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Company Law Reform Bill [HL]

moved Amendment No. 301E:"Page 159, line 39, leave out paragraphs (a) to (c) and insert ““to ensure that any accounts required to be prepared in accordance with the requirements of this Act (and, where applicable, of Article 4 of the IAS Regulation) are properly prepared and show a true and fair view””" The noble Baroness said: This amendment addresses the question of what constitutes adequate accounting records. We will return to this topic when we reach Clause 486, which deals with auditors’ responsibilities towards accounting records, but for now I would like to consider Clause 359 and the company’s duty to keep such records. Amendment No. 301E was suggested to us by the Institute of Chartered Accountants of England and Wales, with whom the noble Lord, Lord McKenzie, will be familiar, as indeed am I and the noble Lord, Lord Sharman. It seeks to reduce the extended definition of ““adequate accounting records”” in subsection (1) to one which focuses on the ability of those records to enable accounts to be prepared in accordance with the Act and, more importantly, to show a true and fair view. This is a probing amendment to ascertain the Government’s thinking. The reason that the Institute of Chartered Accountants asked us to raise this is because of paragraph 635 of the Explanatory Notes, which states:"““‘Accounting records’ is a broad term and includes, for example, bank statements, purchase orders, sales and purchase invoices””." These items are not mentioned in Clause 359, which refers to ““statements of stock”” and similar items. The institute has commented that this goes well beyond the general understanding of the definition of accounting records, and its importance for auditors is to ascertain what kind of records there are because that will drive the kind of testing they need to do. However, we will come back to that in due course. As I said, I am trying to understand what the directors have to do so that the company can keep accounting records. It seems to me that the prime purpose of accounting records is to enable accounts to be prepared, which may be why this requirement is set out in Part 15. I do not believe it is necessary for bank statements to be kept, even less purchase orders, in order for Companies Act accounts or for proper accounting records to be prepared. Indeed, many organisations do not have purchase orders, and in today’s Internet-enabled world I am not at all clear that all companies keep something physical that looks like a bank statement. I would be grateful if the Government would clarify their view of what is meant by accounting records for the purposes of Clause 359. I beg to move.