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Auditors Professional Oversight Third Country Auditors UK Register of Third Country Auditors

UK Register of Third Country Auditors

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The UK Register of Third Country Auditors contains details of third country auditors registered with the FRC in accordance with the UK requirements that give effect to provisions in EU Directive 2006/43/EC, as amended by EU Directive 2014/56/EU. Third country auditors are defined in Article 2 (4) of EU Directive 2006/43/EC, as amended, and in Sections 1241 and 1261 of the Companies Act 2006.

A third country auditory must register with the FRC if it audits the annual or consolidated accounts of a company incorporated outside the European Union/ European Economic Area (EU/EEA) whose transferable securities are admitted to trading on a regulated market in the UK.

However, no registration is required if the company is an issuer exclusively of debt securities within the meaning of Article 2 (1) (b) of EU Directive 2004/109/EC, the denomination of which is:

  • If admitted to trading on or before 31 December 2010: at least €50,000 per unit or, in the case of debt securities denominated in another currency, equivalent, at the date of issue, to at least €50,000; or

  • If admitted to trading after 31 December 2010: at least €100,000 per unit or, in the case of debt securities denominated in another currency, equivalent, at the date of issue, to at least €100,000.

Further detail on the regulatory background can be found here.

The Register shows the status of each third country auditor as either “Equivalent” "Transitional" or "Full (Article 45)”.

A third country auditor is shown as "Equivalent" where it has been accepted for registration in accordance with the UK requirements that give effect to Article 46 of EU Directive 2006/43/EC, as amended, and the European Commission Decision of 19 January 2011 (2011/30/EU) (as amended by the Commission Decisions of 13 June 2013 (2013/288/EU) and 25 July 2016 (2016/1223)), and the Commission Decision of 14 July 2016 (2016/1155). 

The third country auditors classified as “Equivalent” are subject to a system of public oversight, quality assurance, investigation and penalty systems in their home country that the EU has concluded are equivalent to the systems for auditors and audit firms of EU Member States. In the UK such audit firms are required to register with the FRC but in general are not then subject to further UK regulatory requirements. The FRC places reliance on the equivalent systems of audit regulation in the home country. In a small number of cases “Equivalent” third country auditors audit relevant companies that are outside the scope of the home regulator. In principle such audits are subject to external review by, or on behalf of, the FRC but you should not assume that such a review has taken place.

A third country auditor is shown as "Transitional" where it has been accepted for registration in accordance with the UK requirements that give effect to the transitional provisions in Articles 2 and 3 of, and the Annex to, the European Commission Decision of 19 January 2011, as amended by the Commission Decision of 25 July 2016 (2016/1223).
 
The countries listed in the Annex to the Decision either already have some form of audit regulation in place or are considering changes that would put a system of audit regulation in place. However, it is important to be aware that there are wide differences in the nature and extent of audit regulation in the countries listed in the Annex. "Transitional" status provides no assurance as to the extent to which that third country auditor is subject to audit regulation in its home country. Nor, where the third country auditor is regulated in its home country, is it necessarily the case that the specific audit(s) of the relevant issuer(s) fall within the scope of the home country regulatory regime and, for example, are liable to review in the home country. Third country auditors registered by the FRC in accordance with the transitional arrangements are not subject to external review by the FRC.

Third country auditors in neither of the above categories are registered in accordance with the UK implementation of Article 45 of EU Directive 2006/43/EC, as amended. The status is shown in the register as "Full (Article 45)". The information that such firms have to submit on their application for registration is on Form B which should be read with the accompanying guidance. This information is subject only to limited checks at the application stage. Firms with this status are unlikely to be subject to substantive or independent regulation in their home country. Such firms are, in principle, subject to periodic external inspections by, or on behalf of, the FRC. You should not assume that any such review has been undertaken and should contact the FRC if you have specific queries.

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