§ Mr. Anthony CoombsTo ask the President of the Board of Trade whether he has any plans to amend the statutory requirements on disclosure of auditors' remuneration.
§ Mr. Neil HamiltonMy Department has today issued a consultative document seeking views on a proposed technical amendment to the Companies Act 1985 (Disclosure of Remuneration for Non-Audit Work) Regulations 1991.
The regulations seek to foster the independence and integrity of audit firms by requiring their client companies to disclose in their annual accounts any remuneration paid to the firm or its associates for non-audit services. The proposed amendment would offer clear deregulatory benefits to both the client company and the audit firm without detracting from the purpose of the regulations.
As many audit firms provide other services such as consultancy or tax advice, in some cases through separate but connected organisations, the definition of associate was made sufficiently wide to include all such entities. However, audit firms with insolvency practices can find themselves with numerous associates. as presently defined, because they are entitled to control 20 per cent. or more of a company's voting rights solely by virtue of an insolvency appointment.
Any receipt of remuneration by such companies is unlikely to be relevant to the independence and integrity of the audit firm. Moreover, it can be an onerous task both for the audit firm to compile a list of such associates and for the client company to check whether payment has been made to any of them for non-audit services. The proposed amendment aims to correct this situation. For similar reasons, the consultative document also seeks views on whether trustees, or certain types of trustee, should also be excluded from the definition.
371WA copy of the consultative document has been placed in the Library of the House. Comments should reach my Department by 30 July.