HL Deb 11 November 1976 vol 377 cc826-7

[No.36]

After Clause 17, insert the following new clause:

False statements, &c. to auditors.

—(1) An officer of a company who knowingly or recklessly makes a statement which—

  1. (a) is misleading, false or deceptive in a material particular, and
  2. (b) is a statement to which this section applies,
shall be guilty of an offence.

(2) This section applies to any statement made to the auditors of the company (whether orally or in writing) which conveys, or purports to convey, any information or explanation which they require, or are entitled to require, as auditors of the company.

(3) Any person guilty of an offence under this section shall be liable—

  1. (a) on conviction on indictment to imprisonment for a term not exceeding two years, or to a fine, or to both; or
  2. (b on summary conviction, to imprisonment for a term not exceeding six months, or to a fine not exceeding £400, or to both.'

Lord WINTERBOTTOM

My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 36. This, too, is an important Amendment. This new clause makes it an offence for an officer of a company knowingly or recklessly to give information to the company's auditors which is false or misleading in a material respect and provides that any officer committing such an offence shall be liable to heavy penalties. A provision of this kind was recommended in the Inspector's report on London and County Securities Limited. The Government have consulted widely and the provision has been generally welcomed.

The clause goes a little further than the original recommendation in the Inspector's Report on London and County Securities Limited in that it makes it an offence to give false or misleading information to an auditor either knowingly or recklessly. This means that it will be an offence not only if an officer deliberately gives such information, but also if he does so not caring whether or not it is true. The new clause provides a powerful sanction against any attempt by an officer of a company to mislead the auditor. It will considerably strengthen the position of the auditor in his dealings with the company's officers, especially if he is suspicious that they are trying to conceal something from him. It will therefore provide important additional protection for the interests of all those connected with the company. I am certain this is something which your Lordships will welcome.

Moved, That this House doth agree with the Commons in the said Amendment—(Lord Winterbottom.)