Many of those that have changed auditors for their companies will not need to be reminded of the, obligations are outlined in the Companies Act 2006 on both an outgoing auditor and the company that it is ceasing to audit. These measures ensure that both company shareholders and the appropriate authorities are informed about the departure of the auditor and the reasons why.

While these provisions have been in place since April 2008, they were soon criticised on account of the unnecessary bureaucracy and duplication that they brought. The Government therefore consulted on changes in November 2009, although it is only now that simplified requirements have finally been introduced, applying to auditor departures from office in relation to a financial year beginning on or after 1 October 2015.

The changes should prove especially beneficial for company acquisitions, with companies no longer obliged to notify Companies House in the event of the resignation of an auditor or their removal from office by shareholder resolution. This is sure to be welcomed as a logical move by many, given the lack of need to notify Companies House whenever an auditor is appointed.

However, should an auditor cease to hold office prior to his term of office ending, the company is required to inform the relevant audit authority. The relevant authority for a listed company is the Financial Reporting Council (FRC), while unlisted companies – including, in the context of these changes, AIM companies – will be expected to contact the ICAEW (Institute of Chartered Accountants in England and Wales) or other accountancy body with which the auditor is registered.

The new rules also absolve the company of the need to inform the relevant audit authority if it reasonably believes that the auditor’s reasons for departing prior to the expiration of his term of office are all exempt reasons. Such “exempt” reasons include the auditor ceasing to practice as an auditor, the company being exempt from the auditing requirement, the company being wound up under an insolvency procedure and/or the company being a subsidiary undertaking of a UK parent company, with its new auditor auditing the group accounts and the individual accounts of other UK subsidiary undertakings included in the consolidation.

The above means that in the event of a company’s acquisition by another company, the acquired company will no longer be expected to inform the relevant authority if it requests the resignation of its existing auditors and appoints the auditors of the acquiring company in their place. Where there is still a need for the audit authority to be notified, the company will be given a longer period in which to do so, within 28 days of the auditor’s departure from office.

The changes do not significantly impact on the rights of an outgoing auditor to require that a general meeting be called, or on the company’s obligation to circulate the auditor’s statement – the latter applicable if the company is a listed one or, should it be unlisted, if the statement indicates matters that the auditor believes the company’s shareholders or creditors should be alerted to.