Company Law Reform Bill [HL]

moved Amendment No. 321:"Page 235, line 17, at end insert ““in his own name, for and on behalf of the auditor””" The noble Baroness said: My Lords, I beg to move Amendment No. 321, which amends Clause 495 so that when the senior statutory auditor signs the audit report, as will be required for audits carried out by firms, two things are clear: first, that the statutory auditor signs in his own name, and, secondly, that he signs for and on behalf of the auditor. It is a new requirement in this Bill that a senior statutory auditor signs an audit report. When we debated this in Grand Committee, it was clear that the Minister thought Clause 495 would require the senior statutory auditor to sign in his own name. I put it to the Minister that that is not what the clause says. It merely says that the senior statutory auditor should sign it. It does not say what name he should sign. When the auditor is a company, the senior statutory auditor would naturally sign it in his own name, because companies do not have signatures. However, that is not true when a partnership is involved. When I was a partner in an auditing firm, I always signed in the name of the firm, rather than my own name, those things that were communications from the firm rather than me as an audit or client service partner. An audit report is a communication from the firm. I suggest to the Minister that without the first leg of my amendment, the most natural thing will be for partners in audit firms to carry on signing the partnership name. While I suggest that the Minister does need to look at this drafting, he will be aware that the purpose of tabling the amendment is to ensure that the fact that a senior statutory auditor signs the report is not in any way misunderstood by those reading an audit report. The Institute of Chartered Accountants in England and Wales continues to be concerned that this new requirement will create new misunderstandings about the role and responsibilities of the senior statutory auditor vis-à-vis the audit firm. In fact the Bill creates no responsibilities for the senior statutory auditor apart from lifting his pen to sign the audit report. He is not even mentioned in the new auditor offence in Clause 498, to which we shall come in due course. But how is the reader to know that this naming of the statutory auditor is intended to have no legal significance? Furthermore, unless it is clear that the senior statutory auditor signs for and on behalf of the firm, the new signatures may well obscure the fact that an audit opinion is the product of a firm’s procedures, and that the opinion is a collective judgment. The senior statutory auditor has a pivotal role in these procedures and in how the collective judgment is reached, but that is all. The judgments at the end of the day are the firm’s and not his—and he may not even agree with it if, for example, his own judgment has been overruled by the firm’s technical oversight procedures. I hope that the Minister will reconsider this area since it causes much concern to the auditors on whom it is being inflicted. I beg to move.