We require mortgage and insurance intermediaries to appoint an auditor in certain circumstances. Mortgage and insurance intermediaries may also be required to appoint an auditor under the Companies Act 1985 ('CA 85') or other statutory provisions.

This chapter will help you determine whether your firm is caught by our requirements or the CA 85 requirements to appoint an auditor and, if so, what FSA rules consequently apply to your firm and to your firm's auditor. However, if you are obliged to appoint an auditor under CA 85 or other statutory provisions you will also need to refer to the relevant legislation for details of what other non-FSA requirements apply to you.

Firms whose only regulated activities are mortgage mediation activities are not required to appoint an auditor under our rules (SUP 3.1) (but see paragraph 12.2.4 below).

Under our rules, firms that carry on insurance mediation activities, whether or not they also carry on mortgage mediation activities, are exempt under SUP 3.1 from the requirement to appoint an auditor if:

1. (1)

   they do not hold client money or client title documents (such as bearer instruments); or

2. (2)

   where they hold client money, they hold it under a statutory trust, and the balance of the client money bank account does not exceed £30,000 at any time during a financial year (see also CASS 5.3).

All other insurance intermediaries that hold client money or client title documents are required to appoint an auditor. The auditor has to provide a report to the firm, for each relevant period, on the firm's client assets (and this includes its handling of client money) in accordance with SUP 3.10. There is more information on the rules that apply to insurance intermediaries when handling client money in Part III, Chapter 2.

Small insurance and mortgage intermediaries that are limited companies or limited liability partnerships and are authorised by us are required to appoint an auditor under the CA 85.

A firm that has an auditor (whether appointed under the CA 85, other statutory provisions or our rules) will need to consider whether to notify us under Principle 11 (see Part I, Chapter 3) in the following circumstances:

1. (1)

   if the firm expects or knows its auditor will qualify his report on the audited annual financial statements or add an explanatory paragraph (SUP 3.7); or

2. (2)

   if the firm receives a written communication from its auditors commenting on internal controls (SUP 3.7).

The table below summarises when your firm will be required to appoint an auditor, either under our rules or CA 85, and the Handbook rules which will consequently apply to the firm and the auditor. The table assumes that your firm does not have to appoint an auditor for any other reason.