20 November 2017
Implications for Audit Exemption from Companies (Statutory Audits) Bill 2017
The recently published Companies (Statutory Audits) Bill 2017 was drafted to transpose discretionary elements of the Audit Directive 2014/56/EU into Irish Law and to give effect to some elements of Regulation EU No. 537/2014. In addition, Statutory Instrument 312 of 2016 will now also be included in the new legislation.
The Bill will amend provisions within Parts 6 and 15, of the Companies act 2014 which deal with “Financial Statements, Annual Return and Audit” and the Functions of Registrar and of Regulatory and Advisory Bodies. The Bill introduces a new Part 27 into the Companies Act 2014 to provide for statutory audit related matters and also includes provisions for miscellaneous company law issues, not related to the transposition of the audit measures.
A key focus of the Bill is to widen the remit the Irish Auditing and Accounting Supervisory Authority (IAASA), the agency that oversees all of the professional accountancy bodies in Ireland. Section 27 of the Bill states that IAASA will be designated “as the competent authority for the oversight of statutory auditors”. It is now intended that IAASA will have stronger powers of supervision, delegation and sanction with regard to its accountancy members. It is also intended that these regulations will give IAASA greater empowerment to monitor compliance and enforcement of its rules.
In addition to the above, IAASA will now have a more robust role in relation to investigations and will have responsibility for enforcing the requirements for auditors of credit unions, Industrial & Provident and Friendly Societies.
The Institute welcomes all measures to enhance corporate governance in Ireland.
However, one of the miscellaneous regulations in the Bill is a cause for concern. Sections 9 and 10 of the Bill deal with the issue of audit exemptions and in particular the significant change that where a company fails to file its annual return on time in the Companies Registration Office (“CRO”), the current option of applying to the District Court for an exemption has now been removed.
Under the new legislation, as drafted, if a company wants additional time to file its annual return and it wants to avoid the loss of audit exemption it will have to apply to the High Court. If a company wants to have the late filing fees waived, it can only apply to the District Court. However, this order can only deal with the waiving of those fees and as it can’t grant an extension of time to file, the company will lose its audit exemption for the year in question and for the following financial year’s financial statements.
An application to the High Court for such an exemption will incur prohibitive costs. Companies that avail of the audit exemptions by their very nature are smaller SME type companies which will make this avenue of appeal practically a no go area. For persistent late filers of their annual return we have no issue with this new requirement. However for the first time offender it is particularly harsh.
It seems to the Institute that this step challenges the spirit of one of the key objectives of the Companies Act 2014 which was to reduce red tape and make it easier for companies in Ireland to do business.
To read the Bill and the Explanatory Memorandum click on the link below: https://dbei.gov.ie/en/Legislation/Companies-Statutory-Audits-Bill-2017.html
Business Development Manager, ICSA Ireland