The Republic of Ireland has recently implemented the EU’s statutory audit directive. This was by way of a statutory instrument (European Communities (Statutory Audits) (Directive 2006/43/EC) Regulations 2010) which amends existing law and creates stand alone regulations.
A copy of the statutory instrument can be obtained from the website of the Department of Enterprise, Trade and Innovation.
This note is to draw firms’ attention to a few matters relating to this change in the law. While most of this note concerns corporate audit firms, it is suggested that all firms who undertake audits of Irish entities read this note and the legislation referred to above.
Corporate auditors
One amendment to existing Irish law removed the prohibition in section 187 of the Companies Act 1990 that prevented corporate firms being auditors. So auditors who are constituted as companies or limited liability partnerships can now accept appointment as company auditor in Ireland.
The law changed with effect from 20 May 2010. So from that date corporate audit firms can accept audit appointments and sign audit reports, regardless of the date of the accounting period.
The change in the law does not, however, apply to all audit appointments. The law was not changed for ‘public auditors’; that is auditors of societies registered under the Industrial and Provident Societies Acts 1893 to 1978, or the Friendly Societies Acts 1896 to 1993. The restriction still applies for these audits and so corporate auditors cannot accept these appointments.
The position in respect of other entities is not straightforward as there has not been a wholesale change of all laws to reflect the changes made for companies. So, for example, section 87 of the Building Societies Act 1989 refers to a person qualified to be an auditor of a company. That would permit a corporate firm to take the appointment.
Before you accept appointment to an Irish entity that is not a company, we suggest you check the legislation that applies to that entity (or the entity’s constitution for those that are not governed by a specific law) to ensure that the entity can appoint a corporate auditor.
Responsible individuals
There is one further issue you may need to consider, although it should only affect a very few firms and then not significantly. Chapter 4 of the audit regulations states that although the audit qualifications of the three chartered institutes (and the ACCA) are recognised in the UK and Ireland, other qualifications are not.
Individuals who hold an EEA audit qualification need to pass an aptitude test. The test in the UK is different to the one in Ireland, so passing an aptitude test in one country does not give the holder of an EEA qualification the right to be a responsible individual in the other country. Nevertheless, they can still count towards the control requirement of an audit firm in each country.
For audit qualifications from outside the EEA, a similar position arises. As well as different aptitude tests, the underlying qualification may not have been recognised in both countries; at the moment the UK has recognised certain Australian and Canadian qualifications, Ireland has yet to recognise any. So such people can only be responsible individuals (and count towards the control requirement) in the country in which they have taken an aptitude test.
Signing audit reports
As noted below we are currently revising the audit regulations. One revision will be to apply the current regulation 3.16 (in the 2008 edition of the regulations) about signing audit reports to Irish audits. In the meantime it is suggested that firms sign audit reports as follows:
- If the law requires the name of responsible individual who was in charge of the audit to be given (this will be the case for companies) the following is suggested:
<<usual signature of individual>>
William Smith FCA
for and on behalf of
<<Audit firm name>>
Statutory Auditor
Chartered Accountants
<<Address>>
<<Date>>
- If the law does not require the name of responsible individual who was in charge of the audit to be given then the following is suggested:
<<usual signature in firm name>> <<Audit firm name>>Statutory Auditor
Chartered Accountants<<Address>>
<<Date>>.
Audit regulations
We are currently revising the 2008 edition of the audit regulations to deal with these points and with other matters arising from the implementation of the EU directive in Ireland. We will publish further details in Audit News. When the revised regulations are issued, the 2005 edition of the regulations will cease to apply to audits of Irish companies and will be withdrawn.