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Corporate and Consumer Affairs


COMPANIES
(AUDIT, INVESTIGATIONS AND COMMUNITY ENTERPRISE) BILL


 

Current Status of Bill

The Bill has now completed its Committee stage in the House of Commons.

Objectives

This Bill has two aims: improving confidence in companies and financial markets; and promoting social enterprise.

Content

The first Part of the Bill:

strengthens the system of regulating auditors by:

  • imposing independent auditing standards, monitoring and disciplinary procedures on the professional accountancy bodies; enabling the Secretary of State to delegate to the Financial Reporting Council (FRC) her powers to recognise the professional bodies; and securing the FRC's funding through a grant and a levy power;

strengthens the enforcement of accounting and reporting requirements by:

  • extending the remit of the Financial Reporting Review Panel so that it can look at interim as well as annual accounts and reports; giving it a power to require information from companies it is investigating; and opening a gateway for the Inland Revenue to pass information on defective accounts to the FRRP;
  • extending the Secretary of State's power to require more detailed disclosure of non-audit services provided by auditors to companies; giving additional powers to auditors to obtain information from companies; and requiring directors to state that they have not withheld relevant information from their auditors;

strengthens the company investigations regime by:

  • requiring any person to provide relevant information to company investigators; giving investigators the right to require entry and remain on premises of a company under investigation; and providing protection from breach of confidence claims for people who voluntarily provide information in certain circumstances.

The second part of the Bill provides for community interest companies. The main points are:

  • a statutory "lock" on assets and profits of CICs;
  • a "community interest report" which companies must pass in order to be registered as CICs; 
  • an annual community interest test  which CICs must provide to show how their activities have benefited the community;
  • a CIC regulator responsible for ensuring that CICs comply with their legal requirements;

Background

The measures to improve confidence in companies and markets are mostly recommendations from post-Enron reviews including the Co-ordinating Group on Audit and Accounting Issues chaired by Melanie Johnson and Ruth Kelly. They are the final part of the package, supporting other action already taken such as reform of the regulatory structure for the accountancy profession and changes to the Combined Code to strengthen the role of non-executive directors and audit committees.

The community interest company offers a purpose-made company vehicle for social enterprise, as recommended by the Strategy Unit report on the voluntary sector.

Further Information

A copy of the Bill itself and a copy of the Explanatory Notes, which give a more detailed explanation of certain aspects of the Bill can be found at http://www.publications.parliament.uk/pa/cm200304/
cmbills/158/2004158.htm
 

A complete set of Regulatory Impact Assessments (1Mb) covering each measure in more detail, including an assessment of their impact on business and public expenditure.

Fact sheets about the Bill (221 Kb)

Further information on CICs can be found at www.dti.gov.uk/cics

A draft of the regulations affecting Community Interest Companies (CICs) has now been published and can be found at  www.dti.gov.uk/cics

Contact Point

David Williams
Companies (Audit, Investigations, and Community Enterprise) Bill
UG 28
Department of Trade and Industry
1 Victoria Street
London
SW1H 0ET

Telephone: 0207-215-5381
e-mail: david.f.williams@dti.gsi.gov.uk



 
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