Statutory Auditors (Delegation of Functions etc.) Order 2008

– in the House of Lords at 6:27 pm on 21 February 2008.

Alert me about debates like this

Photo of Baroness Vadera Baroness Vadera Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform 6:27, 21 February 2008

rose to move, That the draft order laid before the House on 17 December 2007 be approved.

Photo of Baroness Vadera Baroness Vadera Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform

My Lords, the order will renew the delegation of powers to regulate auditors from the Secretary of State to the Professional Oversight Board of the Financial Reporting Council. It replaces the 2005 order under which powers are currently delegated to the Professional Oversight Board. That order was made under the Companies Act 1989. The regulation of audit was reformed between 2002 and 2005 in response to corporate scandals such as Enron. Both the 2005 delegation order and the 2006 EU audit directive require independent oversight of the professional accountancy bodies' regulation of auditors. Some adjustments to the existing UK audit regime are needed to comply with the audit directive and a new delegation order is needed to reflect those changes. It is also required to reflect changes in the corporate structure at the Financial Reporting Council.

To be appointed as a statutory auditor of a UK company, an individual auditor or a firm must be a member of a recognised supervisory body and be subject to the rules of that body. The recognised supervisory bodies are the accountancy organisations recognised by the Professional Oversight Board. An important role of the board is to approve those bodies and to oversee how they carry out their regulatory work.

Under the delegation order, the Professional Oversight Board also has the power to make regulations on the register of auditors, on audit qualifications and on information to be made public by auditors, known as transparency. As a result of the audit directive, the Professional Oversight Board will also be responsible for co-operation with the European economic area and third-country audit regulators, as well as for the registration and regulation of third-country auditors. The delegation order will also have the effect of making the Professional Oversight Board subject to the Freedom of Information Act. The board is currently consulting on its draft publication scheme. There has been a full consultation on this order and no concerns have been raised. I commend the order to the House and I beg to move.

Moved, That the draft order laid before the House on 17 December 2007 be approved. 6th Report from the Joint Committee on Statutory Instruments.—(Baroness Vadera.)

Photo of Lord Sharman Lord Sharman Spokesperson in the Lords, Department for Business, Enterprise and Regulatory Reform

My Lords, again I will not delay your Lordships long. The order, which brings into effect a regime of regulation for the conduct of statutory audits and their auditors, has been debated widely and has been the subject of much consultation. It is very welcome that this replaces the old regime of self-regulation, which had many faults. The initial indications are that this regime will work well—it has certainly worked better than what we had before. I am grateful that the Minister mentioned the Freedom of Information Act, because it was as a result of an amendment to the Companies Bill in 2006, tabled by the noble Baroness, Lady Noakes, and me, that this regime is now subject to the Freedom of Information Act. I look forward to seeing how that will apply. We support the order.

On Question, Motion agreed to.