From 17 June 2016 there are changes to the audit regime, in
particular for public interest entities (PIEs). PIEs include
companies admitted to the Official List and traded on the main
market of the London Stock Exchange, credit institutions and
The changes derive from a new EU regulation ((EU) No. 537/2014)
on the Statutory Audit of Public Interest Entities and a directive
(2014/56/EU) amending the Statutory Audit Directive (2006/43/EC).
Together these new measures aim to strengthen auditor independence
and increase diversity in the audit market. They also create a
single market for audit services and introduce a co-ordinated
approach to the supervision of auditors in the EU.
Among the changes, new sections in the Companies Act 2006:
require a PIE to have an audit committee and set out the role
of the audit committee in relation to the appointment of its
establish a framework for audit retendering and rotation, under
which PIEs must broadly put their audits out to tender at least
every 10 years and change their auditors at least every 20
require the audit report for a PIE to include a statement on
any material uncertainty that may cast significant doubt about the
company's ability to continue as a going concern; and
allow the court to remove the auditor of a PIE on the
application of the Financial Reporting Council or on the
application of shareholders representing 5 per cent or more of the
voting rights or share capital.
There are also related changes to DTR 7 (corporate governance),
the UK Corporate Governance Code and the Financial Reporting
Council's Guidance on Audit Committees.
A measure of more general application, not limited to PIEs, is
that any contractual term that purports to restrict a company's
choice of auditor is void.
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