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 insurance undertakings.

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 auditor;
  • 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 years;
  • 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.

The Statutory Auditors and Third Country Auditors Regulations 2016

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