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Companies Act 1989 (Delegation) Order 2005

I thank the noble Lords, Lord De Mauley and Lord Dholakia, for their support. The noble Lord, Lord De Mauley, asked whether this was change for change’s sake. Delegating the recognition function to an independent body with regulatory responsibilities for auditors will result in more effective oversight of the audit supervisory bodies and audit qualifications, because the performance of those bodies will be considered by a body with audit and professional oversight responsibilities and the associated experience and skills. That change is worth pursuing. The question of costs was raised. It is estimated that POBA’s direct costs will be some £865,000 for 2005–06. About half of that is for delegated functions. By any measure, the impact of that on audit firms and their clients is not likely to be material. Regarding whether this will reduce competition in the market, we recognise that concerns have been expressed about the small number of credible international providers of audit services. That has been exacerbated by the demise of Andersons. The Office of Fair Trading reviewed the situation in 2002 and concluded that the   market for audit and accountancy was highly concentrated, but the OFT intends to keep the matter under review. In addition, the European Commission has announced that it intends to make progress in these areas. It is in the interests of the standards of the profession as a whole that this is successful and that it should not cause a reduction in the number of firms which are operating. We do not believe that it will lead to more bureaucratic control—it will effectively be the same as the predecessor system. Regarding the impact of existing powers on recognised supervisory bodies, the aim of the order is to strengthen the existing regime by improving oversight of the recognised supervisory bodies and is not to undermine their existing role. I hope that I have dealt with each point to the satisfaction of noble Lords, but, if not, I shall be happy to follow up, either here or in writing. If there are no further points, I thank Members for their consideration and support for the order. It will improve our system of audit regulation by providing more effective oversight, will strengthen the reforms that we have already made to the regulation of audit and support better reporting, thereby improving confidence in our capital markets. I commend the order to the Grand Committee