The Special Committee agreed at the last meeting that section 190 stand part of the Bill, therefore the debate will resume on section 191, amendment No. 238c in the name of the Minister. This amendment has already been discussed with amendment No. 238a. I now call on the Minister to move this amendment.
I move amendment No. 238c:
In page 142, lines 15 to 27, to delete subsection (1) and substitute the following:
"191.—(1) Subject to section 194, a person shall not be qualified for appointment either as auditor of a company or as a public auditor unless—
(a) (i) he is a member of a body of accountants for the time being recognised by the Minister for the purposes of this section and holds a valid practising certificate from such a body, or
(ii) he holds an accountancy qualification granted by a body of accountants that is, in the opinion of the Minister, of a standard which is not less than that required for such membership as aforesaid and which would entitle him to be granted a practising certificate by that body if he were a member of it, and is for the time being authorised by the Minister to be so appointed, or
(iii) he was, on the 31st day of December, 1989, a member of a body of accountants for the time being recognised under section 162 (1) (a) of the Principal Act, or
(iv) he was authorised by the Minister before the 3rd day of February, 1983, and is for the time being authorised by the Minister to be so appointed, or
(v) he is a person to whom section 192 applies, or
(vi) he is a person to whom section 193 applies, and is for the time being authorised by the Minister to be so appointed, and
(b) the particulars required by sections 199 and 200 in respect of such a person have been forwarded to the registrar of companies.".
Amendment No. 238d is additional. Amendments Nos. 238d, 238e and 238f are to be taken together. Agreed? Agreed.
I move amendment No. 238d:
In page 143, subsection (5), line 33, to delete "subsection (2), (3) or (4)" and substitute "subsection (3) or (4)".
Subsection 191 (5) of the present text of the Bill is a transitional provision and arises from the fact that new categories of persons are to be disqualified from acting as auditors of companies, industrial and provident societies and friendly societies. This provision in the existing Bill was designed to smooth the way for the companies, the societies and auditors involved who, by virtue of the new provisions, would no longer be qualified to audit the respective accounts. However the EC Directive contains no such transitional measures and accordingly it is necessary to delete this provision so far as auditors of companies are concerned. Amendments Nos. 238d, 238e and 238f, therefore, remove any reference to an auditor of a company from subsection (5). The provision will continue to apply to public auditors.
I move amendment No. 238e:
In page 143, subsection (5), line 34, to delete "as auditor of a company or".
I move amendment No. 238f:
In page 143, subsection (5), lines 37 and 38, to delete "as auditor of the company or".
I move amendment No. 238g:
In page 144, lines 17 to 20, to delete subsection (11) and substitute the following:
"(11) A recognition or authorisation by the Minister under section 162 of the Principal Act shall, notwithstanding the repeal of that section by this Act, continue in force as if given under this section——
(a) in the case of a recognition, until the time limit provided expires, or the Minister's decision is communicated to the body concerned, under section 195, whichever is the earlier, and
(b) in the case of an authorisation, until the time limit for the person to make the notification required by section 199 (3) expires.".
I have to say again, and I hope the Minister has considered the matter in the meantime, that I object strongly to the terminology of section 191, as amended, in that it says that to become a public auditor, a person must be either a member of a body of accountants or hold a qualification granted by a body of accountants. I do not accept that any private body should have a monopoly in this area. I think there must be a mechanism where the Minister can recognise an individual as having reached a certain standard of qualification, regardless of his membership or non-membership of a particular body. For that reason the new section is considerably worse then the original section 191 which contained provisions which did not confer a monopoly of any kind on any body of accountants. The Minister will recollect that there was a majority sentiment expressed within the Committee — if not a majority in a voting sense — in favour of what I was saying, that is, that we should avoid this. The only reason that might have prevented the Minister from going along with the view of the Committee was was his perfectly understandable desire not to do something without having had the opportunity to consult. He has had such an opportunity since the last meeting and I hope he will be able to remove from section 191 (a) (ii), first line, the words "granted by a body of accountants" so that we will not have a statutory monopoly and there will be a possibility of the Minister stepping in if he feels that individual bodies are being too difficult in respect of granting any person the ability to act as an auditor.
The amendments we are talking about are prompted by the EC Directive. As regards Deputy Bruton's statement that since last week we have had an opportunity to have consultations in detail about this particular provision, the position is we have not had such an opportunity because the EC Presidency and preparations for EC meetings have made it very difficult. On three occasions at the last meeting — and the records will show this — I gave certain assurances. Because of the case made by Deputies Bruton, Roche and O'Dea, I said I intended to come back on Report Stage to this point. Deputies made very specific points in relation to this area which I regard as very significant. I want to assure the Committee that I will come back to those points and do my best to satisfy Members. I can see the point being made by Deputy Bruton, Deputy Roche and Deputy O'Dea. The record will show that I have given a very strong commitment that I will honour on Report Stage when I get an opportunity to go into this area in greater detail. Deputies have made a very strong case and I am very sympathetic to that point of view.
I move amendment No. 238h:
In page 144, before section 192, to insert the following new section:
"192.—(1) Without prejudice to section 191, a person to whom this section applies shall also be qualified for appointment as auditor of a company or a public auditor.
(2) This section applies to a person——
(a) who on the 1st day of January, 1990, was a person to whom Article 18 of the Council Directive applies, and
(b) who, following his admission, before the 1st day of January, 1996, to the membership of a body of accountants recognised under section 195, was subsequently awarded a practising certificate by that body, and
(c) in respect of whom such certificate remains valid.".
I move amendment 238i:
In page 144, before section 192, to insert the following new section:
"193.—(1) Without prejudice to section 191, the Minister may declare that, subject to subsection (2), persons who hold—
(a) a qualification entitling them to audit accounts under the law of a specified country outside the State, or
(b) a specified accountancy qualification recognised under the law of a country outside the State,
shall be regarded as qualified for appointment as auditor of a company or a public auditor.
(2) Before making a declaration under subsection (1), the Minister—
(a) must be satisfied that the qualification concerned is of a standard not less than is required by the Companies Acts to qualify a person for appointment as auditor of a company or a public auditor, and
(b) may direct that such a person shall not be treated as qualified for the purposes of subsection (1) unless he holds such additional educational qualifications as the Minister may specify for the purpose of ensuring that such persons have an adequate knowledge of the law and practice in the State relevant to the audit of accounts, and
(c) may have regard to the extent to which persons qualified under the Companies Acts for appointment as auditor of a company or a public auditor are recognised by the law of the country in question as qualified to audit accounts there.
(3) Different directions may be given under subsection (2) (b) in relation to different qualifications.
(4) The Minister may, if he thinks fit, revoke or suspend for a specified period, in such manner and on such conditions as he may think appropriate, any declaration previously made under subsection (1)."
Amendment 238i has been discussed.
I would like to say something about this amendment which was circulated recently.
Before I come to the point raised by Deputy Bruton, with the permission of the Chairman, I would like to read something into the record in relation to section 191, as amended.
There is one further matter I would like to mention about section 191 as amended. It relates to the possible authorisation of partnerships of accountants as such, in other words, as opposed to recognising individual qualified auditors in those partnerships. This is a matter I am examining at present but until I have completed this exercise I am not in a position to bring forward proposals. However, I may wish to do so on Report Stage. My purpose in mentioning this matter now is to enable me to table an amendment on Report Stage. I thank you, Chairman, and Members for allowing me to bring this forward at this late stage in the discussions.
In relation to section 192, amendment 238i——
Could I refer to the declaration made by the Minister?
We want to make progress and we have got to stick to the procedure.
I was asking a question arising from what the Minister said.
You may. I am giving you this leeway but you are not supposed to.
Then the Minister was not supposed to say anything if that is the case.
If we are going to have this tit-for-tat, I will stick strictly to the rules and I will not let anyone read anything. I do not even have to allow discussion on amendment No. 238i because it has already been discussed but I was going to let you discuss it.
I just want to say I think what the Minister said is interesting, but he should be wary of this in one sense; one of the advantages of the individual in sole practice as an auditor is the personal liability element in the sense that they are personally responsible for failings. If you allow, as I think the Minister is having essentially to do, a corporate auditing provision the question is will the personal liability dimension still be there?
The reason I wanted this read into the report of this meeting was that we are considering this very important matter and I thank Deputy Bruton for his contribution.
Amendment 238i has already been discussed by the Minister, but if you want an up-to-date explanation, I would ask the Minister to give it quickly, please.
The amendment referred to makes provision for the Minister to declare that the holders of a qualification obtained outside the State would be qualified for employment as auditor of the company. This implements article 11 of the directive. Subsection (2) provides, however, that before making a declaration under subsection (1) the Minister must be satisfied about a number of things. These include satisfaction that the standards of the body concerned are not less than those required by the Companies Act to qualify a person for appointment as auditor of a company or as a public auditor and, if necessary, that the applicant must hold such additional educational qualifications as the Minister may specify. For example, an overseas student may not be familiar with the company law or tax laws in Ireland and the Minister may require additional qualifications in this regard. Paragraph (c) of subsection (2) provides, in making a declaration, the Minister may also have regard to the extent of which persons qualified in Ireland are recognised by the overseas authorities. Subsections (3) and (4) contain the necessary technical implementing provisions. We will have to recommend to all students to read the deliberations of our Committee which will familiarise them fully with the extent of the new Companies Act when it is enforced.
So long as they pay a royalty to the participants. May I draw the Minister's attention to subsection (4) which allows the Minister almost complete freedom to withdraw a recognition? Since that is similar to the provision in section 191 for domestically qualified auditors, there is no problem.
I move amendment No. 238j.
In page 144, before section 192, to insert the following new section:
"194. (1) Before granting, renewing, withdrawing, revoking, suspending or refusing a recognition of a body of accountants under the Companies Acts, the Minister may consult with any person or body of persons as to the conditions imposed or standards required by the body of accountants concerned in connection with membership of that body or the awarding to persons of practising certificates.
(2) The Minister may also consult with any person or body of persons before forming any opinion or making any declaration in relation to the qualifications held by any person or class of persons as respects qualification for appointment as auditor of a company or a public auditor.".
I move amendment No. 238k:
In page 144, before section 192, to insert the following new section:
"195. (1) Where a body of accountants recognised under section 162 of the Principal Act satisfies the Minister, within three months after the commencement of this section—
(a) that the standards relating to training, qualifications and repute required by that body for the awarding to a person of a practising certificate are not less than those specified in Articles 3 to 6, 8 and 19 of the Council Directive, and
(b) as to the standards it applies to its members in the areas of ethics, codes of conduct and practice, independence, professional integrity, technical standards, disciplinary procedures,
the Minister shall renew such recognition.
(2) Where a body of accountants referred to in subsection (1) does not satisfy the Minister as to the matters specified in that paragraph, he shall withdraw the recognition of that body until he is so satisfied.
(3) Where a body of accountants which has not previously been recognised by the Minister under section 162 of the Principal Act applies for such recognition after the commencement of this section, the Minister may grant such recognition if he is satisfied as to the matters referred to in subsection (1) in relation to that body or may refuse such recognition if he is not so satisfied.".
I move amendment No. 239:
In page 144, subsection (4), lines 35 and 42, to delete paragraph (a).
This amendment relates to the deletion of subsection (4) (a) of section 192 which requires a body of accountants to submit to the Minister for his approval a code prescribing standards of professional conduct for its members. It is so long ago since this amendment was submitted that I cannot quite recollect why it was submitted. It is important that bodies of this kind should have codes of professional conduct. It may, however, be the case that some of the accounting bodies would feel it is not really a matter for the Minister to approve their professional conduct. However, this is not a matter about which I would feel very strongly. Perhaps I could ask the Minister to comment on paragraph (a).
Subsection (4) (a) is at the very heart of section 192 and provides that the Minister may require a recognised body of accountants to prepare and submit for his approval a code prescribing standards of professional conduct for that body's members, including sanctions for breaches of the code. This provision in the Bill resulted from a certain amount of concern that the existing voluntary ethical guidelines of some accountancy bodies were not being respected in some cases, or that the disciplinary procedures available were not being enforced to a sufficient degree. As aquid pro quo for members of recognised bodies being able to undertake auditing without any other direct authorisation from the Minister, I consider that the Minister should have the discretionary power to be able to monitor and approve the codes of conduct under which the members of the recognised bodies concerned operate. I would also point out that the wording of paragraph (a) is optional in that it does not compel the Minister to require every body of accountants to prepare a code of conduct. If a code does exist and the Minister is happy with its existence and its enforcement there would naturally be no need for him to become involved in the process. In other words, it is strictly an option for the Minister should he wish to make use of it. Taken as a whole, the subsection will give a clear indication to recognised bodies that the Minister expects them to have and, indeed, to enforce professional codes of conduct.
For the members of such bodies it would clearly signal to them that respect and adherence to the bodies codes is no longer optional in a sense but is underpinned by law. I believe that the provision is useful. On reflection, Deputy Bruton might accept that the amendment is not necessary. Deletion of paragraph (a) would remove the Minister from any involvement in the approval of a code of ethics for accountancy bodies. For the reason which I have just given I am more than happy that having this provision on the Statute Book would be a useful option open to the Minister in his dealings with recognised bodies. In the circumstances I would recommend that Deputy Bruton, not press this amendment. Having brought his legislation through the Oireachtas I feel it would be unfortunate if the Minister did not have some say in a code prescribing standards of professional conduct for the members of the bodies involved; it is a very useful provision.
I am pleased to see this section here because it is becoming increasingly common for professional representative organisations to draw up their own code of conduct, code of practice, code of ethics, whatever, and to make them as binding as possible on the membership of the organisation and, often times, compliance with them as a condition of membership. The fact that the Minister may call for this code of conduct or a code of practice is a good step. It is a provision that should be available to the Minister. Deputy Bruton has not explained why he wishes it deleted. I would be interested in hearing the arguments put forward.
Having listened to the Minister I do not see any purpose in pressing this amendment. I would like to make a few remarks on the section when we get to it.
Amendment No. 239a in the name of the Minister; Amendment No. 239b is related and both amendments will be taken by agreement. Agreed? Agreed.
I move amendment No. 239a:
In page 145, subsection (4), between lines 2 and 3, to insert the following paragraphs:
"(e) Where the Minister approves a code under this subsection, he may direct that such provisions of the code as relate to the professional integrity of auditors shall apply, with any necessary modifications approved by the Minister, to persons individually authorised by him.
(f) The Minister may, by regulations, make provision for the function of monitoring compliance by individuals with the code in accordance with paragraph (e). Such regulations may in particular provide for this function to be performed on behalf of the Minister by any body or person specified in the regulations. The regulations may also contain such incidental, consequential, transitional or supplementary provision as may appear to be necessary or proper to ensure compliance with the specified provisions of the code by the individuals concerned.
(g) Every regulation made by the Minister under this section shall be laid before each House of the Oireachtas as soon as may be after it is made and, if a resolution annulling the regulation is passed by either House within the next 21 days on which that House has sat after the regulation is laid before it, the regulation shall be annulled accordingly, but without prejudice to the validity of anything previously done thereunder.".
Article 23 of the EC directive specifically provides that member states must ensure that persons approved for statutory auditing must carry out such audits with professional integrity. The term "professional integrity" is not defined in article 23 and I do not propose in amendment No. 239b — which proposes to insert this requirement in a new section 193 (6) to section 193 of the Bill — to do other than provide for the basic requirement contained in the directive.
In this regard it is probably fair to say that the professional ethics of recognised bodies will elaborate in a practical way what professional integrity amounts to and, of course, the rules of such bodies will have to be enforced through their own disciplinary procedures. Section 192 gives the Minister the power to require recognised bodies to prepare and submit to him a code prescribing standards of professional conduct for its members, including appropriate sanctions for breaches of the code. In this way the Minister will be able to take any action considered appropriate.
However, a difficulty arises in relation to ensuring the same requirement for individually authorised persons. Amendment No. 239a is designed to enable the Minister to apply approved codes of accountancy bodies to individually authorised persons. The idea is that this will be done under supplementary regulations made by the Minister. Enabling the Minister to adopt this approach will also give sufficient flexibility to react to developing situations.
Looking at paragraph (g), will it be the case that every code of conduct will have to be approved by regulations laid before the House, or have I misread that?
If the Minister requires one and approves it, that would be the appropriate and, I think, reasonable approach to adopt. It would have serious implications for individuals practising.
The Minister referred to professional integrity. Am I to understand that what exactly professional integrity means or who would decide what professional integrity is or ought to be, has not been specified?
As I said, the Minister would have the power to approve the codes of practice. In a sense there would be the ethos of the organisation involved. When I mentioned laying orders before each House of the Oireachtas I was referring to individuals and codes of practice for individuals which, I would presume, would be based on the general code of practice which would be required by the relevant organisations. I presume that will be the gist of what we would provide. We will certainly base it on the code of practice and the ethos of the professional organisations. We are coming to a stage where having the Minister involved in that area gives him or her the power to set certain guidelines. Deputy Flood has mentioned already that there is a need for some form of general monitoring, but we know that the professional codes define this term "integrity", and it will be enforced, but we have always recourse to the Minister.
I would be interested to know if the Minister would be prepared to include in subsection (4) (a), which deals with the standards of professional conduct, a requirement for him to approve any activities on the part of the body or bodies of accountants which might have the effect of limiting the supply of persons capable of qualifying as accountants or auditors. It is important if we are giving some form of statutory recognition and authority to professional bodies that we should be assured that that will not be used in the interests of their own members to restrict incoming competition to the profession. I would hope, therefore, that the Minister, in addition to being able to approve or disapprove standards of professional conduct, would also be able to approve or disapprove any artifically severe educational qualifications which might be used to limit supply or incoming members into the profession. That is a fairly important point and I hope the Minister will be able to deal with it.