The Auditors Oversight Law, 2011 (the "Law") was passed by the Legislative Assembly of the Cayman Islands in September 2011 and came into force on 1 May 2012, by Governor's Order.
The Law provides for the regulation of auditors of market traded companies. The main purpose for this legislation is to facilitate the recognition of the auditor oversight regime in the Cayman Islands by other auditor oversight bodies including those in the European Union.
A market traded company is defined as an entity (including a company, partnership or unit trust), whether or not incorporated in the Cayman Islands, of which some or all of its transferable securities are admitted to trading on a regulated market (excluding an exempted entity specified as such by regulation).
Most significantly the Law provides for the establishment of a new corporate body – the Auditors Oversight Authority (the "Authority") – which functions to regulate and supervise auditors who audit the accounts of market traded companies. This includes subjecting "recognised" auditors to systems of quality assurance, investigation and penalties. Recognised auditors are defined as auditors that are entered on the register (which the Authority is required to establish and maintain – see below).
In particular, the Law:
- Provides for qualifications for appointment as an auditor of a market traded company so that only a recognised auditor is qualified for such appointment;
- Requires the Authority to establish a register of recognised auditors. Such persons will be those who:
- pursuant to the Law are eligible to be entered on the register;
- are responsible individuals;
- have applied to and been approved by the Authority;
- have paid the application or annual fee.
- States that an auditor is eligible to be entered on the register if:
- all responsible individuals of the auditor are licensed under section 11 or 12 of the Public Accountants Law (2009 Revision) (the "Regulatory Law");
- the auditor and all responsible individuals of the auditor are bound by and required to comply with the Rules (which may be issued by the Authority from time to time) when auditing the accounts of market traded companies; and
- all responsible individuals of the auditor have been designated by the auditor as competent to audit the accounts of a market traded company.
- Gives the Authority the discretion to accept or refuse an application for entry onto the register.
The Authority is further given wide discretion to amend the register and suspend, cancel or subject an entry to conditions in particular circumstances.
The Government of the Cayman Islands, working closely with the private sector, continues to demonstrate its commitment to ensuring that the Cayman Islands financial services industry keeps pace with the rapidly changing regulatory environment in which international business now operates.
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