Mutual Societies Application Form

Change of Audit Rule

Notes

FCA Mutuals Change of Audit Rule CCBS, FS 74 (N) Release 1  July 2014page 1

/ Legislation and what to do

Registered societies

Section 83 of the Co-operative and Community Benefit Societies Act 2014(2014 Act) requires every society to appoint in each year of account a qualified auditor, or qualified auditors, to audit its accounts and balance sheet for that year.

Section 84 of the 2014Act allowscertain societies to disregardthe requirement of section 83 to appoint qualified auditors if it satisfies certain conditions.

The power to disapply section 83 does not apply to credit unions.

Under Schedule 11 to the Housing Act 2004, registered social landlords are eligible for audit exemption if they meet the relevant criteria.

The following societies must have a full professional audit.

  • Insurance undertakings
  • Deposit takers and deposit holders
  • Societies with subsidiaries
  • Subsidiaries

If your society wishes to take advantage of section 84 of the 2014 Act, it must meet the relevant financial threshold and members must also pass a resolution every year at a general meeting.More detailed information on auditingrequirements and eligible criteria can be found in the notes to the annual returns.

Friendly societies

Section 32(1)a of the Friendly Act 1974(FS74) requires every registered society or branch to appoint in each year of account a qualified auditor, or qualified auditors, to audit its accounts and balance sheet for that year.

Section 32A(1) FS74 allows a registered society or branch to disregard the requirement to appoint qualified auditors but only if it satisfies certain conditions.

The power to disapply section 83 does not apply to a registered friendly society.

What to do

A rule change may be necessary where a society currently requires a professional auditor to audit its accounts; for example, a society with a rule that states ‘…and the audit will be carried out by a registered auditor’. This example ties the society to the appointment of a registered auditor. The society will need to amend its audit rule if it wishes to disappy the requirement to appoint qualified auditors.

A rulechange to state, for example ‘… and an audit, where necessary in law, or where the membership requires, will be carried out by a registered auditor or two or more lay auditors, where the condition for appointing lay auditors prevail’ would enable the society to take advantage of the relaxed auditing requirements.

We are likely to refuse to register a rule change that does not provide for a situation where an audit may be required by law or by the members. For example ‘…the accounts will be examined by an independent accountant".We would encourage you to either usethe example given above or follow the wording below.

Further example of an auditrule

"The members shall vote annually, as allowed by the Act, at the Annual General Meeting, to have when necessary in law, or where the membership requires, an audit carried out by a registered auditor, or an audit carried out by two or more lay auditors, or a report carried out by a registered auditor, or unaudited accounts, where the conditions for such exist.

If a full audit or a report is required, a person who is a qualified auditor under section 91of the Co-operative and Community Benefit Societies Act 2014[or section 36 of the Friendly Societies Act 1974],shall be appointed. The qualified or lay auditors, if so appointed, shall not be officers or servants of the society and nor shall they be partners of, or in the employment of, or employ, an officer or servant of the society.

Lay auditors shall be chosen by the Committee of Management from the general membership and/or others.

If the membership vote for unaudited accounts, the society’s income/expenditure ledger shall be scrutinised by the secretary and committee members only and signed, as a true record, by the secretary and two committee members or such other number as may be required by legislation. An income/expenditure report will be prepared to present to the society’s members at each Annual General Meeting".

How to make an application

Please refer to the information note on amendment of rules (complete or partial).

FCA Mutuals Change of Audit Rule CCBS, FS 74 (N) Release 1  July 2014page 1