Companies Act 2006

Power to require second company audit

1248 Secretary of State’s power to require second audit of a company

(1) This section applies where a person appointed as statutory auditor of a company was not an appropriate person for any part of the period during which the audit was conducted.

(2) The Secretary of State may direct the company concerned to retain an appropriate person—

(a) to conduct a second audit of the relevant accounts, or

(b) to review the first audit and to report (giving his reasons) whether a second audit is needed.

(3) For the purposes of subsections (1) and (2) a person is “appropriate” if he—

(a) is eligible for appointment as a statutory auditor or, if the person is an Auditor General, for appointment as statutory auditor of the company, and

(b) is not prohibited by section 1214(1) (independence requirement) from acting as statutory auditor of the company.

(4) The Secretary of State must send a copy of a direction under subsection (2) to the registrar of companies.

(5) The company is guilty of an offence if—

(a) it fails to comply with a direction under subsection (2) within the period of 21 days beginning with the date on which it is given, or

(b) it has been convicted of a previous offence under this subsection and the failure to comply with the direction which led to the conviction continues after the conviction.

(6) The company must—

(a) send a copy of a report under subsection (2)(b) to the registrar of companies, and

(b) if the report states that a second audit is needed, take such steps as are necessary for the carrying out of that audit.

(7) The company is guilty of an offence if—

(a) it fails to send a copy of a report under subsection (2)(b) to the registrar within the period of 21 days beginning with the date on which it receives it,

(b) in a case within subsection (6)(b), it fails to take the steps mentioned immediately it receives the report, or

(c) it has been convicted of a previous offence under this subsection and the failure to send a copy of the report, or take the steps, which led to the conviction continues after the conviction.

(8) A company guilty of an offence under this section is liable on summary conviction—

(a) in a case within subsection (5)(a) or (7)(a) or (b), to a fine not exceeding level 5 on the standard scale, and

(b) in a case within subsection (5)(b) or (7)(c), to a fine not exceeding one-tenth of level 5 on the standard scale for each day on which the failure continues.

(9) In this section “registrar of companies” has the meaning given by section 1060.

1249 Supplementary provision about second audits

(1) If a person accepts an appointment, or continues to act, as statutory auditor of a company at a time when he knows he is not an appropriate person, the company may recover from him any costs incurred by it in complying with the requirements of section 1248.

For this purpose “appropriate” is to be construed in accordance with subsection (3) of that section.

(2) Where a second audit is carried out under section 1248, any statutory or other provision applying in relation to the first audit applies also, in so far as practicable, in relation to the second audit.

(3) A direction under section 1248(2) is, on the application of the Secretary of State, enforceable by injunction or, in Scotland, by an order under section 45 of the Court of Session Act 1988 (c. 36).