Guidance on Irish audit registration arrangements
Information for firms that undertake audits of Irish entities.
Automatic registration for Irish audit registration has ceased
Following the introduction of new Audit Regulations (effective 1 January 2020), firms are no longer automatically registered on the Irish Audit Register. This change has occurred (irrespective of the outcomes of Brexit) due to changes in the Companies Act 2014.
Changes to firm stationery and websites
If your firm is no longer on the Irish Audit Register, you will need to need to update your stationery/website with the following ‘Registered to carry out audit work in the UK’ or similar to exclude Ireland.
The impact of Brexit
Following the approval by the EU27 states of a withdrawal agreement for the United Kingdom to leave the European Union, Brexit finally took place on 31 January 2020. The withdrawal agreement includes a transition period through to 31 December 2020.
Those firms that have opted in to Irish Audit registration will remain on the Irish register during the transition period and until Ireland amends its laws to exclude firms qualifying purely by membership of ICAEW.
Future of Irish Audit Registration
From 1 February 2020 to 31 December 2020, firms that have opted in to Irish Audit registration will remain on the Irish Audit Register (subject to meeting continuing competence criteria) under transitional arrangements. They may continue thereafter until Ireland amends its laws to exclude firms qualifying purely by membership of ICAEW. These changes may occur pursuant to the terms of the final trade agreement but may slip into 2021 before enacted. If a trade agreement or provisions relating to audit are not concluded by 31 December 2020, then the previous preparations for a no deal Brexit will be implemented (subject to the repeal of section 1470(a))
- When section 1470(a) of the Companies Act 2014 is repealed there will be two impacts;
1. Firms and RIs will have to re-apply under section 1470(c) as third country auditors. This will require the undertaking of an aptitude test, unless they can demonstrate adequate experience to qualify for exemption. Initial soundings from IAASA suggest the exemption criteria for ‘adequate’ will be quite demanding. Firms with no Irish audit clients are unlikely to qualify. The current aptitude test is based on the Chartered Accountants Ireland’s Company Law and Tax papers.
2. The audit control test will be based on those who are ‘eligible’ under section 1470; however with the repeal of 1470(a), depending how the Irish government amend other parts of the act, this may mean that only those who qualify for the exemption or have passed the aptitude test could qualify for the assessment of audit control.
- No recognition can be exercised in the absence of a reciprocity arrangement between the UK and Ireland. A draft MoU for reciprocity arrangements between the UK and Ireland has been agreed in principle. Further steps are needed before reciprocity is formalised.
- Scenario planning is still required. Even if firms can demonstrate entitlement to the exemption for responsible individuals (RIs) at 31 December 2020, or when 1470(a) is repealed, there may be a delay in their recognition.
- UK firms that audit companies listed on the Irish Stock Exchange will need to be registered by IAASA as third country auditors.
- The process for applying to be a third country auditor in respect of audits of Irish entities is currently undefined. It will not be agreed or take effect until after transition completion day (31 December 2020 or later). This makes a roll-over of existing registrations extremely difficult to plan and it could be some months before it is in place. However, on 14 January 2019, IAASA signified that a provisional registration process was in place (Form B) for third country auditor status for those who audit UK entities with listings on the Irish Stock Exchange and this continues to be available.
- As a consequence, it should be assumed that if there is no concluded trade deal in respect of audit arrangements, UK firms will have to cease audit services to existing Irish clients after transition completion day (31 December 2020 or later). In such circumstances firms need to consider the following approaches in their scenario planning, which should have already been considered as part of earlier contingency planning for a no-deal Brexit.
- Firms must identify their audits of Irish (ROI) entities that could be affected by this Irish ruling and the timing of their audit opinions.
- All responsible individuals (RIs) who sign Irish audit opinions need to be separately identified and analysed according to whether their residential address is in the UK or in the ROI. As a consequence of the new opt in arrangements most firms will already have considered this area.
- All audits where the Irish records are retained in the UK need to be identified.
Management of audits
- Consider advancing or delaying audit opinions due to take place in the first quarter of 2021.
- Consider whether the only feasible option is to resign as auditors and the timing thereof.
- Consider moving the audit and the RI responsibility to your Irish network firm, including:
- agree the resignation of the UK firm and replacement by the Irish firm with the client;
- consider the resource capability within the Irish network firm and either; second staff where appropriate; or retain the underlying work within the UK firm under ISA600;
- if the latter, the Irish firm will need to agree the necessary increase in audit fee to cover the ISA220 supervision;
- agree the revised timetable for delivery of the audit opinion with the client.
- For Irish accounting records that are retained in the UK, consider if these records need repatriations or a visit from an Irish audit firm that retains its registration.
- In all options the client needs to be alerted to the operating timescales and needs to consider:
- the impact on filing requirements under company law and listing requirements;
- the impact on taxation payments;
- the impact on banking and other covenants.
Management of registration
Where your firm is likely to need separate registration as a statutory auditor in Ireland:
- Consider if the Irish registration is necessary for the firm;
- if no current audits – is it of strategic value?
- if only a few audits – whether continued engagement is of strategic value?
- if the re-registration requires aptitude tests – which of your firm’s RIs should undertake them?
There are a number of questions that arise as part of this planning. The RABs are seeking clarification with IAASA, the Department of Business Enterprise and Innovation in Ireland, BEIS and the FRC on;
- the definition of a firm’s residency;
- the ability to second staff from the UK to Ireland post transition completion day;
- the application of 31 December 2020 as a cut-off date; and
- the process for re-registering after completion of the transition period.
We will update firms regulated for audit with ICAEW as soon as we receive further information. Further guidance on Brexit and working in the regulated area of audit is available or please contact our technical helpline on +44 (0)1908 248 250