Content Options

SUP 3.8 Rights and duties of auditors

Purpose

SUP 3.8.1G

The auditor of a firm has various rights and duties to obtain information from the firm and both to enable and to require him to pass information to the appropriate regulator in specified circumstances. This section imposes or gives guidance on those rights and duties.

Cooperation with the appropriate regulator

SUP 3.8.2R

An auditor of a firm must cooperate with the appropriate regulator in the discharge of its functions under the Act.

SUP 3.8.3G

The appropriate regulator may ask the auditor to attend meetings and to supply it with information about the firm. In complying with SUP 3.8.2 R, the auditor should attend such meetings as the appropriate regulator requests and supply it with any information the appropriate regulator may reasonably request about the firm to enable the appropriate regulator to discharge its functions under the Act.

SUP 3.8.4R

An auditor of a firm must give any skilled person appointed by the firm or appointed by the appropriate regulator4 all assistance that person4 reasonably requires (see SUP 5 and section 166(5) of the Act (Reports by skilled persons)).

4

Auditor's independence

SUP 3.8.5R

An auditor of a firm must be independent of the firm in performing his duties in respect of that firm.

SUP 3.8.6R

An auditor of a firm must take reasonable steps to satisfy himself that he is free from any conflict of interest in respect of that firm from which bias may reasonably be inferred. He must take appropriate action where this is not the case.

SUP 3.8.7G

SUP 3.5.4 G explains that an auditor whose appointment does not breach the ethical guidance in current issue from the auditor's recognised supervisory body will be regarded as independent by the appropriate regulator.

Auditors' rights to information

SUP 3.8.8G

SUP 3.6.1 R requires a firm to cooperate with its auditor. SUP 3.6.3 G refers to the rights to information which an auditor is granted by the Act. SUP 3.6.4 G refers to similar rights granted by the Companies Act 1985 or where applicable, the Companies Act 2006,2 the Building Societies Act 1986 and the Friendly Societies Act 1992.

Communication between the appropriate regulator, the firm and the auditor

SUP 3.8.9G

Within the legal constraints that apply, the appropriate regulator may pass on to an auditor any information which it considers relevant to his function. An auditor is bound by the confidentiality provisions set out in Part XXIII of the Act (Public record, disclosure of information and cooperation) in respect of confidential information he receives from the appropriate regulator. An auditor may not pass on such confidential information without lawful authority, for example if an exception applies under the Financial Services and Markets Act 2000 (Disclosure of Confidential Information) Regulations 2001 (SI 2001/2188) or with the consent of the person from whom that information was received and (if different) to whom the information relates.

Auditors' statutory duty to report

SUP 3.8.10G
  1. (1)

    Auditors are subject to regulations made by the Treasury under sections 342(5) and 343(5) of the Act (Information given by auditor or actuary to a regulator). Section 343 and the regulations also apply to an auditor of an authorised person in his capacity as an auditor of a person who has close links with the authorised person.3

  2. (2)

    These regulations oblige auditors to report certain matters to the appropriate regulator. Sections 342(3) and 343(3) of the Act provide that an auditor does not contravene any duty by giving information or expressing an opinion to the appropriate regulator, if he is acting in good faith and he reasonably believes that the information or opinion is relevant to any functions of the appropriate regulator. These provisions continue to have effect after the end of the auditor's term of appointment.

    In relation to Lloyd's, an effect of the insurance market direction set out at SUP 3.1.13 D is that sections 342(5) and 343(5) of the Act (Information given by an auditor or actuary to a regulator) apply also to auditors appointed to report on the insurance business of members.3

3

Termination of term of office, disqualification

SUP 3.8.11R

An auditor must notify the appropriate regulator without delay if he:

  1. (1)

    is removed from office by a firm; or

  2. (2)

    resigns before his term of office expires; or

  3. (3)

    is not re-appointed by a firm.

SUP 3.8.12R

If an auditor ceases to be, or is formally notified that he will cease to be, the auditor of a firm, he must notify the appropriate regulator without delay:

  1. (1)

    of any matter connected with his so ceasing which he thinks ought to be drawn to the appropriate regulator's attention; or

  2. (2)

    that there is no such matter.

SUP 3.8.13R

[deleted]1

SUP 3.8.14G

[deleted]1

1