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Companies Bill [Lords]

The hon. Gentleman brings me neatly on to what I was about to say. Amendments Nos. 439 and 440 would substitute the words ““knowingly or recklessly”” with ““dishonestly or fraudulently””. They would thus prevent the litigation risk from being excessively increased for auditors, in line with his comments about alignment with our understanding of the concept of fraud in current law. Although our amendments would leave an auditor offence in place, they would take away the negative by-products to which the clause as drafted will lead, such as companies having to put up with auditors over-auditing under the new law compared with what they would have otherwise done under the current law in order to be comfortable with declaring accounts to be true and fair. Let me turn briefly to the other amendments that hon. Members have tabled. Amendment No. 684 would be unworkable. As I have said, audit companies provide a whole host of services for their clients, such as tax advice, IT systems consultancy, internal audit, due diligence work and regulatory filing work. The restriction suggested under amendment No. 684 would harm not only the businesses that clearly value the additional services that they engage audit companies to provide, but audit businesses themselves. Amendment No. 686 proposes to limit auditors to serving a maximum of five years. Again, I would be concerned that the amendment would lead to added costs for companies and auditors because they would spend too much time on costly tender processes. New auditors have to take time to get to know client operations and doing that regularly would perpetually add unnecessary costs, prevent auditors from carrying out efficient audits on behalf of their clients and, dare I say, lead to the risk that auditors would be less able to spot that one anomaly that represented a major problem because they had not been involved with the company for as long as they ordinarily would have been. For small, medium-sized and large companies alike, that would add not only cost, but risk. Amendment No. 759 would be unworkable and unfair. It would devalue the accounts of companies not involved in any dispute unnecessarily. It would also have an impact on large accounting firms with offices throughout the world. The corporate structure of such a body might be that a large accounting firm in Europe was merged with another firm in Asia. In such circumstances, it might well be impossible to say whether a regulatory action taken in one continent should be included in the report for an office not merged in the other continent. It would be difficult to make the amendment stick. We are broadly happy with the Government amendments. Although we have already heard several interventions, I look forward to hearing hon. Members’ contributions to the debate and, of course, the Minister’s response to the issues that I have raised.