the university of greenwich 1 september 2009 l2b audit and assurance j. e. spencer-wood lecture 2b...

theUNIVERSITYofGREENWICH

1September 2009

L2bAudit and assurance

J. E. Spencer-Wood

Lecture 2bThe auditor and companies legislation

– UK campus students: English law– Hong Kong: UK or HK law (refer to local course leader)– Malaysia: Refer to local course leader– Singapore: Refer to local course leader

Auditing and assurance


2September 2009


J. E. Spencer-Wood

CA 2006 and other statutes

Limited companies• CA 06

Similar provisions apply to many other bodies• An example: The audit of Registered Social Landlords, mainly

under the Housing Act, 1996.Terminology

• Statutory audit• ‘Registered Auditor’ (RA) (UK)• ‘Senior statutory auditor’ (UK)

= ‘Engagement partner’ in international ISA terminology


3September 2009


J. E. Spencer-Wood

No exemption• plc’s

• Banks

• Insurance companies and brokers

• FSA authorised firms

• TU’s

• Employers’ organisations

• When members (10% holding) demand an audit

Limited companies: Exemption from audit


4September 2009


J. E. Spencer-Wood

Exemption granted when the company:

• Qualifies as a small company Defined by CA 06 s477

– Turnover £6.5m (or less)

– Balance sheet total £3.26m (or less)

– Fifty employees (or less)

Limited companiesExemption from audit (cont.)


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J. E. Spencer-Wood

• COMPETENCE

• INDEPENDENCE

• TO DEFINE DUTIES

• TO DEFINE RIGHTS

Reasons for auditor-related sections in statutes


6September 2009


J. E. Spencer-Wood

Stewardship accounting and the auditor

Owners … statutory appointment of…

Directors Auditors

FS’s


7September 2009


J. E. Spencer-Wood

Stewardship accounting and the auditor (cont.)

FS’s

Laid and presented Report on FS’sto owners to owners

DIRECTORS, AUDITORS,MANAGERS / STAFF MANAGERS / STAFF


8September 2009


J. E. Spencer-Wood

Appointment of auditors: CA06 ss485-494

1. For a NEW company• For period to first GM, by DIRECTORS

2. For an ESTABLISHED company• By MEMBERS at (A)GM


9September 2009


J. E. Spencer-Wood

Appointment of auditors (cont.)

• Period of appointment:• From the end of the GM (in which appointed) till the end

of the next GM.

y/e A y/e B y/e C

FS’s

AGM 1 2


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J. E. Spencer-Wood


• CASUAL VACANCIES

• Directors may appoint (otherwise Secretary of State - 7

days)

• ELECTIVE RESOLUTION

• Private coys.

• Deemed re-election


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J. E. Spencer-Wood


• FEES• Fixed by MEMBERS at the GM (or directors or the Secretary of State in

special circumstances if appointed by them)

• Paid by company (legal entity) not its members.

• AUDIT fee must be disclosed (in FS’s)

• Fees paid for NON-AUDIT services must be disclosed

Note: In practice the directors select the auditor(s) for election and negotiate fees


12September 2009


J. E. Spencer-Wood

Resignation: CA06 ss510-526

• CA06 REQUIRE an auditor to give a reason(s) for resigning• Upon resignation the auditor must send to the registered office -

WRITTEN NOTICE of resignation

A STATEMENT OF CIRCUMSTANCES

• The company must send a copy of the resignation to Registrar (14 days)


13September 2009


J. E. Spencer-Wood

Resignation: CA06 ss510-526 (cont.)

• The RA and company must… Notify the POB* if a ‘major’ company

– Major broadly - UK listed or turnover exceeding £500m Notify the RSB** if a small company and before the end of term

* Public Oversight Board

** Recognised Supervisory Body

More about these bodies in following lectures


14September 2009


J. E. Spencer-Wood

Resignation: The ‘Statement’

• Copy to be sent by auditor to the Registrar of Companies

• Must state:• There are no circumstances of the resignation that

need to be drawn to the attention of members or creditors

OR


15September 2009


J. E. Spencer-Wood

Resignation: The ‘Statement’ (cont.)

• The circumstances of the resignation that need to be drawn to the attention of members or creditors.In this case the COMPANY must send a copy to all those entitled to receive the FS’s. (Or apply for a court order where the matter is defamatory).14 days.

• If not seeking re-election a ‘statement’ is still required.


16September 2009


J. E. Spencer-Wood

Resignation: Auditor’s rights

• The auditor may require…• an EGM

• written statement to be sent to members

• The right to have notice of, attend and speak at the (A)GM at which their term of office would have ended.


17September 2009


J. E. Spencer-Wood

Removal of auditors

• CA06 provides mechanisms that allows clear communication channels between the auditor and all Members

• Removal at the end of term• by ORDINARY RESOLUTION (despite of any

contract to the contrary)

• Registrar to be notified within 14 days


18September 2009


J. E. Spencer-Wood

Removal of auditors (cont.)

• Removal before the end of term• By ORDINARY RESOLUTION with SPECIAL

NOTICE

• Copy to auditor

• The notice must contain the fact that representations by the auditor have been made (if such representations have been made)


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J. E. Spencer-Wood


• If resolution passed:• The COMPANY must give notice of the resolution to

the Registrar (14 days) and

• The AUDITOR must send the ‘statement’ to the

Registrar (28 days after depositing ‘statement’ with

company).


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Auditor’s rights

• To make representations in writing

• To require that these representations are circulated to members

• To speak at the GM


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Further rights

1

To receive notice, attend and speak at the (A)GM when term would have expired

2

To receive notice, attend and speak at the GM called to fill vacancy


22September 2009


J. E. Spencer-Wood

‘GAAS’

• Generally accepted auditing standards

• The audit equivalent to GAAP

• Therefore the framework of GAAS consists of

legislation, standards, RSB (or national body) rules,

current practice, worldwide practice and so forth.

the university of greenwich 1 september 2009 l2b audit and assurance j. e. spencer-wood lecture 2b...

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