, the amending provision makes it clear that the audit authority has a discretion to pass on to the accounting authorities a copy of the auditor’s statement or any other relevant information connected to the auditor’s departure.