TRUST COMPANY BUSINESS

GUIDANCE ON APPOINTING AN AUDITOR UNDER THE FINANCIAL SERVICES (TRUST COMPANY BUSINESS (ACCOUNTS, AUDITS AND REPORTS)) (JERSEY) ORDER 2000

1. Introduction

1.1. Article 4(1) of the Financial Services (Trust Company Business (Accounts, Audits and Reports)) (Jersey) Order 2000 requires the Commission to approve an auditor appointed by a registered person under the law.

"A registered person shall appoint and retain an auditor being an auditor approved by the Commission having regard to the trust company business carried on by the registered person".

1.2. Article 113 of the Companies (Jersey) Law 1991, as amended by the Companies (Qualification of Auditor) (Jersey) Order 1996, sets out the qualification requirements for an auditor of a Jersey company.

1.3. The Commission does not interpret Article 4(1) as requiring approval of an auditor before its appointment by a business. The Commission will, however, wish to ensure that an auditor has the necessary skills and experience to audit the company to which they have been appointed.

2. Procedures for the appointment of an auditor Top

2.1. The Commission envisages that:

2.1.1. A business must first appoint an auditor with sufficient experience in the areas of business which it conducts. Businesses will not normally be expected to approach the Commission to discuss the qualifications and experience of their potential auditor. The Commission places particular importance on the business satisfying itself that the auditor has experience of auditing trust company business.

2.1.2. A business must take reasonable steps to satisfy itself that the auditor has the required skills and resources commensurate with the scale, nature and complexity of its operations, and the regulatory requirements and standards to which it is to be audited. It must also ensure that the auditor would be eligible for appointment under the Companies (Jersey) Law 1991.

2.1.3. In line with professional ethics, an auditor will not accept or perform work which they are not competent to carry out.

2.2. Where the Commission receives notice of an appointment or intention to appoint an auditor:

2.2.1. which does not currently audit any other Jersey regulated firm; or

2.2.2. which is a firm or office based outside of Jersey; or

2.2.3. which the Commission believes may have insufficient skills, resources, or experience; or

2.2.4. which the Commission believes would not be qualified for appointment under Article 113 of the Companies (Jersey) Law 1991, as amended,

then it will require the auditor to state its reasons for believing that it will be capable of fulfilling its obligations under the Order.

2.3. In particular, when required to state such reasons under 2.2, the Commission will expect to receive the following information from such an auditor:

2.3.1. the size of the firm (e.g. number of partners/directors and staff in office or firm (in jurisdiction and worldwide));

2.3.2. the names of the partners/ directors, and managers who will be responsible for the assignment, and details of their work experience;

2.3.3. the means by which individuals' knowledge of the Financial Services (Jersey) Law 1998, Orders, Codes of Practice, Proceeds of Crime (Jersey) Law 1999, Money Laundering (Jersey) Order 1999, and the Anti-Money Laundering Guidance Notes for the Finance Sector have been (or will be) attained (e.g. details of courses and training attended);

2.3.4. the means by which the individuals' knowledge of the matters in 2.3.3. above will be kept up to date;

2.3.5. where not constrained by confidentiality obligations, the names of any other relevant audit clients;

2.3.6. a summary of any relevant regulated financial services activities carried on by the firm (unless regulated by the Commission); and

2.3.7. details of the ownership structure, control, and internal organisation of the firm.

2.4. Where the Commission objects to the appointment of an auditor under the Order, it will notify the registered person of its decision and provide reasons for its objection. A registered person may then request the Commission to reconsider its determination, submitting its reasons in writing for such a request.

2.5. Where the Commission rejects the reasons provided to it in writing, it will attach a new condition to the registered person's registration preventing appointment of the auditor. This will allow an appeal to be made against the Commission's decision under Article 11 of the Financial Services (Jersey) Law 1998.

October 2001

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