With this it will be convenient to discuss amendment No. 369, in clause495, page 238, line 7, after ‘auditor’, insert
‘or (when the auditor is a sole practitioner) the name by which he practises,’.
The amendments are technical amendments, in response to which I hope the Minister can give us some clarification. The clause deals with who needs to sign the auditor’s report and in what circumstances; it states that if the auditor is an individual, the report must be signed by that individual, but if the auditor is a firm, it has to be signed by the senior statutory auditor in his name and on behalf of the firm.
That raises questions regarding the position of a sole practitioner, especially one who trades under another name. A situation could easily arise in which a sole practitioner had bought the practice of a previous sole practitioner for perfectly good commercial reasons and chosen to keep the original name. The Bill defines a firm as an entity, whether or not a legal person, which is not an individual. The question then arises: what does an individual who is using another name as a sole practice name do? Does he sign the report himself or does he sign it in the name of the sole practice company name? The sole practitioner does not fit well into the clause, and in fact clause 495 would also need to be amended if the Government accepted the need for clarification.
There is no change, as I understand it, from section 236 of the 1985 Act. We are not aware of any problem, either for an individual auditor or a reader of audit reports. If someone wanted to check on an auditor’s credentials or take legal action against Fred Smith trading as Bloggs and Co., the way in which Fred Smith had signed the audit report would not be a problem. To be frank, we cannot see what the amendment is all about and we resist it.
The amendment is about a sole practitioner who has a sole practice that does not carry his name. Is he an entity or should he sign as an individual? The intention to clarify how sole practitioners should sign off audit reports as auditors.
A sole practitioner is not a firm and can sign either way.