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30 Cards in this Set
- Front
- Back
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ARA
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Statutory accounts (filed w/ Reg) and non-statutory accounts (ie anything other than stat a/cs). Protects d’s (provide info for better planning), s/hs (allow to better judge affairs + if mnged competently) & creditors (judge whether co can pay debts). Also useful in wind-up for liq’s to see what assets may be realised.
Accouting records must be kept at RO or other place d’s decide, and be open to inspection by officers at all times. Auditors also have right of access to books. Records must be kept for at least 3 yrs (ltd) and 6yrs (plc). |
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Accounting reference period
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Permitted to have period end up to 7 days before/after end of that period.
Newly inc co – last day of mnth in which anniversary of inc. First ARP must be a period of more than 6 mnths + less than 18 mnths. Change ARD (s392) – by AA01. No limit on no. of times shorten or on length of shortened period. But for extension – cannot: - change period for which a/cs already overdue - extend period beyond 18mnths unless subj to admin order - extend more than once every 5 yrs (unless in admin, specific approval for Sec or State, doing so to align w/ parent/subsidiary undertaking established in EEA, form submitted by oversea co). Listed – issue announcement through a RIS immed. + if extended beyond 14 mnths will require additional interim report. |
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Timing of accounts
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Timing – 6mnths after ARP for plc and 9mnths for ltd. AGM must be held w/in 6mnths of end of financial yr (nb to ltd if hold AGM). Reg issues reminder 6-8 weeks before due date.
Listed co’s must publish w/in 4mnths of ye under DTRs. Must be avail. to public for 5yrs min & 2 copies sent to UKLA’s DVF. Must also issue half-yr financial reports w/in 2 mnths of period end. Listed co’s – may announce preliminary full year results. If accounts are 1st set and cover period of 12+months then time limit is 9 or 6 mnths from 1st anni. of inc OR 3 mnths from end of financial yr (whichever expires later). Late filing penalties (s451) – arised auto & appeals accepted in v. restricted circs. Calc on sliding scale re how late & type of co. |
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Preparation of accounts
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Form and content set out in s.396. Must be true and fair view & according to applicable IAS.
Parent co’s must prepare group accounts (s404) on consolidated basis unless subsidiary carries out substantially different activity + would obscure true and fair view. |
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Abbreviated accounts - S/M
(to reduce administrative burden on co’s & benefit from certain tax allowances) |
Small co exemption:
- consists of abbrev. BS & notes (no P&L or d’s report) w/ stmnt above sig that relied on small co exemptions AND a special auditor’s report (unless also claiming audit exemption) stating that reqs met. Full a/cs prep/issue to s/hs and inc copy of special auditor’s report. Medium-sized co exemption: - consists of full BS & notes w/ stmnt above sig that relied on m-s co exemption; abbrev. P&L (no need to disclose turnover); special auditor’s report stating reqs met (inc in full a/cs issued to s/hs); and d’s report. |
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Qualification for abbreviated accounts – S/M exemptions
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Small co – must meet 2 of following:
- annual turnover £6.5m or less - BS total £3.26m or less - av. no. of e/es 50 or less Medium-sized co – must meet 2 of following: - annual turnover £25.9m or less - BS total £12.9m or less - av. no. of e/es 250 or less If parent co, only qualifies if group headed by it is also S/M. If cease to be S/M, exemption continues for 1st yr that co doesn’t fulfil conditions. Continues uninterrupted if reverts to S/M. S/M groups – parent co qualifies for exemptions if none of member co’s is plc, banking/insurance co, or authorised person under FSMA. Exact same criteria as above but ‘aggregate net’ numbers. |
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Other exemptions – unlimited companies
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Unlimited co’s – do not have to file copy of a/cs unless during period were:
- subsidiary/parent of ltd undertaking; - banking/insurance co (or parent of one); - a qualifying co in terms of Partnerships & Unlimited Co’s (Accounts) Regs 1993 (ie if a member of a partnership + all other members are ltd cos, LLPs or unltd cos, or a Scottish firm each of whose members is a ltd co); - operating a trading stamp scheme. |
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Circulation of accounts
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Sent to all members (inc joint members if in Arts, first name on register in CA06), debenture holders (and further copy on request w/in 7 days no charge) & everyone entitled to receive notice of GMs at least 2 1days prior to GM which a/cs laid.
Ltd not having AGM must circulate no later than end of period for filing a/cs or the date on which actually delivered to CH if earlier. Plc circulates 2 1days before relevant GM (usually AGM). Can circulate electronically + notify available to view online. Quoted co’s must put on website asap following publication (to view until next ARA published at least) and lodge 2 copies to UKLA DVF. Retain small stock as needed, esp if taking adv of Part 13 CA06 (ecomms). Maintain mailing list of other who may wish to receive ARA (bank, suppliers). |
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Delivery of accounts
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At least 3 original signed sets (Reg, auditors, company, poss FSA).
Reg requires acceptable quality – min size font and reg no on front page. Now accepts e-filing of a/cs (Web Filing Service) if exempt from audit or dormant. Confirm receipt & if accepted. Also send reminders once a/cs due. Inbuilt templates & checks for errors. Can also file w/ HMRC at same time. |
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Liability for statements in accounts and reports
CA06 s. 463 – directors’ liability CA06 s. 1270 – issuers’ liability for reports and statements published under DTRs |
D’s liable to compensate co for any loss it suffers as a result of any untrue or misleading stmnt or omission. This req’s d’s actual K of it or recklessness. Owed to co not other person (s/h).
Co liable to investors who acquire securities of the issuer (the co) and suffer a loss as a result of an untrue or misleading stmnt or omission in a report (annual, half-yr & IMS). Again, K or recklessness is req’d but scope is wider and applies to PDMRs. No direct route for s/h to take action against d to claim against co under this. If successful co will be obliged to compensate investor and co itself has to claim against d under s. 463. Co’s whose securities traded on a reg market must inc responsibility statement in annual and half-yr report by persons resp w/in the issuer (usually whole board). Must be named in the report. Robust process of verification advisable before releasing info! |
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Summary financial statement (s. 426)
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s. 426 – all co’s may chose to issue summary financial statement to s/hs instead of full accounts – avoids overwhelming them and substantial costs. Must inc:
- P&L + BS (consolidated if applicable, then single P&L not obligatory) - summary d’s report - auditors’ report - summary d’s rem report (if listed). Must ascertain wishes of members – reply-paid card to them, period allowed for laying/delivering a/cs must not have expired, summary FS should be approved by board & orginal signed w/ d’s name stated, must be derived from ARA & state only a summary, must inc stmnt clearly declaring that doesn’t contain suff info to allow full understanding of results, inc stmnt informing s/h of right to receive a copy w/out charge. May annex chairman’s stmnt, bus review, general info, financial calendar (e.g. div payment dates), rem report. |
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Directors’ report (s. 415-419)
Auditors comment if report consistent with accounts (s. 496) |
Must be attached unless small co exemption. Summary of req’s (except banking co’s):
- principal activities (sig changes) - devt of bus during yr & position at ye - likely future devts & indication of activities in R&D - results & divs - diff in market value of land since BS date - names of d’s (bios sensible and if listed, all chairman and all committees) - charitable/political donations in excess of £2k - acquisition of co’s own sahres - stmnt re policy for disabled e/es (if 250+ ppl) - action taken to develop – info provided to e/es if affects them, consult them, encourage involvement (share schemes), achieve awareness re economic factors) - stmnt whether branches outside UK but w/in EU - supplier payment policy - auditors (stmnt re re-app) - audit info (stmnt that no relevant info which auditors unaware & d’s taken action to make themselves aware of such info) - indemnity arrangements Signed by d or cosec on board’s behalf. Name of sig stated. |
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Business review (s. 417) & enhanced business review
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Must be included unless small co exemption. Must include:
- fair review of bus - description of principal risks and uncertainties - balanced & comprehensive analysis of devt/perf during yr and position at end of yr - financial KPIs and non-financial KPIs where appropriate – must be measurable (M-sized co’s need not comply w/ non-f KPIs) - duty to promote success of co (s. 172) – reflect in drafting bus review - exemption from disclosing impending matters in course of negotiation, or a person, if would be prejudicial to co’s interests Many co’s disclose req’d info in diff sections – cross-referencing used. Quoted co’s inc enhanced business review in d’s report explaining devt/perf/position of co’s: - main trends/factors likely to affect future devt – forward looking disclosure - env matters, employees, and social + community issue (policies) - key contractual and other arrangements essential to bus (exemption if seriously prejudicial) |
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Listing Rules requirements for accounts
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Published w/in 4 mnths of ye. Must include:
- explanation of diffs of 10% or more between published forecasts + actual results - d’s interests in shares updated to w/in 1mnth prior to notice of meeting (distinguish (non)beneficial) - substantial shareholdings details (holding of 3% +) - details re s/h’s authority for purchase of own shares valid at ye – name of sellers for purchases made/proposed - details of equity or equity-linked securities issued for cash - key contracts or a/gs (eg w/ controlling s/hs or those that change control of co) - stmnt of compliance re UKCGC – comply or explain (EU directives confirmed CGC) - report on d’s rem - stmnt that bus is a going concern w/ supporting assumptions/qualifications - stmnt of d’s resp’s for prep a/cs (auditors must inc stmnt that reviewed disclosures) |
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Director’s remuneration report
The Directors Remuneration Report Regulations 2002 and CA06 ss. 420-422. Extends disclosure obligations of the Code, the Listing Rules and the DTRs. |
- membership of remco details
- forward-looking stmnt on rem policy covering summary/explanation of perf criteria for LT schemes, comparison to relevant co’s, explanations of policy re contract/notice periods, duration of contract & termination payments. - perf graph showing s/h return over past 5 financial yrs compared to perf of recognised index or comparator group of co’s - detailed reports on service contracts (dates, expiry dates, compensation provisions) - rem paid inc bonuses and taxable benefits – in a table inc previous yr - sig awards made to anyone not a d but previously had been - details of shares/debentures/sh options/interests in any other LT incentive schemes held for each - details re ST incentives (annual bonus plans) - description of general rights for each d under any co pension scheme w/ details on value - description of any services provided by a d to a 3rd party & disclose sums paid Often drafted by cosec, and much of info audited. Approved by board and signed by d or cosec on behalf of board. Ord res at the meeting where a/cs laid to approve report but advisory in nature only. |
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Preliminary announcements
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Not obligated but if chose to must comply with LRs – release as soon as approved by board. Imp routine announcement – great interest. Contents agreed w/ auditors & must be consistent w/ ARA published shortly thereafter. At a min, should contain:
- summary P&L account or stmnt of income w/ prior yr comparative figures (div info inc) - BS and CF stmnt, other FS w/ any sig additional info necy. |
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Half-year reports (under DTRs)
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Half-year reports on activities and P&L for 1st 6mnth of each financial yr. Must contain at a min table of figures containing same items as those for preliminary annual announcements. Comparative figures are those for corresponding half-yr period in preceding financial yr. Report must also inc assessment of trend of group’s activities, any dec of interim div, ref to group’s prospects.
Policies & presentation must be consistent w/ latest published a/cs unless to be changed in subsequent annual a/cs – disclose changes/reasons. Reviewed by auditors prior to release. Publish asap and def w/in 2 months of end of period. Board approval and then published by notifying a RIS. Not necy to send to s/hs. Inc responsibility stmnt made by the issuer. |
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Interim management statements (under DTRs)
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2 IMSs during yr – 1st issued in period between 10wks after beginning + 6wks before end of 1st 6mnths, 2nd issued in period between 10wks after beginning + 6wks before end of 2nd 6mnths. Broadly quarterly process so if produce quarterly results not req’d to issue IMSs.
IMS must inc: - explanation of material events/transactions taken place & impact - description of financial position & perf |
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Auditor eligibility
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Must be member of recognised supervisory body (RSB) + not an officer/e/e (or partner of one) of co. Recognised RSBs – ICAEW, ICAS, ICAI, ACCA, AAPA. If becomes ineligible during term, give notice to co & vacate office immediately, together w/ stmnt of circs to be brought to members/creditors attention. Sec state req’s co w/in 21 days to engage services of someone else to either audit again or review first audit + state whether 2nd audit necy.
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Auditor appointment
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D’s may appoint 1sst auditor who holds office until end of 1st meeting a/cs laid. Co reappoint or appoint diff auditor. Private co’s – s.485 – auditor’s period of office deemed to run between end of 28 days following circulation of annual accounts to corresponding period following yr. Can be deemed re-ap unless 5% members object by giving notice (s. 488). D’s may appoint an auditor to fill a casual vacancy.
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Resignation of auditor
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Must give notice in writing to co at RO w/ stmnt declaring whether any circs connected that he considers should be brought to attention of members/creditors (s. 519).
- If no circs – co files copy of notice (not stmnt) w/ Reg w/in 14 days. D’s fill vacancy. - If circs disclosed - period of 21 days must elapse to allow co/aggrieved person to apply to court to restrain publication (ss. 520-1). Court must be satisfied auditor not abusing rights to secure needless publicity for defamatory material. - If circs disclosed + no app made to court – auditor must file copy of stmnt w/ Reg in following 7 days + co must send copy of stmnt to all entitled to receive copy of a/cs w/in 14 days of receipt. Auditor then entitled to circulate stmnt to members re reasons for resig (not defamatory); requisition a GM to explain; attend/speak at GM convened w/in 2 1days of requisition + held w/in 28 days of notice. If listed, auditors req’d to make stmnt explaining circs in every instance if cease to hold office. Deposited at RO. |
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Removal of auditors
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Usual procedure is to request auditor to resign voluntarily. Could leave it until next GM.
Special notice must be given to co or proposed resolutions (s. 511) + copies sent to auditor proposed for removal/appointment/not being reappointed. May make reps in writing + ask co to circulate to s/hs. Co must comply & state in notice that reps been made. If too late to inc w/ notice still send out or read out at meeting. Auditor entitled to receive notice of/attend/speak at meeting. If change of auditor is pressing, may by ord res remove before retirement. Vacancy filled by co in GM, but poss by d’s. Form AA03 filed at Reg. |
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Remuneration
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Fixed by co in GM. In practice usual for meeting to give auth to d’s to fix rem. Must be stated in note to co’s annual accounts. Also disclose any rem for non-audit services. Apply to benefits ‘in kind’. CG issue – imp re independence + objectivity. Additional disclosure t/f req’d by co on fees payable to auditor & on processes for ensures I/O not compromised.
ss. 493-494 – Sec of State auth to req co’s to disclose additional info re terms of an auditor’s engagement/rem/perf of duties/provision of non-audit services. |
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Duties of auditors
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Primary duty is to report to members on a/cs. Contractual rel which implies obligation to perform work w/ skill + care (similar to tort), + comply w/ statutory duties. Other functions:
- reporting on non-disclosure of info re emoluments + substantial contracts w/ d’s or loans to d’s - considering whether info in d’s report is consistent w/ corresponding a/cs - auditing interim a/cs - making stmnts in connection w/ re-reg of ltd to plc - reporting re ltd purchasing own shares - give stmnt of opinion on summary financial stmnt re consistency - audit opinion re parts of d’s rem report |
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Rights of auditor
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Carry out whatever investigations appropriate to state whether proper a/cing record maintained and confirm a/cs in a/g w/ records. If not, state so. Offence for officer to give false info/explanations or make stmnt that he knows to be misleading/deceptive when q’d by auditor.
Stat rights: - right of access to co’s books, a/cs, vouchers + to ask for info/explanations - attend GMs + receive all notices/communications, WRs, also to speak if matters concern him - subsidiaries of co’s inc in GB must give auditor info req’d to perform duties re parent co - for parent co w/ subsidiary inc outside GB, parent co must obtain the info for auditor. Rights under Companies (Audit, Investigations and Community Enterprise) Act 2004 – inc into CA06: - power to request info from d/e/e – crim not to cooperate - d’s req’d to certify that not withheld any relevant info + a/cs don’t contain untrue info - Financial Reporting Review Panel has power to review a/cing practices - audit firms subj to professional standards + codes of conduct - BIS has power to investigate companies + to require access to co premises |
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Rights of auditor
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Carry out whatever investigations appropriate to state whether proper a/cing record maintained and confirm a/cs in a/g w/ records. If not, state so. Offence for officer to give false info/explanations or make stmnt that he knows to be misleading/deceptive when q’d by auditor.
Stat rights: - right of access to co’s books, a/cs, vouchers + to ask for info/explanations - attend GMs + receive all notices/communications, WRs, also to speak if matters concern him - subsidiaries of co’s inc in GB must give auditor info req’d to perform duties re parent co - for parent co w/ subsidiary inc outside GB, parent co must obtain the info for auditor. Rights under Companies (Audit, Investigations and Community Enterprise) Act 2004 – inc into CA06: - power to request info from d/e/e – crim not to cooperate - d’s req’d to certify that not withheld any relevant info + a/cs don’t contain untrue info - Financial Reporting Review Panel has power to review a/cing practices - audit firms subj to professional standards + codes of conduct - BIS has power to investigate companies + to require access to co premises |
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Liabilities of the auditor
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Must act honestly & w/ reasonable care and skill. Liable to co for any loss resulting from negligence or default in perf of his duties (court may grant relief if honest etc).
Liability unlimited. Concerns – reduced comp if found liable + go out of bu. Liability may be limited by approval of co by ord res. Details in liability limitation a/g to reduce to extent no less than such an amount which is fair and reasonable taking into a/c auditor’s resp’s & contractual obligations & prof standards expected. Must disclose a/g in ARA & will be re acts or omissions of the audior for the relevant financial yr. S/h’s have right to revoke a/g by ord res = effect of removing limitation for any acts following date of revocation. 2 new offences for auditors under CA06 s. 507: - knowingly or recklessly causing auditor’s report ot inc misleading or deceptive info - knowingly or recklessly omitting info in auditor’s report req’d by CA06. s. 527 – s/h rights to raise audit issues if quoted co – stmnt can be placed on website ahead of GM at which a/cs to be considered. Stmnt re audit of a/cs and the issue. Must be requisitioned by members rep at least 5% of total VRs or by 100 members holding paid up shares on av. sum per member of not less than £100. |
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The auditor’s report
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Must contain:
- that in their opinion, AAs prepared in accordance w/ CA06 - that true and fair view been given re BS, state of affairs of co; P&L; for group a/cs – same + undertakings included as a whole. Must inc names & sigs of auditors. Copy submitted to CH must have auditor’s report signed by auditor. If a firm then name/sig of senior statutory auditor. |
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Audit exemptions – small companies
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Ltds w/ turnover of less than £6.5m or BS total of less than £3.26m exempt provided that during yr, co wasn’t a plc, a parent co or subsidiary, or sub to reg regimes in s. 478 (banking, insurance, FSA-auth, TUs, e/r’s associations).
Becoming exempt doesn’t auto terminate app of existing auditor – reasonable to ask existing auditor to resign. D’s may appoint auditors if grow. NB – purpose of auditors is to provide measure of reassurance. T/f s. 476 states any member(s) holding at least 10% of nominal value may, by notice in writing deposited at RO of co no later than 1 month before ye, require co to obtain an audit of its a/cs for that yr. Unaudited a/cs may be delivered to Reg in form of abbreviated BS & notes containing stmnts above d’s sig that: - for ye xx co was entitled to exemption under s. 477 - members haven’t req’d co to obtain audit in acc w/ s. 476 - d’s acknowledge resp for ensuring co keeps a/cing records that comply w/ s. 386 AND preparing a/cs which give true & fair view of state of affairs of co at ye + of its P/L for the yr, in acc w/ ss. 394-396, + which otherise comply w/ CA req’s as far as applicable. - must be prep in acc w/ special provisions of CA re small co’s. Co may deliver the unabbreviated a/cs prepared for its members. Same stmnts must appear on unabbreviated BS. |
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Audit exemptions – dormant companies
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Must deliver a/cs & all other req’d return to Reg. Under s. 480, auto qualify for audit exemption provided they have no sig a/cing trans during yr. If so, prepare and deliver abbreviated BS & notes only.
Not regarded as sig trans – payment for shares taken by subscribers, fees paid to Reg of Cos, civil penalties (late filing fees), attending to stat matters (change Arts, RO, d). All other trans (bank/interest charges) disqualify co from claiming dormant status and will need to appoint auditors again. AA02 reduces admin burden – provides spaces for BS entries & special dec by d’s confirming resp for preparing a/cs and that co qualified as dormant for that period. Duty of d to manage dormant co no less than for trading co. Can remain dormant for any length of time. Cannot be struck off or dissolved simply b/c not trading. |
