The Companies (Audit, Investigations and Community Enterprise) Act 2004 will give auditors greater powers to get to the information they require, and increase the authority of the profession’s watchdogs.
It does not, though, contain provisions to allow auditors to limit their liability by contract with clients. Proposals for a system of proportionate liability, where auditors’ liability would be related to how much the firm was to blame, is likely to appear in the second companies bill in the New Year.
Among the provisions in the Act are:
- requirements for directors to make a statement in the directors’ report about the disclosure of relevant information to auditors;
- government powers to require large and quoted companies to publish details of non-audit services provided by their auditors;
- the requirement for professional accounting bodies the supervise auditors to sign up to independent auditing standards, monitoring and disciplinary procedures;
- powers for the Financial Reporting Review Panel to require documents and broaden its scope;
- allowing the Inland Revenue to pass information about suspect accounts to the FRRP.
‘One of the next steps will be to introduce a new operating and financial review for quoted companies, which will provide investors with new and more meaningful information about companies’ business opportunities, risks and future prospects,’ said trade and industry minister Jacqui Smith.
‘We then intend to publish for consultation, draft clauses implementing the wide-ranging company law review – the biggest overhaul of company law in a century.’
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