knowledge | 23 August 2018 |
Companies (Statutory Audits) Act 2018: “Are We There Yet?”
It is expected that most of the Companies (Statutory Audits) Act 2018 (the “Act”) will come into effect in September 2018.
Once commenced, the Act will give effect to certain optional provisions of the EU Audit Directive and the EU Audit Regulation. In July 2016 the Statutory Audits Regulations (the “Regulations”) gave effect to the mandatory provisions (and some optional provisions). The Act will revoke the Regulations and will restate them in the Companies Act 2014 (the “2014 Act”), thus providing a consolidated legal framework for statutory audits.
The Act restates provisions of the Regulations that exercise some of the options in the Audit Directive to:
- extend to certain public-interest entities (“PIEs”) an exemption from establishing an audit committee provided the functions of an audit committee are performed at group level. PIEs include entities which are listed on an EEA regulated market, credit institutions, insurance undertakings and entities that are specifically designated as being PIEs; and
- provide for the rotation of the key audit partners of a PIE every five years, with provision (on an exceptional basis) for an extension of up to two years.
The Act also exercises options in the Audit Directive to:
- permit Irish Auditing and Accounting Supervisory Authority (“IAASA”), as supervisory authority, to lay down additional requirements in relation to the content of the audit report; and
- confer increased supervisory powers, powers of sanction and powers of delegation on IAASA.
New to the Act is a provision that will amend the 2014 Act so that the loss by a company of the audit exemption will apply in respect of the financial statements for the two financial years immediately succeeding a financial year in respect of which the annual return has not been filed on time. Currently, the loss by the company of the audit exemption is for the financial year in respect of which the annual return has not been filed on time.
The Act will also repeal certain provisions in the Industrial and Provident Societies Act and the Friendly Societies Act to reflect, for example, auditor eligibility criteria and to provide for certain offences and fines.
As is currently provided for in the Regulations, the Act provides that any contractual clause restricting, to certain lists or categories of statutory auditors, the choice of
statutory auditors who may be appointed to that company, will be prohibited and void.
Amendments to the 2014 Act will include a new Part 27 on “Statutory Audits” and Schedules 19 and 20 which will largely restate provisions of the Regulations and will include provisions governing matters from approval of statutory auditors and audit firms to the public register to be maintained by the Registrar of Companies.
These additions necessitate other changes to the 2014 Act, for example the Act will amend the 2014 Act, restating the Regulations, so that any offences committed by a body corporate under Part 27 will be included in the application of the 2014 Act’s provisions on offences by a body committed with consent of its officer. So, where an offence is committed under Part 27, and it is proved to have been committed with the consent of or to be attributable to a director, manager, secretary or other officer of the body corporate, or any person who was purporting to act in any such capacity, that person as well as the body corporate shall be guilty of an offence and shall be liable to be proceeded against and punished as if he or she were guilty of that offence.
Commencement information is not available currently. However this briefing will be updated when commencement information is known.
This document has been prepared by McCann FitzGerald LLP for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.