Since 2016 the rules governing statutory audit in Ireland have been significantly enhanced following the transposition of two EU instruments. The EU’s decision to reform the regulation of statutory audit came as a result of the EU Commission’s assessment, following the financial crisis, of the role of audit in that crisis. One of the main objectives of the EU reform was to improve audit quality.
The resulting Audit Directive (2014/56/EU) and Regulation ((EU)(537/2014)) updated existing EU law and were given effect in S.I. 312 of 2016 and elevated to primary legislation in the Companies (Statutory Audits) Act 2018.
The Audit Directive put requirements for statutory auditors on a statutory footing such as in relation to assessing and maintaining independence from the audited entity and maintaining professional scepticism. The Audit Regulation, which has direct effect, introduced additional requirements specifically addressed to auditors of public-interest entities. Public-interest entities are systemically important entities such as credit institutions and insurance undertakings. Entities with securities listed on a regulated main market in the EU are also classified as public-interest entities.
The main requirements are
- A public-interest entity must change auditor at least every 10 years
- The prohibition on certain non-audit services to a public-interest entity by its auditor
- A cap on fees from non-audit services relative to audit fees
The transposition of the audit reform package provided the Irish Auditing and Accounting Supervisory Authority (IAASA), which is an independent body responsible for the supervision of auditing and accounting profession, with new powers to further enhance audit quality and the system of oversight of statutory audit in Ireland.
IAASA is designated as the single competent authority with responsibility for the oversight of statutory auditors and audit firms in accordance with the EU reform package. Under the Audit Regulation, IAASA has direct responsibility for the quality assurance of audits of public-interest entities. IAASA is also responsible for any investigations or sanctions arising, as a result of those quality assurance inspections.
As part of its new responsibilities IAASA issued a public consultation ‘The future publication and grading policy for audit firms that carry out statutory audits of public-interest entities’. IAASA’s consultation and feedback papers on foot of this consultation and its conclusions in this regard are available on the Authority’s website at https://www.iaasa.ie/News/2019/Publication-and-Grading-Feedback-Paper-(1). As IAASA is independent in the exercise of its functions, I have no direct role in this matter.