Change of Auditor Flow Chart for Companies

Published: 25 September 2023

2 minute read

Process when the Auditor of Public Company ceases to hold office

Process when the Auditor of Public Company ceases to hold office. Content explained in this section.

Process when the Auditor of Public Company ceases to hold office

The figure is a flow chart with eight labelled boxes linked by arrows. The chart is single-directional. At each step, arrows point forward to one or more boxes. Below the flow chart is described as lists in which the possible next steps are listed beneath each box label.

  1. Auditor ceases to hold office
    1. Forward to Does the company believe that the only reasons for the auditor's ceasing to hold office are exempt reasons?
  2. Does the company believe that the only reasons for the auditor's ceasing to hold office are exempt reasons?[1]
    1. If "Yes", No further action
    2. If "No", forward to Did the auditor cease to hold office at the end of an accounts meeting?
  3. Did the auditor cease to hold office at the end of an accounts meeting?[2]
    1. If "Yes", No further action
    2. If "No", forward to Is the company a Public Interest Company?
  4. Is the company a Public Interest Company?[3]
    1. If "Yes", Notify the FRC
    2. If "No", Notify the RSB of the outgoing auditor

Process when the Auditor of Private Company ceases to hold office

Process when the Auditor of Private Company ceases to hold office. Content explained in this section.

Process when the Auditor of Private Company ceases to hold office

The figure is a flow chart with six labelled boxes linked by arrows. The chart is single-directional. At each step, arrows point forward to one or more boxes. Below the flow chart is described as lists in which the possible next steps are listed beneath each box label.

  1. Auditor ceases to hold office
    1. Forward to Does the company believe that the only reasons for the auditor's ceasing to hold office are exempt reasons?
  2. Does the company believe that the only reasons for the auditor's ceasing to hold office are exempt reasons?[1]
    1. If "Yes", No further action
    2. If "No", forward to Did the auditor cease to hold office at the end of a period for appointing an auditor?
  3. Did the auditor cease to hold office at the end of a period for appointing an auditor?[4]
    1. If "Yes", No further action
    2. If "No", Notify the RSB of the outgoing auditor

Form of the statement

The notice is to take the form of a statement by the company of what the company believes to be the reasons for the auditor’s ceasing to hold office and must include:

  1. The auditor’s name and address
  2. The number allocated to the auditor on being entered in the register of auditors kept under section 1239 of the Companies Act 2006 (CA06);
  3. The company’s name and registered number.

Where the company receives a statement from the auditor under section 519 CA06, the statement is sent at the time required by section 519(4), and the company agrees with the contents of the statement, the notice may take the form of a copy of the statement endorsed by the company to the effect that it agrees with the contents of the statement.

The notice must be given within 28 days of the auditor ceasing to hold office.

How to send the statement to the FRC

The notifications to the FRC should be sent by email to: [email protected]

How to send the statement to the RSB

The RSB (Recognised Supervisory Body) is the body with which the audit firm is registered and which is responsible for the direct regulation of that audit firm. This will be one of the ACCA, ICAEW, ICAS or CAI.

Guidance on notifying changes of auditors to the RSBs can be found on the websites of the RSBs.

Footnotes

  1. [1]

    Section 519A(3) of CA06 defines “exempt reasons” as circumstances where:

    a) The Auditor is no longer to carry out statutory audit work within the meaning of Part 42 (see section 1210(1));

    b) The company is, or is to become, exempt from audit under section 477, 479A or 480, or from the requirements of this Part under section 482, and intends to include in its balance sheet a statement of the type described in section 475(2);

    c) The company is a subsidiary undertaking of a parent undertaking that is incorporated in the United Kingdom and

    - The parent undertaking prepares group accounts, and

    - The Auditor is being replaced as auditor of the company by the auditor who is conducting, or is to conduct, an audit of the group accounts;

    d) The company is being wound up under Part 4 of the Insolvency Act 1986 or Part 5 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)), whether voluntarily or by the court, or a petition under Part 4 of that Act or Part 5 of that Order for the winding up of the company has been presented and not finally dealt with or withdrawn.

    The reason described in c) is only an exempt reason if the auditor who is conducting, or is to conduct, an audit of the group accounts is also conducting, or is also to conduct, the audit (if any) of the accounts of each of the subsidiary undertakings (of the parent undertaking) that is incorporated in the United Kingdom and included in the consolidation.
  2. [2]

    The end of an accounts meeting for a public company is the date of a general meeting of the company at which the company's annual accounts and reports are (or are to be) laid in accordance with section 437 CA06.
  3. [3]

    Section 519A CA06 defines a Public Interest Company as a company which is:

    a) An issuer whose transferable securities are admitted to trading on a UK regulated market;

    b) A credit institution within the meaning given by Article 4(1)(1) of Regulation (EU) No 575/2013 of the European Parliament and of the Council, which is a CRR firm within the meaning of Article 4(1)(2A) of that Regulation; or

    c) An insurance undertaking as defined in Article 2(1) of Council Directive 91/674/EEC of 19 December 1991 of the European Parliament and of the Council on the annual accounts and consolidated accounts of insurance undertakings as that Article had effect immediately before IP completion day, were the United Kingdom a member State.

    “Issuer” and “regulated market” have the same meaning as in Part 6 of the Financial Services and Markets Act 2000.
  4. [4]

    Section 485(2) of the Companies Act 2006 provides that the period for appointing an auditor of a private company is the end of the period of 28 days beginning with:

    - the end of the time allowed for sending out copies of the company's annual accounts and reports for the previous financial year (see section 424), or

    - if earlier, the day on which copies of the company's annual accounts and reports for the previous financial year are sent out under section 423.

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