SUP 3.5 Auditors' independence

If an auditor is to carry out his duties properly, he needs to be independent of the firm he is auditing, so that he is not subject to conflicts of interest. Many firms are also subject to requirements under the Companies Act 1989, or the Companies Act 2006,1 the Building Societies Act 1986 or the Friendly Societies Act 1992 on auditor's independence.

The FSA will regard an auditor as independent if his appointment or retention does not breach the ethical guidance in current issue from the auditor's recognised supervisory body on the appointment of an auditor in circumstances which could give rise to conflicts of interest.

Firms are reminded that the Building Societies Act 1986 and Friendly Societies Act 1992 provide that an auditor who is ineligible under section 27 of the Companies Act 1989 where applicable, otherwise sections 1214 and 1215 of the Companies Act 20061 for appointment as auditor of a company (which is a subsidiary undertaking of a building society or a subsidiary of a friendly society) is ineligible for appointment as auditor to the building society or friendly society concerned.