Dáil Éireann Debate, Wednesday - 17 April 2019
140. Deputy Billy Kelleher asked the Minister for Business, Enterprise and Innovation her views on requiring large accountancy firms to separate audit functions from non-audit business; and if an impact analysis has been carried out by her Department in this regard. [18005/19]
Amharc ar fhreagra141. Deputy Billy Kelleher asked the Minister for Business, Enterprise and Innovation her views on proposals (details supplied); and if an impact analysis has been carried out by her Department in this regard. [18006/19]
Amharc ar fhreagraI propose to take Questions Nos. 140 and 141 together.
The EU completed a significant reform of the rules governing statutory audit with the adoption of two new instruments in April 2014. The resulting Audit Directive (2014/56/EU) and Regulation ((EU)(537/2014)) updated existing EU law. The package contained new legislative requirements including in relation to the independence regime between the audited entity and audit firm and auditor reporting.
The Audit Directive and Regulation were given effect in S.I. 312 of 2016 and elevated to primary legislation in the Companies (Statutory Audits) Act 2018. The Regulatory Impact Analyses for S.I. 312 of 2016 and the Companies (Statutory Audits) Act 2018 are each published on my Department’s website with details of the Member State options exercised in the transposition.
The new framework for statutory audit enhances independence requirements on all statutory auditors and audit firms such as the requirement to maintain professional scepticism and to assess possible threats to their independence in advance of taking up an audit engagement. The EU Regulation also introduced new obligations specifically addressed to the auditors of public interest entities i.e. credit institutions, insurance undertakings and listed entities. The main requirements on auditors and public interest entities in respect of independence are:
- The prohibition of the provision of certain non-audit services to the audited entity and the provision of other non-audit services subject to certain conditions.
- A cap on fees from non-audit services of 70% of audit fees, based on the average of the three preceding years audit fees.
- A requirement to change auditor at least every ten years and to change the key audit partner every five years.
In relation to auditor communication, the content of all audit reports now includes requirements to describe the scope of the statutory audit and to provide a statement on any material uncertainty that cast significant doubt about the entity’s ability to continue as a going concern. The EU Regulation also imposed additional obligations in respect of the audit report of public interest entities such as providing a description of the most significant assessed risks of material misstatement including assessed risks of material misstatement due to fraud and the auditor’s response to those risks.
There are no plans to change the current requirements which have been in place since 2016 but, as with all areas of policy and law, their impact will be kept under review.
