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SIR 1000 - Investment Reporting Standards applicable to all engagements in connection with an Investment Circular (July 2005)

The Auditing Practices Board Limited

The Auditing Practices Board Limited, which is part of the Financial Reporting Council, prepares for use within the United Kingdom and the Republic of Ireland:

• Standards and guidance for auditing;
• Standards and guidance for the work of reporting accountants in connection with investment circulars; and
• Standards and guidance for auditors' and reporting accountants' integrity, objectivity and independence

with the objective of enhancing public confidence in the audit process and the quality and relevance of audit services in the public interest.

The Auditing Practices Board Limited discharges its responsibilities through a Board ("the APB") comprising individuals who are eligible for appointment as company auditors, and those who are not so eligible. Those who are eligible for appointment as company auditors may not exceed 40% of the APB by number.

Neither the Auditing Practices Board Limited nor the APB accepts any liability to any party for any loss, damage or costs howsoever arising, whether directly or indirectly, whether in contract, tort or otherwise from any action or decision taken (or not taken) as a result of any person relying on or otherwise using this document or arising from any omission from it.

© APB Limited 2005 ISBN 1-84140-707-0

Contents

• The Auditing Practices Board Limited
• Standards for Investment Reporting
• Introduction
• Engagement acceptance and continuance
• Agreeing the terms of the engagement
• Ethical requirements
• Legal and regulatory requirements
• Quality control
• Planning and performing the engagement
• Documentation
• Professional scepticism
• Reporting
• Modified opinions
• Pre-existing financial information
• Consent
• Events occurring between the date of the reporting accountant's report and the completion date of the transaction
• Effective date
• APPENDIX 1
• APPENDIX 2
• APPENDIX 3
• APPENDIX 4
• Notice to Readers

Standards for Investment Reporting

1000 – Investment Reporting Standards Applicable to All Engagements in Connection with an Investment Circular

SIR 1000 contains basic principles and essential procedures (“Investment Reporting Standards”), indicated by paragraphs in bold type, with which a reporting accountant is required to comply in the conduct of all engagements in connection with an investment circular prepared for issue in connection with a securities transaction governed wholly or in part by the laws and regulations of the United Kingdom.

SIR 1000 also includes explanatory and other material, including appendices, in the context of which the basic principles and essential procedures are to be understood and applied. It is necessary to consider the whole text of the SIR to understand and apply the basic principles and essential procedures.

The definitions in the glossary of terms set out in Appendix 4 are to be applied in the interpretation of this and all other SIRs. Terms defined in the glossary are underlined the first time that they occur in the text.

This SIR replaces SIR 100 “Investment circulars and reporting accountants” issued in December 1997.

To assist readers, SIRs contain references to, and extracts from, certain legislation and chapters of the Rules of the UK Listing Authority. Readers are cautioned that these references may change subsequent to publication.

Introduction

1The application of Standards for Investment Reporting (SIRs) is best understood by reference to the following four defined terms used throughout the SIRs:

1. investment circular is a generic term defined as "Any document issued by an entity pursuant to statutory or regulatory requirements relating to securities on which it is intended that a third party should make an investment decision, including a prospectus, listing particulars, a circular to shareholders or similar document";
2. reporting accountant is defined as “An accountant engaged to prepare a report for inclusion in, or in connection with, an investment circular. The reporting accountant may or may not be the auditor of the entity issuing the investment circular. The term “reporting accountant” is used to describe either the engagement partner or the

engagement partner's firm². The reporting accountant could be a limited company or an engagement principal employed by the company;

1. public reporting engagement is defined as “An engagement in which a reporting accountant expresses a conclusion that is published in an investment circular, and which is designed to enhance the degree of confidence of the intended users of the report about the 'outcome³' of the directors' evaluation or measurement of ‘subject matter' against 'suitable criteria"; and
2. private reporting engagement is defined as “An engagement, in connection with an investment circular, in which a reporting accountant does not express a conclusion that is published in an investment circular”. Private reporting engagements are likely to involve the reporting accountant reporting privately to one or more of an issuer, sponsor or regulator.

2In order to provide flexibility to develop SIRs for a wide range of possible public reporting engagements, the description of public reporting engagement includes three generic terms. Their meanings are as follows:

1. the "subject matter" of the engagement is that which is being evaluated or measured against suitable criteria. Examples of subject matter are the entity's financial position and the directors' expectation of the issuer's profit for the period covered by a profit forecast;
2. criteria are the benchmarks used to evaluate or measure the subject matter. "Suitable criteria” are usually derived from laws and regulations and are required by directors to enable them to make reasonably consistent evaluations or measurements of the subject matter. With respect to public reporting engagements the suitable criteria for specific types of engagement are described in the individual SIR dealing with such engagements. Where the reporting accountant's engagement requires it to consider only certain criteria, such criteria are described as “reporting accountant's criteria". Reporting accountant's criteria are set out in the SIRs. Where a SIR has not been issued with respect to a particular type of reporting engagement, the reporting accountant uses those criteria that are specified by legislation or regulation. The evaluation or measurement of a subject matter solely on the basis of the reporting accountant's own expectations, judgments and individual experience would not constitute suitable criteria; and
3. the "outcome” of the evaluation or measurement of a subject matter is the information that results from the directors applying the suitable criteria to the subject

matter. Examples of outcomes are historical financial information and a directors' profit forecast and related disclosures that are included in an investment circular.

3Not all engagements performed by a reporting accountant are public reporting engagements. Examples of engagements that are not public reporting engagements include:

• Engagements involving the preparation of a comfort letter.
• Engagements involving the preparation of a long form report.

Such engagements are private reporting engagements.

4This SIR establishes basic principles and essential procedures for the work of reporting accountants that are common to all reporting engagements (both public and private) relating to investment circulars. Other SIRs set out basic principles and essential procedures to address the particular issues and requirements arising on specific public reporting engagements. These comprise:

1. SIR 2000 “Investment reporting standards applicable to public reporting engagements on historical financial information";
2. SIR 3000 “Investment reporting standards applicable to public reporting engagements on profit forecasts"; and
3. SIR 4000 “Investment reporting standards applicable to public reporting engagements on pro forma financial information.

5Appendix 1 summarises public reporting engagements that reporting accountants may be required to undertake under the Prospectus Rules.

Engagement acceptance and continuance

6The reporting accountant should accept (or continue where applicable) a reporting engagement only if, on the basis of a preliminary knowledge of the engagement circumstances, nothing comes to the attention of the reporting accountant to indicate that the requirements of relevant ethical standards and guidance, issued by the Auditing Practices Board and the professional bodies of which the reporting accountant is a member, will not be satisfied. (SIR 1000.1)

7The reporting accountant should accept (or continue where applicable) a reporting engagement only if:

1. the scope of the engagement is expected to be sufficient to support the required report;

1. the reporting accountant expects to be able to carry out the procedures required by the SIRs; and
2. those persons who are to perform the engagement collectively possess the necessary professional competencies. (SIR 1000.2)

8In determining whether the scope of the engagement is expected to be sufficient to support the required report, the reporting accountant considers whether there appear to be any significant limitations on the scope of the reporting accountant's work.

9A reporting accountant may be requested to perform reporting engagements on a wide range of matters. Some engagements may require specialised skills and knowledge. In these circumstances the reporting accountant considers using internal or external specialists having the appropriate skills.

Agreeing the terms of the engagement

10The reporting accountant should agree the terms of the engagement with those from whom they accept instructions. All the terms of the engagement should be recorded in writing. (SIR 1000.3)

11Generally, a letter is prepared by the reporting accountant, covering all aspects of the engagement, and accepted in writing by the directors of the issuer and, where relevant, the sponsor. With respect to a public reporting engagement the letter will record the reporting accountant's understanding of what constitutes the subject matter of the engagement, the suitable criteria, and the information that constitutes the outcome of the evaluation or measurement of the subject matter against the suitable criteria.

12As an alternative to a letter drafted by the reporting accountant, an instruction letter may be issued by the directors and, where relevant, the sponsor. In these circumstances, its terms are formally acknowledged by the reporting accountant in writing, clarifying particular aspects of the instructions and covering any matters that may not have been addressed.

13This letter, or exchange of letters (together referred to as “the engagement letter”), provides evidence of the contractual relationship between the reporting accountant, the entity and, where relevant, the sponsor. It sets out clearly the scope and limitations of the work to be performed by the reporting accountant. It also confirms the reporting accountant's acceptance of the engagement and includes a summary of the reporting accountant's responsibilities and those of the directors and, where relevant, the sponsor as they relate to the reporting accountant's role.

14The engagement letter establishes a direct responsibility to the other parties from the reporting accountant. It is also the mechanism by which the scope of the reporting accountant's contribution is defined and agreed. If in the course of the engagement the

terms of the engagement are changed, such changes are similarly agreed, and recorded in writing.

15The engagement letter will usually set out the form of any reports (public or private) required (including, in each case, the nature of any opinion to be expressed by the reporting accountant). Accordingly, it is important to clarify those from whom the reporting accountant has agreed to accept instructions including, where relevant, sponsors, and determine their requirements and the scope of such reports, at an early stage.

16The engagement letter should specify those reports that are intended for publication in the investment circular and any other reports that are required. The engagement letter should specify, in respect of each report, to whom it is to be addressed. (SIR 1000.4)

17The engagement letter sets out the express terms governing the reporting accountant's contractual responsibilities in connection with the transaction to those instructing them. Reporting accountants do not accept responsibility beyond the matters or entities in respect of which they are specifically instructed. Nor are they expected to comment or report on matters which more properly fall within the skill and experience of other experts or advisers. They understand, however, the need to apply their own professional skill and experience in interpreting and carrying out their instructions. The reporting accountant may find information outside the defined scope of the engagement that it believes should be disclosed, because, in its view such information is material to the purpose of the investment circular or to the proposed transaction. The reporting accountant discusses such matters with the directors of the issuer and the sponsor, where relevant, and agrees a course of action.

Ethical requirements

18In the conduct of an engagement involving an investment circular, the reporting accountant should comply with the applicable ethical standards issued by the Auditing Practices Board. The reporting accountant should also adhere to the relevant ethical guidance of the professional bodies of which the reporting accountant is a member. (SIR 1000.5)

19While it is not the responsibility of the reporting accountant to judge the appropriateness, or otherwise, of a proposed transaction, in respect of which they have been engaged, there may be rare circumstances where a reporting accountant considers the proposed transaction, or their proposed association with the transaction, to be so inappropriate that the reporting accountant cannot properly commence work or continue to act.

Legal and regulatory requirements

20The reporting accountant should be familiar with the applicable laws and regulations governing the report which is to be given. (SIR 1000.6)

21The principal legal and regulatory requirements applicable to reporting accountants in the United Kingdom are summarised in Appendix 2. Readers are cautioned that these references may change subsequent to publication of this SIR.

Quality control

22The reporting accountant should comply with the applicable standards and guidance set out in International Standard on Quality Control (UK and Ireland) 1 and ISA (UK and Ireland) 220. (SIR 1000.7)

23International Standard on Quality Control (UK and Ireland) 1 “Quality control for firms that perform audits and reviews of historical financial information, and other assurance and related services engagements” provides standards and guidance on the system of quality control that a firm establishes.

24The quality control procedures that an engagement partner applies are those set out in ISA (UK and Ireland) 220 “Quality control for audits of historical financial information”. In applying ISA (UK and Ireland) 220, the terms “audit” and “audit engagement” are read as "reporting accountant's engagement” and the term “auditor's report” is read as "reporting accountant's report".

25When undertaking any engagement involving an investment circular a partner with appropriate experience should be involved in the conduct of the work. (SIR 1000.8)

26Reporting accountants are frequently from a firm that is also the auditor of the entity. The audit partner, although having knowledge of the entity, may not have the necessary experience to take responsibility for all aspects of an engagement involving an investment circular. The extent of involvement of a partner with the requisite experience of dealing with investment circulars is determined, for example, by the expertise required to make the reports that the reporting accountant has agreed to provide and the experience of the audit partner.

27In some cases it may be appropriate for the partner with the requisite experience of dealing with investment circulars to act as a second partner. In other cases it may be appropriate for such a partner to be the lead engagement partner.

Planning and performing the engagement

28The reporting accountant should develop and document a plan for the work so as to perform the engagement in an effective manner. (SIR 1000.9)

29Planning is an essential component of all reporting accountant's engagements. Examples of the main matters to be considered include:

• The terms of the engagement.
• Ethical considerations.
• Whether the timetable is realistic.
• The reporting accountant's understanding of the entity and its environment.
• Identifying potential problems that could impact the performance of the engagement.
• The need for the involvement of specialists.

30Planning is not a discrete phase, but rather an iterative process throughout the engagement. As a result of unexpected events, changes in conditions or the evidence obtained from the results of evidence-gathering procedures, the reporting accountant may need to revise the overall strategy and engagement plan, and thereby the resulting planned nature, timing and extent of further procedures.

31A preliminary review of the available information may provide an indication of potential issues that might need to be addressed in carrying out the engagement. If the preliminary review indicates that there are factors which may give rise to a qualification or other modification of any report, then such factors are reported immediately to the directors and, where relevant, the sponsor.

32Changes in circumstances, or unexpected results of work carried out, may require the plan to be amended as work progresses. Any such amendments are documented. Where the changes affect the work set out in the engagement letter, the engagement letter is also amended as necessary following agreement with the directors, and where relevant, the sponsor.

33The reporting accountant should consider materiality in planning its work in accordance with its instructions and in determining the effect of its findings on the report to be issued. (SIR 1000.10)

34Matters are material if their omission or misstatement could, individually or collectively, influence the economic decisions of users of the outcome. Materiality depends on the size and nature of the omission or misstatement judged in light of the surrounding circumstances. The size or nature of the matter, or a combination of both, could be the determining factor.

35In certain circumstances, such as private reporting engagements to report the results of agreed-upon procedures, materiality may have been determined for the reporting accountant within the scope of the engagement.

36The reporting accountant should obtain sufficient appropriate evidence on which to base the report provided. (SIR 1000.11)

37The reporting accountant, either directly or indirectly, will seek to obtain evidence derived from one or more of the following procedures: inspection, observation, enquiry, confirmation, computation and analytical procedures. The choice of which of these, or which combination, is appropriate will depend on the circumstances of each engagement and on the form of opinion (if any) to be given. Guidance on considerations applicable in particular circumstances is given in other SIRs which address the particular issues and requirements arising on specific engagements.

38The evidence gathered in support of an individual report takes account of the information gathered and conclusions drawn in support of other reporting engagements in connection with the transaction.

39If the reporting accountant becomes aware of any withholding, concealment or misrepresentation of information, it should take steps, as soon as practicable, to consider its obligation to report such findings and, if necessary, take legal advice to determine the appropriate response. (SIR 1000.12)

40In preparing any report the reporting accountant relies on information supplied to it by the directors, employees or agents of the entity that is the subject matter of the reporting accountant's enquiries. The engagement letter may limit the extent of the reporting accountant's responsibility where information which is material to the report has been withheld from, concealed from or misrepresented to the reporting accountant. Notwithstanding any such limitation, the reporting accountant does not accept such information without further inquiry where, applying its professional skill and experience to the engagement, the information provided, prima facie, gives rise to doubts about its validity.

41The reporting accountant normally informs the directors of the issuer and the sponsor, where relevant, as soon as practicable, of any withholding, concealment or misrepresentation of information. The reporting accountant's duty of confidentiality would ordinarily preclude reporting to a third party. However, in certain circumstances, that duty of confidentiality is overridden by law, for example, in the case of suspected money laundering it may be appropriate to report the matter direct to the appropriate authority. The reporting accountant may need to seek legal advice in such circumstances, giving due consideration to any public interest considerations.

42The reporting accountant should obtain appropriate written confirmation of representations from the directors of the entity. (SIR 1000.13)

43Written confirmation of representations made by the directors on matters material to the reporting accountant's report is ordinarily obtained. These representations also encompass statements or opinions attributed to directors, management, employees or agents of an entity, which are relied upon by the reporting accountant.

44This may be achieved by the directors confirming that they have read a final draft of the report and that to the best of their knowledge and belief:

1. they have made available to the reporting accountant all significant information, relevant to the report, of which they have knowledge;
2. the report is factually accurate, no material facts have been omitted and the report is not otherwise misleading; and
3. the report accurately reflects any opinion or statements attributed therein to the directors, management, employees or agents of the entity.

45Representations by the directors of the entity cannot replace the evidence that the reporting accountant could reasonably expect to be available to support any opinion given, if any. An inability to obtain sufficient appropriate evidence regarding a matter could represent a limitation of scope even if a representation has been received on the matter.

Documentation

46The reporting accountant should document matters that are significant in providing evidence that supports the report provided and in providing evidence that the engagement was performed in accordance with SIRs. (SIR 1000.14)

47The reporting accountant should record in the working papers (or, if applicable, the report) the reporting accountant's reasoning on all significant matters that require the exercise of judgment, and related conclusions. (SIR 1000.15)

48The information to be recorded in working papers is a matter of professional judgment since it is neither necessary nor practical to document every matter considered by the reporting accountant. When applying professional judgment in assessing the extent of documentation to be prepared and retained, the reporting accountant may consider what is necessary to provide an understanding of the work performed and the basis of the principal decisions taken to another person, such as a reporting accountant, who has no previous experience with the engagement. That other person may, however, only be able to obtain an understanding of detailed aspects of the engagement by discussing them with the reporting accountant who prepared the documentation.

49The form and content of working papers are affected by matters such as:

• The nature and scope of the engagement.
• The form of the report and the opinion, if any, to be given.
• The nature and complexity of the entity's business.

• The nature and condition of the entity's accounting and internal control systems.

• The needs in the particular circumstances for direction, supervision and review of the work of members of the reporting accountant's team.

• The specific methodology and technology that the reporting accountant uses.

Professional scepticism

50The reporting accountant should plan and perform an engagement with an attitude of professional scepticism. (SIR 1000.16)

51An attitude of professional scepticism is essential to ensure that the reporting accountant makes a critical assessment, with a questioning mind, of the validity of evidence obtained and is alert to evidence that contradicts or brings into question the reliability of documents or representations.

52Whilst the reporting accountant may proceed on the basis that information and explanations provided by the directors and management of the issuer are reliable, it assesses them critically and considers them in the context of its knowledge and findings derived from other areas of its work. The reporting accountant is alert for, and, where appropriate reports, on a timely basis, to the directors and sponsors, where relevant, any inconsistencies it considers to be significant. The extent to which the reporting accountant is required to perform further procedures on the information and explanations received will depend upon the reporting accountant's specific instructions, and the level of assurance, if any, it is to provide and the requirements of relevant SIRs.

Reporting

53In all reports the reporting accountant should:

1. address reports only to those parties who are party to the engagement letter (and on the basis agreed in the engagement letter) or to a relevant regulatory body;
2. identify the matters to which the report relates;
3. address all matters that are required by the engagement letter;
4. explain the basis of the reporting accountant's work;
5. give, where applicable, a clear expression of opinion;
6. include the reporting accountant's manuscript or printed signature;
7. include the reporting accountant's address; and
8. date the report. (SIR 1000.17)

54In all public reporting engagements the reporting accountant should explain the basis of the reporting accountant's opinion by including in its report:

1. a statement as to the reporting accountant's compliance, or otherwise, with applicable Standards for Investment Reporting; and
2. a summary description of the work performed by the reporting accountant. (SIR 1000.18)

55Certain of the reports prepared in connection with investment circulars are public reporting engagements and, therefore, intended for publication in the investment circular. Examples of such reports are accountant's reports, reports on profit forecasts and reports on pro forma financial information. Additional basic principles and essential procedures on the expression of opinions or conclusions relating to these example public reporting engagements are provided as follows:

1. accountant's reports on historical financial information, in SIR 2000;
2. reports on profit forecasts, in SIR 3000; and
3. reports on pro forma financial information, in SIR 4000.

56In private reporting engagements the reporting accountant would ordinarily include in its report:

1. a statement of compliance with this SIR; and
2. either a summary description of the work performed or a cross reference to the description of work to be performed in the engagement letter.

In some private reporting engagements those engaging the reporting accountant agree with the reporting accountant the procedures to be performed⁴. In such cases it may be unnecessary for the report of the reporting accountant to repeat the description of the procedures that is set out in the engagement letter.

57Before signing the report, the reporting accountant should consider whether it is appropriate to make the required report, having regard to the scope of the work performed and the evidence obtained. (SIR 1000.19)

58The date of a report is the date on which the reporting accountant signs the report as being suitable for release. However, the reporting accountant should not sign the report (whether modified or not) unless sufficient appropriate evidence has been obtained and all relevant procedures have been finalised. Such procedures include the review procedures of both the engagement partner and the engagement quality control reviewer.

59As noted in paragraph 15 above, the engagement letter usually sets out the form of the report to be issued, including, where applicable, the form of opinion to be expressed. The reporting accountant ensures that the form of report or opinion is consistent with the terms of the engagement letter.

60The level of assurance, if any, provided by the reporting accountant may vary from engagement to engagement. This reflects the wide range of characteristics of the matters to which the engagements undertaken by reporting accountants relate. To avoid any misunderstanding by the user of the report as to the scope of the opinion or the level of assurance provided, it is important that the matters to which the engagements undertaken by reporting accountants relate are clearly identified and that the reporting accountant's opinion or other assurance is expressed in terms that are appropriate to the particular engagement. Standards and guidance on the form and scope of reports appropriate in particular circumstances is given in other SIRs which address particular issues and requirements relevant to individual reports.

61In certain circumstances the Prospectus Rules require, “a declaration by those responsible for certain parts of the registration document that, having taken all reasonable care to ensure that such is the case, the information contained in the part of the registration document for which they are responsible is, to the best of their knowledge, in accordance with the facts and contains no omission likely to affect its import". The reporting accountant is responsible for its reports included in investment circulars and ordinarily includes this declaration (when satisfied it is able to do so) at the end of each public report included in an investment circular to which the Prospectus Rules apply.

Modified opinions

62The reporting accountant should not express an unmodified opinion when the following circumstances exist and, in the reporting accountant's judgment, the effect of the matter is or may be material:

1. there is a limitation on the scope of the reporting accountant's work, that is, circumstances prevent, or there are restrictions imposed that prevent, the reporting accountant from obtaining evidence required to reduce engagement risk to the appropriate level; or
2. the outcome is materially misstated. (SIR 1000.20)

63Where not precluded by regulation, the reporting accountant expresses a qualified opinion when the effect of a matter described in paragraph 62 is not so material or pervasive as to require an adverse opinion or a disclaimer of opinion. When giving a qualified opinion, the opinion is expressed "except for” the matter to which the qualification relates.

64Some regulations require a positive and unmodified opinion. Consequently, in the event that the reporting accountant is unable to report in the manner prescribed it considers, with the parties to whom it is to report, whether the outcome can be amended to alleviate its concerns, or whether the outcome should be omitted from the investment circular.

Pre-existing financial information

65With respect to historical financial information, where the issuer already has available:

1. audited annual financial statements; or
2. audited or reviewed financial information, which meet the requirements of the applicable rules in respect of the preparation and presentation of historical financial information to be included in the investment circular,

it may choose to include these financial statements, or financial information, in the investment circular together with the pre-existing reports of the auditor. In these circumstances the audit firm is not required by the Prospectus Rules to consent to the inclusion of its reports in the investment circular.

Consent

66Where the reporting accountant is required to give consent to the inclusion of its public report, or references to its name, in an investment circular the reporting accountant should, before doing so, consider its public report in the form and context in which it appears, or is referred to, in the investment circular as a whole by:

1. comparing its public report together with the information being reported on to the other information in the rest of the investment circular and assessing whether the reporting accountant has any cause to believe that such other information is inconsistent with the information being reported on; and
2. assessing whether the reporting accountant has any cause to believe that any information in the investment circular is misleading.

When the reporting accountant believes information in the investment circular is either inconsistent with its public report, together with the information being reported on, or misleading, the reporting accountant should withhold its consent until the reporting accountant is satisfied that its concerns are unwarranted or until the investment circular has been appropriately amended. (SIR 1000.21)

67The reporting accountant should give consent to the inclusion of any report in an investment circular only when all relevant reports that it has agreed to make, in that investment circular, have been finalised. (SIR 1000.22)

68In order to comply with the relevant legislation or regulations, the issuer of an investment circular may ask a reporting accountant to provide a consent letter, consenting to the inclusion of public reports in investment circulars in a number of different circumstances. An example consent letter is set out in Appendix 3. The various circumstances include:

1. under the Prospectus Rules. These relate to a prospectus issued by an issuer (other than under the Listing Rules). No consent is required to the inclusion of previously issued reports. Where a reporting accountant prepares an accountant's report on a financial information table for the purposes of the prospectus, the reporting accountant's consent must be obtained. A statement referring to the reporting accountant's consent to the inclusion of such report in the prospectus is required, by item 23.1 of Annex I of the Prospectus Rules, to be included in the Prospectus;
2. under the Listing Rules. Where these relate to listing particulars prepared in connection with an application for admission of securities to listing, the same consent requirements, that is item 23.1 of Annex I of the Prospectus Rules, apply;
3. under the Listing Rules. Where these relate to a Class 1 circular, paragraph 13.4.1 (6) of the Listing Rules sets out similar consent requirements;
4. under the City Code. In connection with a takeover, Rule 28.4 requires a similar consent requirement in respect of a public report on a profit forecast. Rule 28.5 requires a similar consent in connection with a subsequent document issued in connection with the offer; and
5. under the AIM Rules. The consent requirements of item 23.1 of Annex I of the Prospectus Rules apply.

69Whilst the reporting accountant's reporting responsibilities do not extend beyond its report, the process of giving consent involves an awareness of the overall process whereby the investment circular is prepared, and may entail discussions with those responsible for the document as a whole in relation to its contents.

70In deciding whether to give its consent, a reporting accountant reads the final version of the investment circular with a view to assessing the overall impression given by the document, having regard to the purposes for which it has been prepared, as well as considering whether there are any inconsistencies between its report and the information in the rest of the document. As part of this process the reporting accountant considers whether it has any cause to believe that any information in the investment circular may be misleading such that the reporting accountant would not wish to be associated with it.

71For this purpose the engagement partner uses the knowledge of the partners and professional staff working on the engagement. If particular issues are identified the engagement partner may make enquiries of partners and professional staff previously engaged on the audit of financial statements that are the basis of financial information in the investment circular, and any other partners and professional staff who may have been

previously consulted regarding such issues, including the engagement quality review partner who is independent of the engagement. The engagement partner is not expected to make enquiries more widely within the reporting accountant's firm.

72Because of the degree of knowledge required and the increased responsibility that may be assumed, it is inappropriate for a reporting accountant to provide consent unless the reporting accountant has been commissioned to undertake work specifically in connection with the relevant document in relation to the matter for which consent is sought. Hence, if an investment circular includes a reference to a report or opinion, previously provided by the reporting accountant, which is already in the public domain, the reporting accountant is not expected to provide consent to the inclusion of that information and does not generally do so. As discussed in paragraph 65, an example would be the inclusion or incorporation by reference in a prospectus of a previously published audit report or interim review report.

73An exception to this general rule would be where the reporting accountant has previously consented to the inclusion in an investment circular of that earlier report or opinion and it is being repeated or referred to in connection with the same transaction in respect of which it was originally issued. For example, as noted in paragraph 68 above, Rule 28.5 of the City Code requires a profit forecast made and reported on in one document to be confirmed in any subsequent document in connection with the same offer, and for the reporting accountant to indicate that it has no objection to its report continuing to apply. In such a case, before issuing its consent the reporting accountant makes enquiries as to whether there have been any material events subsequent to the date of its original report which might require modification of or disclosure in that report.

74Letters of consent are dated the same date as the relevant document. The City Code requires the letter of consent to be available for public inspection. The letter of consent may be made available for public inspection in other cases.

Events occurring between the date of the reporting accountant's report and the completion date of the transaction

75If, in the period between the date of the reporting accountant's report and the completion date of the transaction, the reporting accountant becomes aware of events and other matters which, had they occurred and been known at the date of the report, might have caused it to issue a different report or withhold consent, the reporting accountant should discuss the implications of them with those responsible for the investment circular and take additional action as appropriate. (SIR 1000.23)

76If, as a result of discussion with those responsible for the investment circular concerning an event that occurred prior to the completion date of the transaction, the reporting accountant is either uncertain about or disagrees with the course of action proposed, it

may consider it necessary to take legal advice with respect to its responsibilities in the particular circumstances.

77After the date of its report, the reporting accountant has no obligation to perform procedures or make enquiries regarding the investment circular.

Effective date

78A reporting accountant is required to comply with the Investment Reporting Standards contained in this SIR for reports signed after 31 August 2005. Earlier adoption is encouraged.

APPENDIX 1

Summary of possible reporting accountant's public reporting engagements under the Prospectus Rules

In the following table possible reporting accountant's responsibilities, as set out in the Prospectus Rules, are shaded.

Type of Engagement / Document Aspect	Shares	Debt, units < €50k	Debt, units =/> €50k	Derivatives, units < €50k	Derivatives, units =/> €50K	Asset backed securities, units < €50k	Asset backed securities, units =/> €50k	Depository receipts, units < €50k	Depository receipts, units =/> €50k	Banks issuing anything other than equity securities
Applicable annex: Registration document	I, II	IV	IX	IV	IX	VII	VII	X	X	XI
Securities note	III	V	XIII	XII	XII	VIII	VIII	X	X	As relevant instrument type
Historical financial information	I, 20.1	IV, 13.1	IX, 11.1	IV, 13.1	IX, 11.1	VII, 8.2	VII, 8.2 bis	X, 20.1	X, 20.1 bis	XI, 11.1
Number of years	3 years with latest 2 years on new GAAP	2 years with latest year on new GAAP	2 years with latest year on new GAAP	2 years with latest year on new GAAP	2 years with latest year on new GAAP	2 years with latest year on new GAAP	2 years with latest year on new GAAP	3 years with latest 2 years on new GAAP	3 years with latest 2 years on new GAAP	2 years with latest year on new GAAP
Issuers operating less than one year	Special purpose financial information must be included	Special purpose financial information must be included	Special purpose financial information must be included	Special purpose financial information must be included	Special purpose financial information must be included	Special purpose financial information must be included	Special purpose financial information must be included	Special purpose financial information must be included	Special purpose financial information must be included	No additional requirements
Report on financial information	Auditor's report or accountant's report as applicable	Auditor's report or accountant's report as applicable	Auditor's report or accountant's report as applicable	Auditor's report or accountant's report as applicable	Auditor's report or accountant's report as applicable	Auditor's report or accountant's report as applicable	Auditor's report or accountant's report as applicable	Auditor's report or accountant's report as applicable	Auditor's report or accountant's report as applicable	Auditor's report or accountant's report as applicable
Age of latest financial information	I, 20.5	IV, 13.4	IX, 11.4	IV, 13.4	IX, 11.4	No more than 18 months	No more than 18 months	X, 20.4	X, 20.4	XI, 11.4
Age of audited information	No more than 15 months if unaudited interims or 18 months if audited interims	No more than 15 months if unaudited interims or 18 months if audited interims	No more than 18 months	No more than 18 months	No more than 18 months	No more than 18 months	No more than 18 months	No more than 15 months if unaudited interims or 18 months if audited interims	No more than 15 months if unaudited interims or 18 months if audited interims	No more than 18 months
Pro forma financial information	I, 20.2 & III	No requirements	No requirements	No requirements	No requirements	No requirements	No requirements	No requirements	No requirements	No requirements
Report on proper compilation	Required to show effect of significant gross changes	No requirements	No requirements	No requirements	No requirements	No requirements	No requirements	No requirements	No requirements	No requirements
Profit forecasts and estimates	I, 13	IV, 9	IX, 8	IV, 9	IX, 8	No requirements	No requirements	X, 13	X, 13	XI, 8
Disclosure of assumptions	Required	Required	Required	Required	Required	No requirements	No requirements	Required	Required	Required
Report on proper compilation (for forecasts and estimates)	Required	Required	No requirements	Required	No requirements	No requirements	No requirements	Required	Required	Required
Outstanding forecasts	Update statement required	No requirements	No requirements	No requirements	No requirements	No requirements	No requirements	Update statement required	Update statement required	Update statement required

APPENDIX 2

Principal legal and regulatory requirements

The description of legal and regulatory requirements provided in this appendix is intended to be a guide and not intended to be a definitive interpretation of such requirements.

The FSA Handbook

1In July 2005 the then existing listing rules were modified to take account of the implementation of the Prospectus Directive in the United Kingdom. At the same time the opportunity was taken to revise the rules applying to the continuing obligations of listed companies.

2The FSA Handbook now includes three parts relevant to securities and their issuers, namely: the "Prospectus Rules", the “Listing Rules" and the “Disclosure Rules”.

3The Prospectus Rules effect the practical implementation of the Prospectus Directive. They apply to all prospectuses required to be issued by UK companies either offering securities to the public or seeking admission of securities to a regulated market. The annexes to the PD Regulation provide detailed rules on prospectuses and, in particular, the content requirements of prospectuses. In respect of prospectus content requirements, the Prospectus Rules reproduce the Annexes to the PD Regulation. Accordingly, references to the contents requirements in Annexes to the Prospectus Rules are also references to the Annexes to the PD Regulation.

4The Prospectus Rules also make it clear that the FSA expect “CESR's recommendations for the consistent implementation of the European Commission's Regulation on Prospectuses no. 809/2004”⁵ to be followed by issuers when preparing a prospectus.

5The Listing Rules provide the rules and guidance applicable to issuers of securities both seeking admission to, and once admitted to, the Official List. They include the conditions for admission to listing, the requirements concerning Sponsors under the Listing Rules, Class 1 and related party transactions and the requirements for listing particulars when a prospectus is not required to be prepared.

6The Disclosure Rules contain rules and guidance in relation to the publication and control of "inside information" and the disclosure of transactions by persons discharging managerial responsibilities and their connected persons.

7The annexes to the Prospectus Rules provide that historical financial information for the last three completed financial years, where it exists, is to be included in a prospectus. This information can either be extracted or incorporated by reference from the issuer's annual financial statements or presented in the prospectus specifically for that purpose. The Prospectus Rules provide that where the accounting framework to be applied in an issuer's next annual financial statements is different from that previously applied, at least some of the historical financial information must be represented on the basis of those new policies. The historical financial information must either be accompanied by the auditor's report on the statutory financial statements or by a new opinion by reporting accountants where the information has been presented for the purpose of the prospectus.

8Where an issuer with listed equity securities proposes to undertake a Class 1 acquisition, Listing Rule 13.5 requires that certain historical financial information is presented in relation to the target and, where relevant, the target's subsidiary undertakings. The last three years historical financial information must be presented in a financial information table on a basis consistent with accounting policies of the issuer. Unless the target is itself admitted to trading on an EU regulated market or on an overseas regulated market or listed on an overseas investment exchange, the financial information table must be reported on by a reporting accountant. However, if there is no report by reporting accountants on the financial information table itself, it is necessary for the issuer to consider whether any material adjustment is required to achieve consistency between the target's historical financial information and the accounting policies of the issuer, in which event a reconciliation of key financial statement components must be presented and the reconciliation reported on by reporting accountants.

9If an issuer chooses to include a profit forecast or profit estimate in a prospectus the registration document may be required to contain the following information:

1. a statement setting out the principal assumptions upon which the issuer has based its forecast or estimate. See item 13.1 of Annex I to the Prospectus Rules for more detailed requirements regarding assumptions; and
2. a report prepared by independent accountants or auditors stating that in the opinion of the independent accountants or auditors the forecast or estimate has been properly compiled on the basis stated and that the basis of accounting used for the profit forecast or estimate is consistent with the accounting policies of the issuer.

The profit forecast or estimate must be prepared on a basis comparable with the historical financial information.

10If a profit forecast in a prospectus has been published which is still outstanding, the issuer must provide a statement setting out whether or not that forecast is still correct as

at the time of the registration document, and an explanation of why such forecast is no longer valid if that is the case.

11Where an issuer includes pro forma financial information in a prospectus, (relating to shares, transferable securities equivalent to shares and certain other securities convertible into shares), Annex I item 20.2 and Annex II of the Prospectus Rules require any such information to be reported on by the reporting accountants. The Listing Rules also require a reporting accountant's report on any pro forma financial information that an issuer chooses to include in a Class 1 circular.

12Where a statement or report attributed to an expert (including reporting accountants) is included in a prospectus at the issuer's request, the Prospectus Rules require a statement of consent from the expert. This is discussed in more detail in paragraphs 66 to 74 in the body of this SIR. The consent of the auditor is not required where reports (audit or review) previously issued by the auditor are included in a prospectus.

13Other rules apply in particular circumstances. By replication of the Prospectus Rules requirements an expert is required, by the Listing Rules, to consent to the inclusion of any report in any listing particulars. However, the consent of the auditor is not required where reports (audit or review) previously issued by the auditor are included in the listing particulars.

14The Listing Rules also require pro forma financial information in a Class 1 circular to be reported on by an issuer's reporting accountants and to contain provisions requiring an expert's consent to any report included in a Class 1 circular.

Admission to the Main Market of the London Stock Exchange

15A two-stage admission process applies to companies who want to have their securities admitted to the Main Market for listed securities of the London Stock Exchange. The securities need to be admitted to the Official List by the UK Listing Authority (UKLA), a division of the Financial Services Authority, and also admitted to trading by the London Stock Exchange. To be admitted to trading the Admission and Disclosure Standards need to be met. Once both processes are complete the securities are officially listed on the Exchange.

AIM requirements

16Under the AIM Rules of the London Stock Exchange, companies seeking admission to AIM must publish an AIM admission document. This is the case whether or not they are required by the Prospectus Rules to prepare a prospectus (because they are also making an offer of securities to the public which is not exempt from the requirement to produce a prospectus).

17The AIM Rules provide that the content of an admission document should be based on the share disclosure requirements in the Prospectus Rules, modified to allow issuers to

elect not to include certain financial information where no prospectus is required, notably profit forecasts and pro forma financial information. However, if such information is included the Prospectus Rules requirements must be followed.

The Professional Securities Market

18From 1 July 2005, issuers listing debt, convertibles or depository receipts in London will have a choice of being admitted to a regulated market or the Professional Securities Market, which is a market operated and regulated by the London Stock Exchange. Issuers listing on the Professional Securities Market will not be required to report historical financial information under IFRSs or an EU approved equivalent standard either in listing documents or as a continuing obligation requirement.

The City Code

19Where a document sent to shareholders in connection with an offer falling within the scope of the City Code contains a profit forecast or estimate, with certain exceptions, Rule 28.3 of the City Code requires that forecast or estimate to be reported on by reporting accountants and by the financial advisers. The City Code's requirements for such reports are similar to those under the Prospectus Rules. In certain circumstances, the City Code also provides for a reporting accountant to report on merger benefit statements (Rule 19.1) and interim financial information (Rule 28.6 (c)).

Companies legislation

20In the United Kingdom, financial information presented in an investment circular may constitute "non statutory accounts" within the meaning of section 240 of the Companies Act 1985. The document in which the financial information is presented will usually, therefore, contain a statement complying with section 240(3) of the Companies Act 1985. However, this statement is only appropriate where the financial information comprises non-statutory accounts of the company issuing the document. No statement is needed in respect of financial information on a target company in an acquisition circular, for example, unless the directors of the target company explicitly accept responsibility for that part of the document. The statement is also the responsibility of the directors of the company publishing the document, not the reporting accountants.

Financial Services and Markets Act 2000

21Upon implementation of the Prospectus Directive into UK law with effect from 1 July 2005, the existing regime regarding the issue of prospectuses in the UK whether in connection with an official listing of securities or a public offer was repealed.

22Under Part VI, the FSA's function is a statutory one. Part VI covers not only the whole process by which securities are admitted to official listing but also the obligations to which companies are subject once they have obtained listing. The Listing Rules represent listing rules for the purposes of Part VI.

23Prospectus Rule 5.5 (in relation to prospectuses), and regulation 6 of The Financial Services and Markets Act 2000 (Official Listing of Securities) Regulations 2001 (in relation to listing particulars, i.e. not prospectuses within the meaning of the Prospectus Directive) provide that each person:

1. who accepts, and is stated in the particulars as accepting, responsibility for the particulars or for any part of the particulars; or
2. who has authorised the contents of, or any part of, the particulars;

is deemed to accept responsibility for the particulars (or that part of them).

24This raises potential issues for reporting accountants, for example:

• If they are involved in advising on an investment circular but are not named in it.
• If they issue a report or letter which is included in the investment circular.

25In the first example the Prospectus Rules and The Financial Services and Markets Act 2000 (Official Listing of Securities) Regulations 2001 relieve professional advisers from responsibility for the circular where they are solely giving advice as to the contents of the listing particulars in a professional capacity.

26In the second example the Prospectus Rules and The Financial Services and Markets Act 2000 (Official Listing of Securities) Regulations 2001 limit the responsibility of experts, including reporting accountants, to the part for which they accept responsibility and only if the part for which they accept responsibility is included in (or substantially in) the form and context to which they have agreed.

APPENDIX 3

Example of a consent letter

The Directors ABC plc

Dear Sirs

We hereby give our consent to the inclusion in the [describe Investment Circular] dated [ ] issued by ABC plc of [our accountant's report]/[our report relating to the profit estimate for the year ended 20,]/[our report relating to the profit forecast for the year ending 20,]/[our report relating to the pro forma financial information for the year ended 20 ] dated [ ] [[and] the references to our name⁶] in the form and context in which [it]/[they] are included, as shown in the enclosed proof of the [describe Investment Circular] which we have signed for identification.

[We also hereby authorise the contents of the [report[s]] referred to above which [is/are] included in the Prospectus for the purposes of Prospectus Rule [5.5.3R (2)(f)] [5.5.4R (2)(f)] OR [We also hereby authorise the contents of the [report[s]] referred to above which [is/are] included in the Listing Particulars for the purposes of Regulation 6(1)(e) of The Financial Services and Markets Act 2000 (Official Listing of Securities) Regulations 2001.] OR [We also hereby authorise the contents of the [report[s]] referred to above which [is/are] included in the Admission Document for the purposes of the Schedule Two to the AIM Rules]⁷

Yours faithfully

Reporting accountant

APPENDIX 4

Glossary of terms

• **Accountant's report**: A _report_ by a _reporting accountant_ included in an _investment circular_, in which the _reporting accountant_ normally expresses a “_true_ and _fair_, for the _purposes_ of the _investment circular_” _opinion_ on _historical financial information_ relating to the _issuer_ and its _subsidiaries_ in accordance with _SIR 2000_ “_Investment Reporting Standards_ applicable to _public reporting engagements_ on _historical financial information_ ".
• **Admission and Disclosure Standards**: The _Admission and Disclosure Standards_ published by the _London Stock Exchange_, for companies _admitted_ or seeking to be _admitted to trading_ by the _Exchange_.
• **Agreed-upon procedures [engagements]**: An _engagement_ where the _reporting accountant_ is engaged to carry out _procedures_ of an _audit_ or _assurance_ _nature_, that the _reporting accountant_, the entity and any _appropriate_ third _parties_ have agreed, and to _report_ on _factual findings_. The _recipients_ of the _report_ must form their own _conclusions_ from the _report_ by the _reporting accountant_. The _report_ is _restricted_ to those _parties_ that have agreed to the _procedures_ to be performed, since others, _unaware_ of the _reasons_ for the _procedures_, may _misinterpret_ the _results_.
• **AIM**: The _Alternative Investment Market_ operated by the _London Stock Exchange plc_. The _market_ is for smaller growing companies. _Securities_ _admitted_ to _AIM_ are _unlisted_.
• **AIM Admission Document**: The _document_ prepared in connection with an _application_ for _admission_ of an _issuer_'s _securities_ to _trading_ on _AIM_. If upon _admission_ a _prospectus_ is required in accordance with the _Prospectus Rules_, such _prospectus_ may serve as the _AIM Admission Document_.
• **AIM Rules**: The _Rules_ of the _Alternative Investment Market_.
• **CESR**: The _Committee of European Securities Regulators_.
• **Circular**: A _circular_ issued by any company to its _shareholders_ and/or _holders_ of its _debt securities_ in connection with a _transaction_, which does not constitute a _prospectus_, _listing particulars_ or _AIM admission document_.
• **City Code**: The _City Code on Takeovers and Mergers_, published by the _Panel on Takeovers and Mergers_.
• **Class 1 circular**: A _circular_ relating to a _Class 1 transaction_.
• **Class 1 transaction**: A _transaction_ where one or more of a _number_ of _specified percentage ratios_ exceed a _predetermined level_ as _specified_ in _Chapter 10 of the Listing Rules_.
• **Comfort letter**: A _private letter_ from the _reporting accountant_, usually prepared at the _request_ of the _issuer_ and/or the _sponsor_, where _relevant_. It is _intended_ to provide the _addressees_ with _comfort_ (in the _form_ of an _opinion_ or a _report_ on the _results_ of _specific procedures_ carried out by the _reporting accountants_) regarding _matters_ _relevant_ to the _addressees'_ _responsibilities_.
• **Completion date of the transaction**: The _date_ by which any _offer_ contained in the _circular_ must have been accepted or _application_ made for _shares_ or other _securities_ to be issued, or the _date_ on which _shareholders_ vote to approve the _transaction_.
• **Consent letter**: A _letter_ whereby the _reporting accountant_ consents to the inclusion in an _investment circular_ of _references_ to its _name_ or the inclusion of any of its _reports_ or _letters_ which are to be published therein.
• **Due diligence**: The _process_ whereby the directors of the _issuer_ and other _parties_, whether as _principal_ or in an _advisory capacity_, satisfy themselves that the _transaction_ is entered into after _due and careful enquiry_ and that all _relevant regulatory_ and/or _legal requirements_ have been _properly complied_ with. There is no _generally accepted definition_ of required _procedures_ for this _purpose_ and where others (such as _reporting accountants_) are engaged to carry out _work_ that will form _part_ of the _process_, it is for the _instructing parties_ to make _clear_ what is required of those others in the _particular circumstances_.
• **Engagement partner**: The _partner_ or other _person_ in the _firm_ who is _responsible_ for the _engagement_ and its _performance_, and for _reports_ that are issued on behalf of the _firm_, and who, where required, has the _appropriate authority_ from a _professional, legal or regulatory body_.
• **Financial information**: The _term_ is used to signify the _specific information_ presented in the _form_ of a _table_ upon which a _reporting accountant_ reports. Typically, this _information_ encompasses a _number_ of _accounting periods_.
• **Financial statements**: A _balance sheet_, _profit and loss account_ (or other _form_ of _income statement_), _statement of cash flow_, and _statement of total recognised gains and losses_ (or _statement of changes in equity_), _notes_ and other _statements_ and _explanatory material_. In _order_ to avoid _confusion_ the _term financial information_ is used throughout the SIRs to refer to the _information_ upon which the _reporting accountant_ reports. When the _term financial statements_ is used within the SIRs this refers to _financial statements_ from which the _financial information_ has been derived by the _issuer_.
• **FSA**: _Financial Services Authority_.
• **FSMA**: _Financial Services and Markets Act 2000_.
• **IFRSs**: _International Financial Reporting Standards_ issued by the _International Accounting Standards Board_. This _term_ incorporates all _International Financial Reporting Standards_, _International Accounting Standards_ (_IASs_) and _Interpretations_ originated by the _International Financial Reporting Interpretations Committee_ (_IFRIC_) or the former _Standards Interpretation Committee_ of the _IASC_.
• **Investment circular**: A _generic term_ describing any _document_ issued by an entity pursuant to _statutory_ or _regulatory requirements_ relating to _securities_ on which it is _intended_ that a third _party_ should make an _investment decision_, including a _prospectus_, _listing particulars_, _circular to shareholders_ or _similar document_.
• **ISAs (UK and Ireland)**: _International Standards on Auditing (UK and Ireland)_ issued by the _Auditing Practices Board_.
• **Issuer**: For the _purposes_ of the _Prospectus Rules_ “A _legal person_ who issues or proposes to issue _securities_”. For the _purposes_ of the _Listing Rules_ "Any company or other _legal person_ or _undertaking_ (including a _public sector issuer_), any _class_ of whose _securities_ has been _admitted to listing_, or is the _subject_ of an _application for admission to listing_".
• **Listing particulars**: A _document_ not being a _Prospectus_ prepared in connection with an _admission_ of _securities_ to the _Official List_.
• **Listing Rules**: The _part_ of the _FSA_'s _Handbook_ entitled “_Listing Rules_” governing the _conduct_ of companies whose _securities_ are _admitted_ to the _Official List_.
• **London Stock Exchange**: The _London Stock Exchange plc_.
• **Long form report**: A _private report_ with a _restricted circulation_, normally prepared by the _reporting accountants_ on the _instructions_ of, and addressed to, the _sponsor_, where _relevant_, and the directors of the _issuer_ as _part_ of their _due diligence_, dealing with agreed _matters_ including _commentary_ on _financial_ and other _information_ in an _orderly_ and _relevant form_ for a _specific purpose_.
• **Main Market**: The _London Stock Exchange_'s _market_ for larger and _established companies_. _Securities_ _admitted to the Main Market_ are _listed_.
• **Nominated adviser**: A _corporate broker_, _investment banker_ or other _professional adviser_ approved by the _London Stock Exchange_ to act as a _nominated adviser_ to an _AIM company_ under the _AIM Rules_.
• **Ofex**: An _independent_, _self regulated_, UK _market_ for smaller companies.
• **Official List**: The _Official List_ maintained by the _FSA_.
• **Outcome**: The _outcome_ of the _evaluation_ or _measurement_ of a _subject matter_ is the _information_ that _results_ from the directors applying the _suitable criteria_ to the _subject matter_. Examples of _outcomes_ are _historical financial information_ and a directors' _profit forecast_ and _related disclosures_ that are included in an _investment circular_.
• **Partner**: Any _individual_ with _authority_ to _bind_ a _firm_ of _reporting accountants_ with respect to the _performance_ of any _engagement_ in connection with an _investment circular_.
• **PD Regulation**: The _implementing EU Regulation 809/2004_ that provides the _detailed rules_ concerning _Prospectuses_ and their _contents_. Much of the _text_ of this _regulation_ is included within the _Prospectus Rules_.
• **Private reporting engagement**: An _engagement_ in which a _reporting accountant_ does not express a _conclusion_ that is published in an _investment circular_.
• **Professional Securities Market**: A _market_ for _debt_, _convertibles_ and _depository receipts_, which is operated and _regulated_ by the _London Stock Exchange_. This is not a _regulated market_ as defined by the _Prospectus and Transparency Directives_.
• **Profit estimate**: _Historical financial information_ for a _financial period_ which has expired but for which the _results_ have not yet been published.
• **Profit forecast**: The _PD Regulation_ defines a _profit forecast_ as “a _form_ of _words_ which _expressly states_ or by _implication_ indicates a _figure_ or a _minimum_ or _maximum figure_ for the _likely level_ of _profits_ or _losses_ for the _current financial period_ and/or _financial periods_ _subsequent_ to that _period_, or contains _data_ from which _calculation_ of such a _figure_ for _future profits_ or _losses_ may be made, even if no _particular figure_ is mentioned and the _word_ "_profit_” is not used. Where a _profit forecast_ relates to an _extended period_ and/or is _subject_ to _significant uncertainty_ it is sometimes referred to as a _projection_.
• **Pro forma financial information**: _Financial information_ such as _net assets_, _profit_ or _cash flow statements_ that _demonstrate_ the _impact_ of a _transaction_ on _previously published financial information_ together with the _explanatory notes_ thereto.
• **Projection**: See "_Profit forecast_".
• **Prospectus**: The _document_ issued in accordance with the _Prospectus Rules_ in connection with either a _public offer_ or an _admission_ of _securities_ to _trading_ on a _regulated market_.
• **Prospectus Regulations**: The UK _statutory instrument_ which makes _amendments_ to _Part VI of FSMA_ and to certain _secondary legislation_.
• **Prospectus Rules**: The _FSA_'s _Handbook part_ "_Prospectus Rules_" which together with the _PD Regulation_ and the _changes_ to _FSMA Part VI_ made by the _Prospectus Regulations_, _implement_
• **Public offer**: An _offer_ to the _public_ in any _form_ to _subscribe_ for _securities_ in an _issuer_.
• **Public reporting engagement**: An _engagement_ in which a _reporting accountant_ expresses a _conclusion_ that is published in an _investment circular_ and which is designed to enhance the _degree_ of _confidence_ of the _intended users_ of the _report_ about the “_outcome_” of the directors' _evaluation_ or _measurement_ of "_subject matter_" (usually _financial information_) against "_suitable criteria_".
• **Report**: This _term_ encompasses _letters_ that the _reporting accountant_ may be required to send by _regulation_ or arising from the _terms_ of the _engagement_.
• **Reporting accountant**: An _accountant_ engaged to prepare a _report_ for inclusion in, or in connection with, an _investment circular_. The _reporting accountant_ may or may not be the _auditor_ of the entity _issuing_ the _investment circular_. The _term_ “_reporting accountant_” is used to describe either the _engagement partner_ or the _engagement partner_'s _firm_. The _reporting accountant_ could be a _limited company_ or an _engagement principal_ employed by the company.
• **Reporting accountant's criteria**: A _subset_ of _suitable criteria_ which the _reporting accountant_'s _engagement_ requires the _reporting accountant_ to consider. _Reporting accountant_'s _criteria_ are set out in _appendices_ to the SIRs.
• **Securities**: Are as _defined_ by _Article 4 of the EU's Markets in Financial Instruments Directive_ with the _exception_ of _money-market instruments_ having a _maturity_ of less than twelve months.
• **Sponsor**: For the _purposes_ of SIRs, “_sponsor_” is a _generic term_ which includes any one or more of the following to whom the _reporting accountant_ has agreed, in its _engagement letter_, to address a _relevant report_:
  1. a _person_ approved, under _section 88 of FSMA_, by the _FSA_ as a _sponsor_. The _FSA_'s _sponsor regime_ applies to _applications_ for _admission to listing_ and _major transactions_. The _sponsor regime_ is designed to ensure that _effective due diligence_ is undertaken on _issuers_ and _transactions_ to ensure that _issuers_ are eligible for _listing_, that _major transactions_ are _properly evaluated_ and that all _relevant information_ has been included in the _investment circular_. _Listing Rule 8.2.1_ sets out the _circumstances_ when an _issuer_ must appoint a _sponsor_;
• **Subject matter**: The _subject matter_ of an _engagement_ is that which is being _evaluated_ or _measured_ against “_suitable criteria_”. Examples of _subject matter_ are the entity's _financial position_ and the directors' _expectation_ of the _issuer_'s _profit_ for the _period_ covered by a _profit forecast_.
• **Suitable criteria**: _Criteria_ are the _benchmarks_ used to _evaluate_ or _measure_ the _subject matter_. _Suitable criteria_ are usually derived from _laws_ and _regulations_ and are required by directors to enable them to make reasonably consistent _evaluations_ or _measurements_ of the _subject matter_. With respect to _public reporting engagements_ the _suitable criteria_ for _specific types_ of _engagement_ are described in the _individual SIR_ dealing with such _engagements_.

Notice to Readers

The Auditing Practices Board Limited

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1. In this table the expression IFRS is intended to refer to "those IFRSs as adopted for use in the European Union". ↩

2. Where the term applies to the engagement partner, it describes the responsibilities or obligations of the engagement partner. Such obligations or responsibilities may be fulfilled by either the engagement partner or a member of the engagement partner's team. ↩

3. The "outcome" is sometimes described as "subject matter information." ↩

4. These are often referred to as "agreed-upon procedures engagements" ↩

5. "CESR" is the Committee of European Securities Regulators. Its recommendations were issued in February 2005 and are sometimes referred to as the “Level 3 Guidance of the Lamfalussy Process". This guidance can be accessed on the CESR website www.cesr-eu.org. ↩

6. This is required only when a statement is attributed to a reporting accountant as an expert outside the context of a report from the reporting accountant included in the investment circular. ↩

7. This paragraph is not required in respect of a Class 1 Circular. ↩

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Name SIR 1000 - Investment Reporting Standards applicable to all engagements in connection with an Investment Circular (July 2005)

Publication date 27 September 2023

Type Standard

Format PDF, 248.4 KB

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