Appointment of Auditors under Companies Act 2006

     

Appointment of Auditors under Companies Act 2006

Unless the company is exempt from the requirement to appoint auditors as a ‘small company’ or a ‘dormant company’ (and its members have not required an audit to be carried out) the company must appoint an auditor for each financial year (section 485 CA 2006 for private companies and section 489 CA 2006 for public companies).

In the case of a public company, the appointment must normally be made at the company’s ‘accounts meeting’, ie the meeting at which the company’s annual accounts and reports are laid before the members (this will invariably be the company’s AGM). In the case of a private company (which is not required to hold an AGM), the appointment must normally be made during ‘the period for appointing auditors’. This is a period of 28 days starting with the end of the period allowed for sending out accounts to members: this is based on the period allowed for filing accounts, ie 9 months from the year end or, if earlier, the date on which the accounts have actually been sent out to members by the company. So, for example, if the company sends out its accounts for a year end of 31 December on the following 1 July, the company will have a further 28 days after that date to appoint its auditors for the current year.

Companies that fail to appoint auditors on either of these bases must inform the Secretary of State within one week. The Secretary of State has the default power under section 486 (private company) and section 490 (public company) to fill the vacancy.

In both cases the directors have the statutory power to fill a casual vacancy in the office of auditor. No time limit applies for this.

The auditor ceases to hold office at the next accounts meeting or at the end of the next ‘period for appointing auditors’ as the case may be. In the case of a private company, the serving auditor will be deemed to have been re-appointed unless

•  some other auditor is appointed

• the serving auditor had been appointed by the directors under section 485(3) CA 2006, in which case the members’ approval is required

• the company’s articles require actual re-appointment

• the members have resolved to oppose the re-appointment under section 488 CA 2006

• the directors have resolved not to appoint an auditor for the current year.

The Act provides for regulations be made to require disclosure, in the notes to the company’s accounts or in the directors’ report, or in the auditor’s own report, of (i) the terms on which the auditor is appointed, remunerated or performs his duties and (ii) non-audit services provided by the company’s auditor and the amount of remuneration paid for those services.

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