Company Law Reform Bill [HL]

Clause 492(1) states that audit firms should identify who is to sign an audit report as senior statutory auditor in accordance with standards issued by the European Commission or with guidance issued in the UK by the Secretary of State or somebody to whom he has delegated the task by order. If the Commission issues standards that address this point, firms will need to comply with them. If the Commission does not address this point, we believe that it should be possible to issue UK guidance, which could be issued by the Secretary of State, or the Secretary of State could delegate the task to somebody such as the FRC or one of its boards. There will not be different UK and European descriptions of the senior statutory auditor, because UK guidance can apply only if there are no applicable Commission standards. In practice, we would issue UK guidance only if there was a need and it was seen that there would be a sustained period without European guidance. Even then, we would seek to ensure that the UK’s guidance was consistent with any developing proposals in Europe. More specifically on the questions that the noble Baroness raised, we believe that the Commission will issue standards in due course, but possibly not by the time this Bill comes into force. Therefore, we shall see a process involving the FRC and consultation to arrive at an appropriate definition. The point about having one that would be a good starting point for European standards, which we would seek to encourage Europe to pick up, is a good one and one that we would seek to take forward. On the matter of the IAS definition, it is a suggestion that we shall certainly look into as we have no interest in reinventing wheels if there is a suitable definition already available—particularly one that might be a good starting point for Europe. So it will probably not be issued by the Commission in time for implementation, but there will be consultation and the FRC will almost certainly be involved. We would want to have something that would become the European definition, if that was possible.