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August 24, 2011

Irish audit exemption unlikely to have big impact on profession

The Chartered Accountants Ireland does not expect the government’s plan to exempt more businesses from mandatory audit to have a big impact on the profession.

“At this stage we would not anticipate a huge drop in revenue,” Chartered Accountants Ireland technical director Aidan Lambe said.

Grant Thornton Ireland partner Patrick Burke is in agreement saying the firm does not anticipate a material impact on revenues either.

“There is a greater scrutiny of financial statements in this difficult trading period. Those advancing credit, suppliers or particularly financial institutions, require this process to be as informed and less risky as possible, therefore the requirement for audited financial statements will probably still continue to remain high,” Burke said.

This month the Irish government announced plans to increase the number of businesses exempt from mandatory audit to the maximum level permitted under European law.

The new thresholds will allow companies with a turnover of less than €8.8m ($12.5m), a balance sheet of €4.4m and fewer then 50 employees to be exempt from the statutory audit requirement. The previous threshold was 20% less.

Lambe said among the reasons these changes will have a limited impact is the fact that the law only applies to individual companies and not to groups, smaller regulatory entities in the financial service sector or dormant subsidiaries. On top of this, in Ireland there is a large credit union sector which traditionally is audited by smaller auditing firms, Lambe notes.

“So, pushing up the threshold will, yes bring some more companies into the audit exemption net but our member firms say this will not have a significant impact on the level of business that smaller accounting firms are providing”.

What’s more, Lambe stresses, “company-law will still require these businesses to prepare a ‘true and fair view’ and to file a bridge-information with the companies’ offices so to that extent these companies will still need to employ the technical expertise that the accounting firms have”.

Related article

Irish government exempts more businesses from audit

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