The Authority’s Enforcement function undertakes enquiries and investigations under its powers set out in section 933 and section 934 of the Companies Act. Section 933 relates to the Authority’s power to intervene in the disciplinary process of PABs, and section 934 relates to the Authority’s powers to directly investigate the conduct of members/ member firms of those PABs.
Section 933 Enquiries
Section 905(2)(d) of the Act provides that IAASA may conduct, under section 933, enquiries into whether a PAB has complied with its approved investigation and disciplinary procedures and, where appropriate, impose sanctions. Section 905(2)(ea) of the Act provides that IAASA may conduct, under section 933, enquiries into whether a RAB has complied with its statutory obligations under Part 27 of the Act. IAASA may also impose sanctions in relation to these enquiries.
Section 934 Investigations
Section 905(2)(f) of the Act provides that IAASA may undertake, under section 934, investigations into possible breaches of the standards of a PAB by a member of that body. Section 905(2)(fa) of the Act provides that IAASA may undertake, under section 934, investigations into possible contraventions of section 336, section 337, part 27 of the Companies Act or the EU Audit Regulation by a statutory auditor relating to public interest entities. IAASA may also impose sanctions in relation to these investigations.
Initiation of Enquiry or Investigation
Not all matters referred to the Enforcement Unit will result in the initiation of an enquiry or investigation. The Authority has a wide discretion as to whether it launches a preliminary enquiry/investigation. The Authority’s remit is not an appeal process and it is not the role of the Authority to substitute the decision of the PAB for a different decision that could have been made by that PAB.
If the Enforcement Unit initiates a preliminary enquiry it must consider whether there is a prima facie case that a PAB has failed to comply with its approved investigation and disciplinary procedures or a RAB has failed to comply with the applicable provisions in performing a Part 27 function, and if it determines that the circumstances of the matter are such as to warrant the initiation of a full enquiry into the matter, the Authority shall refer the matter to an Enquiry Committee for a full enquiry.
If the Enforcement Unit initiates a preliminary investigation it must consider whether there is a prima facie case that a “specified person” has committed a relevant contravention and it is appropriate or in the public interest that there should be a Full investigation.
Full Enquiry or Investigation
If the matter is referred to a Full Enquiry/ Investigation Committee the Authority will appoint an Enquiry/Investigation Committee to conduct a full enquiry/investigation on behalf of the Authority. The Committee will consist of 3 individuals and the majority of each committee shall not be members of a PAB. The Committee may conduct an oral hearing if the Committee determines that an oral hearing should take place. That hearing shall be in public but the Committee has a discretion to exclude the public from all or part of a hearing if necessary and in the interests of justice. The standard of proof on which the Committee makes its findings is on the balance of probabilities. The Committee must provide reasons for its decisions and it has the power to impose sanctions and costs.
A copy of the relevant procedural regulations are attached here.
The Authority may engage in negotiations on a without prejudice basis for the purpose of seeking a settlement. The settlement process offers both the Authority and the specified person/PAB a means of achieving early resolution of a matter. Early settlement is an efficient use of the Authority’s resources and provides timely resolution and transparency through the publication of the details of the case. Where settlement is agreed, it results in the avoidance of the additional costs and administrative burden of extended investigations for both the Authority and the specified person/PAB.
The Settlement procedures guidance documents can be found here.