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New legislation has brought in additional requirements in respect of the disclosure of auditor remuneration. This is part of the government’s strategy to use regulation and disclosure in order to head off the perceived threat to auditor independence. The new regulations apply for periods beginning on or after 1 October 2005. These changes include a significant increase in the disclosure about non-audit work carried out by auditors.
The ICAEW have issued guidance on the new requirements. A summary of their guidance is included below:
• Applicable to UK GAAP and IFRS accounts
• Applicable to Companies, Charitable Companies & Limited Liability Partnerships
• Comparatives are required
• Small and Medium sized companies only need to disclose audit fees
Audit fees
• In consolidated accounts this only includes fees payable to the parent company auditor for audit work on the parent company and consolidated accounts
• No requirement to disclose separately fees relating to the audit of the parent company
• The amount disclosed is the fee relating to relevant annual accounts
• Fees paid by subsidiaries to unassociated auditors are not required to be disclosed
Other services
• Subsidiaries are exempt from disclosing other (non-audit) services
• Where a service could fall within more than one category, it is treated as falling within the one highest on the list.
• Fees for other services should be calculated on an accruals basis
• Companies are required to disclose the amounts receivable by the auditor for each of the following services separately:
1. Auditing the accounts of associates of the company
2. Other services supplied pursuant to legislation
3. Other services relating to taxation
4. Services relating to information technology
5. Internal audit services
6. Valuation and actuarial services
7. Services relating to litigation
8. Services relating to recruitment and remuneration
9. Services relating to corporate finance transactions
10. All other services
What goes where?
Category 1 - Audits of subsidiaries and associated pension schemes
Category 2 - Interim reviews in accordance with the Listing Rules
Category 3 - Tax compliance and tax advisory services
Category 10 - Advice on accounting matters and interim reviews not required by legislation
For more information
Please contact David Cox, haysmacintyre, London, United Kingdom
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