Senator O'Leary's amendment gives me an opportunity to clarify a number of points. I shall deal directly with the amendment and state my position in relation to it.
The amendment deals with section 18(4). It refers specifically to the duties of auditors when the directors of a company wish to avail of the provisions of sections 10 to 12, that is, where a company wishes to benefit from the exemptions specified in sections 10 to 12 the auditor has two specific duties under section 18(4). Those duties are quite clear and simple. Subsection (4) states:
...it shall be the duty of the auditors of the company to provide the directors of the company with a report in writing stating that, in the opinion of the auditors of the company, the directors of the company are entitled to annex those accounts to the annual return...
In other words, where a company wish to be defined as a small company and are availing of the exemptions in sections 10 to 12 the first duty of the auditor shall be to provide a report in writing that the company is entitled to avail of the exemptions. The second duty of the auditor is that he must give a report in writing stating that in the opinion of the auditor the accounts so annexed are properly prepared as aforesaid.
The second obligation on the auditors is the subject of the amendment put down by Senators O'Leary and Cregan and put down initially by Senator O'Leary on Committee Stage. It has also been the subject of a meeting I had with the consultative committee of the accounting bodies, who expressed concern about the phrase "properly prepared as aforesaid".
I am satisfied that the wording of subsection (4) is quite clear and does not need to be amended. If an amendment on the lines submitted by Senator O'Leary were to be adopted it would possibly cause confusion. It could also raise problems of a legal nature. The words "properly prepared as aforesaid", merely state that the abridged accounts — for a small company the abridged balance sheet or for a medium company the abridged profit and loss account and balance sheet — have been prepared in accordance with the entitlements under sections 10 to 12. It does not impute any qualitative judgment on the account. The auditors' report in this regard merely states that the accounts have been properly prepared as aforesaid. In other words, that they have been properly prepared in an abridged form as allowed by this Bill.
The abridged versions of accounts and balance sheets for small companies must at all times give a true and fair view of matters in the company. In relation to the balance sheet the true and fair view required by section 3 follows throughout the Bill. There is no mechanism whereby any accounts filed in the Office of the Registrar can do anything other than reflect a true and fair view of the company whether those accounts are in an abridged or in a comprehensive form. There is no getting away from the concept of a true and fair view. Otherwise, the Bill would become valueless. If the Bill did not have the philosophy of a true and fair view running through it we would not achieve what we set out to achieve. If it is necessary in order to achieve that true and fair view, that notes would have to be submitted that will have to be done.
The second matter I should like to comment on relates to whatever structures or rules an auditor may wish to put on an account. This is dealt with in section 18 (3)(b) which states:
"a copy of the report of the auditors under section 163 of the Principal Act".
In other words, an auditor has to certify the accounts under section 163 of the Principal Act. It is there that whatever strictures the auditor has in relation to the qualitative aspect of the accounts are entered. There are different certificates, the report under subsection (4) and the report of the auditors under section 163 of the Principal Act. I am satisfied that the requirements of this Bill when it comes into force, will be of benefit to companies and auditors and will not impose any undue burden on them.
The Senator raised a separate issue in relation to the rights of directors to draw up abridged balance sheets for small companies under section 10. Section 10 (1) which refers to small companies states quite specifically:
notwithstanding paragraph (a) of section 3(1) of this Act, but subject to paragraph (b) of the said section 3(1) the directors of a company treated as a small company pursuant to section 8 (1) of this Act may draw up an abridged balance sheet showing only those items preceded by letters or roman numbers in Formats 1 and 2 of the balance sheet formats set out in the Schedule to this Act:
In other words, the directors may draw up an abridged balance sheet and submit it to the Companies Registration Office. They may draw up a full balance sheet or an abridged one for their shareholders but they still have to comply with the Principal Act. They will also have to have their auditor's certificate, directors' report and notes for their shareholders. In all probability, small companies would have a more comprehensive set of accounts for shareholders. What we are doing in section 10 is giving small companies the right to lodge abridged balance sheets, in other words, balance sheets showing only those items preceded by letters or roman numerals in formats 1 and 2 of the balance sheet formats set out in the Schedule to this Act.
This is an enabling section which we are allowing small companies to avail of. They may draw up and lodge an abridged version of the balance sheet. They will also have to report to their shareholders and may or may not draw up a more comprehensive set of accounts. They are two different things. We are facilitating small companies. As I said in my Second Stage speech we are not anxious to put an undue burden on small companies. I know Senator O'Leary accepts this concept. Whether the balance sheet is an abridged version or not it must still comply with the concept of giving a true and fair view of the company. If in drawing up an abridged balance sheet notes will be required to achieve that end then notes will have to be produced. One has to understand that there are certain obligations on directors and auditors and these obligations are being strengthened where companies wish to avail of sections 10 to 12. Nevertheless running right through the Act is the principal philosophy that company accounts must at all times show a fair view of the company.
I hope I have answered all of Senator O'Leary's questions on this matter. I will be glad to address any other points he wishes to make by way of questions if this is allowed under the procedure.