Company Law Reform Bill [HL]

moved Amendment No. 363:"Page 246, line 4, leave out subsection (1) and insert—" ““(1)   The appropriate audit authority on receiving notice under section (Duty of auditor to notify appropriate audit authority) or (Duty of company to notify appropriate audit authority) of an auditor’s ceasing to hold office— (a)   must inform the accounting authorities, and (b)   may if it thinks fit forward to those authorities a copy of the statement or statements accompanying the notice.”” The noble Lord said: My Lords, in moving government Amendment No. 363, I shall speak also to government Amendments Nos. 369 and 370 and the other amendments in the group. Clause 514 provides for the audit authority—typically POB or one of the supervisory bodies—on receiving statements from an auditor who is ceasing to audit a company to inform the accounting authorities; that is, the Secretary of State and his delegate, currently the FRRP. Amendments Nos. 363, 369 and 370 are technical amendments, mainly consequential on the government amendments in the group we have just discussed. Unless there are questions about them, I shall move on to discussing the other amendments in the group. On reviewing the debate on the similar amendments in Grand Committee, I think that there may have been some misunderstanding about the Government’s intentions in Clause 514. The statements made by resigning or otherwise departing auditors and the corresponding companies are to be sent to the audit authorities because their role is to oversee auditors, and they should take an interest in the reasons for their dismissal or resignation. On occasions, it is possible that these statements will reveal that the auditors believe that there has been some significant accounting irregularity and, when it happens, we think it appropriate for the audit authority to bring it to the attention of the accounting authorities. The Financial Reporting Review Panel will want to know about such accounting irregularities, as will the Department of Trade and Industry. The FRRP may want to apply to the court for an order requiring revision of the accounts. On the other hand, the DTI can consider investigation, inspection or prosecution. There are two accounting authorities mentioned in the Bill because they have different roles and powers. The FRRP will not want to receive statements about most situations where the auditor and company may have had a difference of view but where the published accounts have been agreed. Nor will the DTI, so the task we are giving the DTI is not to deal with a flood of paperwork of modest interest, as I think was suggested in Grand Committee, but to receive occasional reports of serious irregularities. I am sorry that we did not explain what was envisaged more clearly in the Explanatory Notes or in Grand Committee. I hope that, with this explanation, the noble Baroness will accept that it is entirely reasonable that the audit authorities should have discretion about what statements to forward to the audit authorities, and that those few statements that are worth sending should go to both the FRRP and the DTI. I beg to move.