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Reminders from the Audit Registration Committee

In Audit News 45 we gave some guidance on how audit reports should be signed to reflect the requirements of s503 of the Companies Act 2006.

Signing audit reports

We explained that the following requirements must be met when signing the auditor’s report provided to the company on completion of the audit.

  • The name of the responsible individual (RI) in charge of the audit must be given.
  • The audit report has to be signed in his or her name, not in the name of the firm.
  • The printed name of the RI must be included in the signature block in the format it appears on the public audit register, ie, first name, surname.
  • The RI is also known as the ‘senior statutory auditor’ and this phrase must also be added to the signature block.
  • The firm’s name must be stated in the signature block as it appears on the register.
  • The words ‘Statutory Auditor(s)’ must also be included after the name of the firm.

Although these requirements have been in place for accounting periods starting after 6 April 2008 (for accounts filed at Companies House after 1 October 2009), we still see a large number of incorrect audit reports with the following errors:

  • the name of the RI is omitted;
  • the firm is wrongly described as ‘Registered Auditor(s)’ rather than ‘Statutory Auditor(s)’; and
  • the audit report has been signed in the name of the firm, rather than in the name of the RI.

To date, the Audit Registration Committee (ARC) has not taken regulatory action over these matters. Nevertheless, the signing requirements have been in place for several years, and the ARC expects that, by now, firms should be familiar with the requirements.

In future, any cases where the audit report is not signed in the name of the RI may be reported to the ARC for it to consider whether any regulatory action is necessary. You should therefore ensure that all RIs in your firm are fully aware of the signing requirements as this is an area that we will look at on your firm’s next visit.

Signing audit reports for market traded companies in the Crown Dependencies

We explained in Audit News 47 that, from 5 April 2010, new requirements applied for firms that audit companies incorporated in one of the Crown Dependencies that have ‘transferable securities’ admitted to trading on a ‘regulated market’ in the EU (called ‘market traded companies’).

The arrangements for firms that audit market traded companies are explained in Audit requirements in the Crown Dependencies and there is a common set of audit rules for firms in the Crown Dependencies that audit these companies, based on the Audit Regulations.

The rules for signing audit reports of market traded companies state that:

‘Save as otherwise authorised by the Companies Law in force at the time of signing the audit report, any audit report must:
- state the name of the RI who was in charge of the audit and be signed by this person in his or her own name; and
- state the name of the firm as it appears in the register.’

During 2013, the ARC was made aware of a number of audit reports for market traded companies that did not include the name of the RI and/or were not signed by the RI in his or her own name.

The committee recognises that the regime for the audits of market traded companies is relatively new and that it has not previously issued any guidance in this area. It therefore decided not to take any regulatory action in these cases.

The committee nevertheless considers that it’s important for firms to ensure that audit reports are properly signed. If any future instances are brought to the ARC’s attention, it will consider whether regulatory action, by way of published regulatory penalty, is appropriate.

If you’re in any doubt about the format for signing an audit report of a market traded company, you should contact ICAEW or the registrar in the relevant Crown Dependency for further guidance.

You should note that the signature only needs to be hand written for at least one copy supplied to the company. Printed versions - without a written signature and provided they contain the name of the RI - are fine for other purposes, including the filing at Companies House under sections 441 to 447 of the Companies Act 2006.