Companies Act 2006 – Section 1215
Effect of lack of independence
1550. This section sets out the consequences of the prohibition from acting as a statutory
auditor on grounds of lack of independence, as defined in section 1214. They replicate the
effect of ineligibility as explained for section 1213.
Section 1216: Effect of appointment of a partnership
1551. This section is a restatement of section 26 of the 1989 Act. The effect of the section is
to ensure that when a partnership constituted in England and Wales, Northern Ireland, or any
other country or territory in which a partnership is not a legal person, is appointed as a
statutory auditor under this Part, the appointment may continue even if a partner leaves the
partnership. For a partnership or other person to be considered as appropriate for the
appointment to continue, they must be eligible for appointment as a statutory auditor and not
be prohibited (as indicated in section 1214(1)). Without this provision, the appointment
would cease every time the membership of the partnership changed.
Section 1217: Supervisory bodies
1552. This section restates section 30 of the 1989 Act and defines a supervisory body as a
body established in the UK which maintains and enforces rules regarding the eligibility of
persons appointed as statutory auditors and the conduct of statutory audit work. Subsection
(4) introduces Schedule 10, which specifies the requirements supervisory bodies must meet in
order to be recognised, and the process for doing so.
Schedule 10: Recognised supervisory bodies
Part 1: Grant and Revocation of recognition of a Supervisory Body
1553. This Schedule restates provisions in Schedule 11 to the 1989 Act. Paragraph 1
identifies the steps a body is required to take to become recognised by the Secretary of State.
Paragraph 3 specifies the steps that the Secretary of State is required to take if the recognition
of the body is revoked. Paragraph 5 provides that recognition (and revocation) orders are not
statutory instruments. Paragraph 4 is a transitional provision that allows bodies recognised
under the 1989 Act or the Companies (Northern Ireland) Order 1990 to continue to be
recognised.
Part 2: Requirements for recognition of a supervisory body
1554. Paragraphs 6 and 7 require a recognised supervisory body to ensure that persons
eligible for appointment as a statutory auditor hold appropriate qualifications (as defined in
section 1219). They require a firm that is a statutory auditor to be controlled by qualified
persons. Paragraphs 8 to 11 require the bodies to have rules and practices which ensure that
auditors are fit and proper persons, that professional integrity and independence is
maintained, that technical standards for audits are assured and that there are procedures for
maintaining appropriate levels of competence. Paragraphs 12 to 16 specify the requirements
for monitoring, enforcement, discipline and investigation of complaints.
Part 3: Arrangements in which recognised supervisory bodies are required to participate
1555. Paragraphs 21 to 27 specify the arrangements with independent bodies that recognised
supervisory bodies must enter into in order to meet the requirements of this Schedule
described above.
Section 1218: Exemption from liability for damages
1556. This section is a restatement of section 48 of the 1989 Act. It sets out those bodies and
individuals that are exempt from liability for damages arising from the discharge or claimed
discharge of supervisory functions as specified in this Part of the Act (these include the
effects of rules, practices, powers and arrangements of the body). It applies to recognised
supervisory bodies (see sections 1217 and Schedule 10) and their officers, employees and
members of their governing bodies. The exemption does not apply if they have acted in bad
faith, or if it would prevent an award of damages because the act was unlawful under the
Human Rights Act.
Section 1219: Appropriate qualifications
1557. This section restates section 31 of the 1989 Act. It provides that a person holds an
appropriate audit qualification if he holds a professional qualification obtained in the UK
which is recognised in accordance with section 1220 and Schedule 11. Qualifications
recognised under Part 2 of the 1989 Act or the Companies (Northern Ireland) Order 1990 will
continue to be recognised.
1558. Persons whose qualifications from other EU Member States are recognised under the
European Communities (Recognition of Professional Qualifications) (First General System)
Regulations 2005 to practise as statutory auditors are also considered to hold an appropriate
qualification. So too are overseas qualifications from non-EU countries if approved under
section 1221. Subsection (2) restates a transitional provision from the 1989 Act for those
persons who began a course of study in accountancy before 1 January 1990 and obtained a
qualification between 1 January 1990 and 1 January 1996, enabling them to apply to the
Secretary of State for approval of their qualification. The transitional provisions contained in
section 31(2) and (3) of the 1989 Act have not been restated.
Section 1220: Qualifying bodies and recognised professional qualifications
1559. This section is a restatement of section 32 of the 1989 Act. It defines the term
“qualifying body” as a body that offers a professional qualification in accountancy and
introduces Schedule 11 which sets out the requirements that qualifying bodies must impose.
Only a qualification recognised in accordance with these provisions can be considered a
recognised professional qualification within the meaning of section 1219(1)(a).
Schedule 11: Recognised Professional Qualifications
Part 1: Grant and revocation of recognition of a professional qualification
Paragraph 1: Application for recognition of professional qualification
1560. This Schedule restates provisions in Schedule 12 to the 1989 Act. Paragraph 1
identifies the steps a body is required to take for a qualification it offers to be recognised by
the Secretary of State. Paragraph 3 specifies the steps that the Secretary of State is required
to take if the recognition is revoked. Paragraph 5 provides that recognition (and revocation)
orders are not statutory instruments. Paragraph 4 is a transitional provision that allows
qualifications recognised under the 1989 Act or the Companies (Northern Ireland) Order
1990 to continue to be recognised.
Part 2: Requirements for recognition of a professional qualification
1561. Paragraph 6 sets the minimum academic standards that a person must have attained
before he can attempt to gain the professional qualification. Paragraph 7 requires that the
qualification is restricted to persons who have either completed a relevant academic course or
have seven years’ professional experience. Paragraph 8 requires that an examination must be
passed (part of which has to be in writing) for the person to achieve the qualification. This
examination must be in subjects of theoretical knowledge prescribed by the Secretary of
State; or a university or equivalent level examination; or by practical demonstration of
knowledge to examination or diploma level that is recognised by the Secretary of State.
Paragraph 9 requires persons to carry out at least three years’ practical training.
Section 1221: Approval of overseas qualifications
1562. This section restates section 33 of the 1989 Act as regards the approval of overseas
qualifications from non-EU countries. It sets out the conditions that will need to be satisfied,
relating to the assurance of professional competence. The section provides for approval of all
those in a specified country who are qualified to audit accounts, or only those who hold
specified qualifications in that country. In the case of the latter, the Secretary of State may
specify any additional requirements to be satisfied. The section allows the Secretary of State
to recognise an overseas qualification only if there is comparability of treatment of UK
qualifications in the country in question.