ACCA F4 - Corp and Business Law (ENG)

298 19: Other company officers  Part F Management, administration and regulation of companies

Where an auditor knowingly or recklessly causes their report to be materially misleading, false or

deceptive, they commit a criminal offence and may be liable to a fine.

2.6 Rights of auditors

The Companies Act provides statutory rights for auditors to enable them to carry out their duties.

The principal rights of auditors, excepting those dealing with resignation or removal, are set out in the

table below, and the following are notes on more detailed points.

Access to records A right of access at all times to the books, accounts and vouchers of the

company.

Information and

explanations

A right to require from the company's officers, employees or any other

relevant person, such information and explanations as they think necessary

for the performance of their duties as auditors.

Attendance at/notices of

general meetings

A right to attend any general meetings of the company and to receive all

notices of and communications relating to such meetings which any member

of the company is entitled to receive.

Right to speak at general

meetings

A right to be heard at general meetings which they attend on any part of the

business that concerns them as auditors.

Rights in relation to

written resolutions

A right to receive a copy of any written resolution proposed.

If auditors have not received all the information and explanations they consider necessary, they should

state this fact in their audit report.

The Act makes it an offence for a company's officer knowingly or recklessly to make a statement in any

form to an auditor which:

 Conveys or purports to convey any information or explanation required by the auditor and

 Is materially misleading, false or deceptive

The penalty is a maximum of two years' imprisonment, a fine or both.

2.7 Auditors' liability

Under the Companies Act any agreement between an auditor and a company that seeks to indemnify the

auditor for their own negligence, default, or breach of duty or trust is void. However, an agreement can be

made which limits the auditor's liability to the company.

Such liability limitation agreements can only stand for one financial year and must therefore be

replaced annually.

Liability can only be limited to what is fair and reasonable having regard to the auditor's responsibilities,

their contractual obligations and the professional standards expected of them.

Such agreements must be approved by the members and publicly disclosed in the accounts or directors'

report.

2.8 Termination of auditors' appointment

Auditors may leave office in the following ways: resignation; removal from office by an ordinary

resolution with special notice passed before the end of their term; failing to offer themselves for re-

election; and not being re-elected at the general meeting at which their term expires.

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