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The Auditors Oversight Law, 2011 (the "Law") was
passed by the Legislative Assembly of the Cayman Islands in
September 2011 and came into force on 1 May 2012, by Governor's
Order.
The Law provides for the regulation of auditors of market traded
companies. The main purpose for this legislation is to facilitate
the recognition of the auditor oversight regime in the Cayman
Islands by other auditor oversight bodies including those in the
European Union.
A market traded company is defined as an entity (including a
company, partnership or unit trust), whether or not incorporated in
the Cayman Islands, of which some or all of its transferable
securities are admitted to trading on a regulated market (excluding
an exempted entity specified as such by regulation).
Most significantly the Law provides for the establishment of a
new corporate body – the Auditors Oversight Authority
(the "Authority") – which functions to regulate
and supervise auditors who audit the accounts of market traded
companies. This includes subjecting "recognised" auditors
to systems of quality assurance, investigation and penalties.
Recognised auditors are defined as auditors that are entered on the
register (which the Authority is required to establish and maintain
– see below).
In particular, the Law:
Provides for qualifications for appointment as an auditor of a
market traded company so that only a recognised auditor is
qualified for such appointment;
Requires the Authority to establish a register of recognised
auditors. Such persons will be those who:
pursuant to the Law are eligible to be entered on the
register;
are responsible individuals;
have applied to and been approved by the Authority;
have paid the application or annual fee.
States that an auditor is eligible to be entered on the
register if:
all responsible individuals of the auditor are licensed under
section 11 or 12 of the Public Accountants Law (2009 Revision) (the
"Regulatory Law");
the auditor and all responsible individuals of the auditor are
bound by and required to comply with the Rules (which may be issued
by the Authority from time to time) when auditing the accounts of
market traded companies; and
all responsible individuals of the auditor have been designated
by the auditor as competent to audit the accounts of a market
traded company.
Gives the Authority the discretion to accept or refuse an
application for entry onto the register.
The Authority is further given wide discretion to amend the
register and suspend, cancel or subject an entry to conditions in
particular circumstances.
The Government of the Cayman Islands, working closely with the
private sector, continues to demonstrate its commitment to ensuring
that the Cayman Islands financial services industry keeps pace with
the rapidly changing regulatory environment in which international
business now operates.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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