The audit exemption is and always has been a great opportunity to reduce red tape for Irish businesses. From the time the original legislation was introduced back in 1999 the size criteria has grown and increased under various legislative changes.

The most recent change was S.I. 308 of 2012 which increased the size criteria to:

• • balance sheet total: EUR 4,400,000;
  • net turnover: EUR 8,800,000;
  • average number of employees during the financial year: 50.

For an Irish company to avail of the audit exemption they must meet all 3 of the above criteria in the current and preceding financial periods. In the majority of EU Member States it is necessary only to satisfy 2 out of the 3 criteria to avail of Audit Exemption. The Department of Jobs, Enterprise and Innovation have now launched a consultation in relation to changing the Irish criteria to reflect the more popular EU member state approach of 2 out 3 rather than 3 out of 3 criteria.

To view the consultation paper please click here.

The deadline for the consultation is 31st of May 2013 and it is expected that there will be a significant response. The consultation document also sets out some of the proposed changes outlined in a new EU Accounting Directive in relation to Audit Exemption and also some of the key changes proposed under the Companies Bill 2012.

Two of the key changes under the Companies Bill 2012 identified relating to audit exemption include:

• Companies limited by guarantee availing of the audit exemption
• Parents and subsidiaries being eligible to avail of the audit exemption

These changes will unquestionably further reduce red tape for SME Businesses. From your perspective as an accountant or auditor these amendments will remove the burden of having to apply the onerous auditing standards to small companies who experience limited benefit from an audit under the Clarity Auditing Standards due to their size and complexity and in some cases just can not afford to pay the fees required to produce a file to an adequate standard.

On this basis the changes in the 2012 Companies Bill and the focus of this consultation paper are positive.

However, there is one significant issue that is being overlooked that is an ongoing annoyance and problem for the profession. Neither the consultation paper nor the Companies Bill currently provide for the removal of the late filing requirement. Under current legislation to avail of the audit exemption a company must be up to date with its annual return filings with the CRO in the current and preceding period.

This is a worrying omission from the consultation implying that there are not plans to change the legislation in this regard. In a country where we repeatedly talk about reducing red tape and administrative burden this is actually one of the biggest practical issues in relation to audit exemption. This is an opportunity to genuinely reduce red tape but it appears to have been ignored. By leaving in this requirement the CRO, and effectively the Government, are making the accountancy profession key drivers of corporate compliance.

From a CRO perspective this is good as their return and compliance performance is elevated, but it is the accountants who ultimately achieve this result by hounding their clients to file on time so that they do not fall into audit. Small company directors do not always understand the difference between audit and non-audit and they are definitely not prepared to pay for the difference. Accountants drive their clients to comply to minimize their own workload. The legislation should make directors accountable rather than effectively penalising Irish accountants with additional underpaid work when their clients do not comply.

We are gravely concerned that the opportunity is going to be missed for the Irish accountancy profession to get this issue resolved once and for all. On this basis we are going to prepare a detailed consultation response highlighting the problem and we are now seeking your comment and input to include it as part of our response.

More importantly, however, we have created a petition for which we are seeking your signature, so that we can demonstrate that the accounting profession as a whole wants this legislative flaw rectified. We know from talking to accountants that you want this requirement changed and we also know that your clients need it changed. We see this as an opportunity to have your voice heard. Help us help you.

Please sign the petition so that we can present it to the Department of Jobs Enterprise and Innovation as part of our submission. We will also submit it to all of the relevant bodies and organisations in Ireland that can facilitate change in this area. Make sure to pass it on to your friends and colleagues so that we can get the maximum support possible and make sure that the legislature will listen.

We really think that this is potentially an important opportunity, so if you wish to respond yourself we have provided a link to the Consultation Paper. If you are making a submission your response should be submitted by 31st of May 2013 to [email protected] or by post to:-

Marie Dempsey
Company Law (EU/Legislation)
Department of Jobs, Enterprise and Innovation
Earlsfort Centre
Lr Hatch St
Dublin 2

If you have any comments or want to discuss the audit exemption please email [email protected]. Most importantly click here now to Sign the Petition today.

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Should you have any questions in relation to this article or should you have any Company Law or Company Secretarial queries please contact John Murphy on 053 910 0000, [email protected].