Modifications etc. (not altering text)
C1Sch. 11 Pt. II amended (1.10.1991) by S.I. 1991/824, regs. 1(2)(a), 11(6); S.I. 1991/1996, art. 2(1)(a)
C2Sch. 11 Pt. II excluded (1.10.1991) by S.I. 1991/824, regs. 1(2)(a), 11(4); S.I. 1991/1996, art. 2(1)(a)
Sch. 11 Pt. II excluded (9.2.2005) by The European Communities (Recognition of Professional Qualifications) (First General System) Regulations 2005 (S.I. 2005/18), reg. 11(4) (with reg. 3)
4(1)The body must have rules to the effect that a person is not eligible for appointment as a company auditor unless—
(a)in the case of an individual, he holds an appropriate qualification;
(b)in the case of a firm—
(i)the individuals responsible for company audit work on behalf of the firm hold an appropriate qualification, and
(ii)the firm is controlled by qualified persons (see paragraph 5 below).
(2)This does not prevent the body from imposing more stringent requirements.
(3)A firm which has ceased to comply with the conditions mentioned in sub-paragraph (1)(b) may be permitted to remain eligible for appointment as a company auditor for a period of not more than three months.
5(1)The following provisions explain what is meant in paragraph 4(1)(b)(ii) by a firm being “controlled by qualified persons”.
(2)For this purpose references to a person being qualified are, in relation to an individual, to his holding an appropriate qualification, and in relation to a firm, to its being eligible for appointment as a company auditor.
(3)A firm shall be treated as controlled by qualified persons if, and only if—
(a)a majority of the members of the firm are qualified persons, and
(b)where the firm’s affairs are managed by a board of directors, committee or other management body, a majority of the members of that body are qualified persons or, if the body consists of two persons only, at least one of them is a qualified person.
(4)A majority of the members of a firm means—
(a)where under the firm’s constitution matters are decided apon by the exercise of voting rights, members holding a majority of the rights to vote on all, or substantially all, matters;
(b)in any other case, members having such rights under the constitution of the firm as enable them to direct its overall policy or alter its constitution.
(5)A majority of the members of the management body of a firm means—
(a)where matters are decided at meetings of the management body by the exercise of voting rights, members holding a majority of the rights to vote on all, or substantially all, matters at such meetings;
(b)in any other case, members having such rights under the constitution of the firm as enable them to direct its overall policy or alter its constitution.
(6)The provisions of paragraphs 5 to 11 of Schedule 10A to the Companies Act 1985 (rights to be taken into account and attribution of rights) apply for the purposes of this paragraph.
6(1)The body must have adequate rules and practices designed to ensure that the persons eligible under its rules for appointment as a company auditor are fit and proper persons to be so appointed.
(2)The matters which the body may take into account for this purpose in relation to a person must include—
(a)any matter relating to any person who is or will be employed by or associated with him for the purposes of or in connection with company audit work; and
(b)in the case of a body corporate, any matter relating to any director or controller of the body, to any other body corporate in the same group or to any director or controller of any such other body; and
(c)in the case of a partnership, any matter relating to any of the partners, any director or controller of any of the partners, any body corporate in the same group as any of the partners and any director or controller of any such other body.
(3)In sub-paragraph (2)(b) and (c) “controller”, in relation to a body corporate, means a person who either alone or with any associate or associates is entitled to exercise or control the exercise of 15 per cent. or more of the rights to vote on all, or substantially all, matters at general meetings of the body or another body corporate of which it is a subsidiary.
7(1)The body must have adequate rules and practices designed to ensure—
(a)that company audit work is conducted properly and with integrity, and
(b)that persons are not appointed company auditor in circumstances in which they have any interest likely to conflict with the proper conduct of the audit.
[F1(1A)The body must participate in arrangements within paragraph 17, and the rules and practices mentioned in sub-paragraph (1) above must include provision requiring compliance with any standards for the time being determined under such arrangements.]
(2)The body must also have adequate rules and practices designed to ensure that no firm is eligible under its rules for appointment as a company auditor unless the firm has arrangements to prevent—
(a)individuals who do not hold an appropriate qualification, and
(b)persons who are not members of the firm,
from being able to exert any influence over the way in which an audit is conducted in circumstances in which that influence would be likely to affect the independence or integrity of the audit.
Textual Amendments
F1Sch. 11 para. 7(1A) inserted (6.4.2005) by Companies (Audit, Investigations and Community Enterprise) Act 2004 (c. 27), ss. 1(2), 65; S.I. 2004/3322, art. 2(2), Sch. 2 (subject to transitional provisions in arts. 4-13)
8[F2(1)]The body must have rules and practices as to the technical standards to be applied in company audit work and as to the manner in which those standards are to be applied in practice.
[F3(2)The body must participate in arrangements within paragraph 18, and the rules and practices mentioned in sub-paragraph (1) above must include provision requiring compliance with any standards for the time being determined under such arrangements.]
Textual Amendments
F2Sch. 11 para. 8 renumbered as Sch. 11 para. 8(1) (6.4.2005) by Companies (Audit, Investigations and Community Enterprise) Act 2004 (c. 27), ss. 1(3), 65; S.I. 2004/3322, art. 2(2), Sch. 2 (subject to transitional provisions in arts. 4-13)
F3Sch. 11 para. 8(2) inserted (6.4.2005) by Companies (Audit, Investigations and Community Enterprise) Act 2004 (c. 27), ss. 1(3), 65; S.I. 2004/3322, art. 2(2), Sch. 2 (subject to transitional provisions in arts. 4-13)
9The body must have rules and practices designed to ensure that persons eligible under its rules for appointment as a company auditor continue to maintain an appropriate level of competence in the conduct of company audits.
10(1)The body must have adequate arrangements and resources for the effective monitoring and enforcement of compliance with its rules.
(2)The arrangements for monitoring may make provision for that function to be performed on behalf of the body (and without affecting its responsibility) by any other body or person who is able and willing to perform it.
10A(1)The body must—
(a)participate in arrangements within paragraph 19(1), and
(b)have rules designed to ensure that members of the body who perform any company audit functions in respect of major audits take such steps as may be reasonably required of them to enable their performance of any such functions to be monitored by means of inspections carried out under the arrangements.
(2)Any monitoring of such persons under the arrangements is to be regarded (so far as their performance of company audit functions in respect of major audits is concerned) as monitoring of compliance with the body’s rules for the purposes of paragraph 10(1).
(3)In this paragraph “company audit function” and “major audit” have the same meaning as in paragraph 19.
11The rules and practices of the body relating to—
(a)the admission and expulsion of members,
(b)the grant and withdrawal of eligibility for appointment as a company auditor, and
(c)the discipline it exercises over its members,
must be fair and reasonable and include adequate provision for appeals.
12(1)The body must have effective arrangements for the investigation of complaints—
(a)against persons who are eligible under its rules to be appointed company auditor, or
(b)against the body in respect of matters arising out of its functions as a supervisory body.
(2)The arrangements may make provision for the whole or part of that function to be performed by and to be the responsibility of a body or person independent of the body itself.
12A(1)The body must—
(a)participate in arrangements within paragraph 20(1), and
(b)have rules and practices designed to ensure that, where the designated persons have decided that any particular disciplinary action should be taken against a member of the body following the conclusion of an investigation under such arrangements, that decision is to be treated as if it were a decision made by the body in disciplinary proceedings against the member.
(2)In sub-paragraph (1) “the designated persons” means the persons who, under the arrangements, have the function of deciding whether (and, if so, what) disciplinary action should be taken against a member of the body in the light of an investigation carried out under the arrangements.
13(1)The body must have adequate rules or arrangements designed to ensure that persons eligible under its rules for appointment as a company auditor take such steps as may reasonably be expected of them to secure that they are able to meet claims against them arising out of company audit work.
(2)This may be achieved by professional indemnity insurance or other appropriate arrangements.
14The body must have rules requiring persons eligible under its rules for appointment as a company auditor to comply with any obligations imposed on them by regulations under section 35 or 36.
15The body must have satisfactory arrangements for taking account, in framing its rules, of the cost to those to whom the rules would apply of complying with those rules and any other controls to which they are subject.
16The body must be able and willing to promote and maintain high standards of integrity in the conduct of company audit work and to co-operate, by the sharing of information and otherwise, with the Secretary of State and any other authority, body or person having responsibility in the United Kingdom for the qualification, supervision or regulation of auditors.