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Appointment of auditors - Coggle Diagram
Appointment of auditors
Private company
Unless the directors have reasonable grounds for believing that the company will qualify from exemption to appoint auditors, auditors must be appointed, for their first audited financial year before the end of the period allowed for sending accounts to members or if earlier, the date accounts were sent to members
Auditors must appointed or reappointed within the period of 28 days commencing on the deadline for sending accounts to members or if earlier the date the accounts were actually sent to members
The directors may appoint the first auditor to the company. The directors may also appoint an auditor following a period during which the company was exempt from audit or to fill a casual vacancy caused by the resignation or death of the previous auditor
The directors will make the initial appointment of an auditor and the appointment is confirmed annually either by the members in general meeting or by there being no objection to the appointment automatically continuing in cases where no general meeting is held (a deemed re-appointment)
If a private company which is not exempt fails to appoint an auditor in accordance with CA2006 s.485/286, the Secretary of State may appoint an auditor to fill the vacancy. In circumstances where auditors have not been appointed, the company must given notice to the Secretary within seven days of the expiry of the period allowed for appointing auditors
Where no auditor has been appointed by the end of the next period allowed for appointing auditors, the auditor in office immediately before that time is deemed to have been re-appointed unless
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The directors have resolved that no auditor should be reappointed for the financial year in question
Members holding between them at least 5% of the total voting rights may prevent the deemed reappointment of an auditor by giving notice in writing to that effect to the company before the end of the accounting reference period immediately prior to the time when the auditor would otherwise be deemed to be reappointed
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Exempt companies
A company that is exempt from having its accounts audited is also exempt from the obligation to appoint auditors
A private company becoming exempt from the audit requirement does not automatically terminate the appointment of existing auditors and in such circumstances the directors should resolve that no auditors be appointed for the financial year
Certain transactions such as the giving of a solvency statement on a proposed reduction of capital, require the company's auditor to confirm that the statement made by the directors is reasonable
Auditor Remuneration
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Remuneration of auditors appointed or reappointed by the members must be fixed by the members or in such other manner as the members may decide
In practice most companies seek authority from their members to authorise the directors to determine the remuneration of the auditors. For a public company, this resolution is usually combined with the resolution reappointing the auditors for the coming year when the current accounts are laid before the members
The amount of the auditors remuneration in their capacity as auditors including any expenses must be disclosed in the accounts. Remuneration includes any cash value of any benefits in kind given to the auditors. In addition to remuneration for audit services, companies are required to disclose amounts paid to auditors and their associates for non-audit services such as financial or taxation services
Companies qualifying as small companies are exempt from these obligations to disclose auditors remuneration and non audit remuneration and parent companies qualifying as medium sized are exempt form the obligation to disclose non audit remuneration
Auditor liability
Except in specified circumstances there is a general prohibition on companies providing any form of liability limitation or other protection to their auditor
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If a company enters into a limitation of liability agreement with its auditor the financial accounts to which the agreement relates must contain a disclosure of the principal terms of the agreement and the date of approval of the resolution approving the resolution