Synergy Information

Audits

Audits

As a business, do you need to get an audit done?

Following the enactment of the Companies (Accounting & Auditing) Act 2003, the turnover threshold for private companies availing of audit exemption has been increased.  Which means that 95% of small companies do not require an audit.  Companies that meet laid down criteria can qualify for audit exemption. That means that you do not need to get an auditor to audit your books but you still need to have your accounts prepared and submitted to the Companies Registration Office (CRO) and Corporation Tax returns will still need to be filed with the Revenue Commissioners. None of this removes your duty to keep proper books and records.

You don’t even have to have an accountant prepare your books.  If you know how to do it, you can do it yourself.  If you don’t, you can get an accountant to do it and the accountant doesn’t need to be an auditor.

What’s an audit?

An audit is an examination of the Financial Statements of a company by an independent person, an auditor. The auditor attaches a report to the Financial Statements stating that they show a true and fair view of the state of affairs of the company and of the profit or loss for the period (or otherwise, as may be the case). The auditor will also review the Financial Statements to ensure that they have been prepared in accordance with company law and accounting standards.

Auditors need to follow international auditing standards, even for small audits, and are subject to regulation by their professional body. An audit can be a costly process, so availing of audit exemption can significantly save on professional fees.

Conditions to be satisfied

The conditions to be satisfied before a company will be able to claim the exemption from the requirement to have its accounts audited are set out in section 32(3) of the 1999 Act (as amended by the Companies (Auditing and Accounting) Act 2003, the Investment Funds Companies and Miscellaneous Provisions Act 2006 and the Companies (Amendment)(No.2) Act 1999 (Section 32) Order 2012) and are as follows:

In respect of the financial year concerned:

  • The company must be a company to which the Companies (Amendment) Act 1986 applies i.e. a Private Limited Company.
  • The amount of turnover of the company must not exceed €8.8 million.
  • The balance sheet total of the company is less than €4.4 million at the end of its financial year.
  • The average number of employees must not exceed 50.
  • The company must not be a parent company or a subsidiary company.
  • The company must not come within one of 19 classes of companies listed in the Second Schedule to the 1999 Act; See Attorney Generals website for Second Schedule.  The company is not
  • a company "limited by guarantee"
  • a holding or subsidiary company
  • a bank, insurance, management or investment company.
  • The company's annual return, to which the accounts for the financial year in question are attached, must be furnished to the CRO in compliance with section 127 Companies Act 1963. This means that the return must be delivered to the CRO not later than 28 days after the company's Annual Return Date, or where the return has been made up to an earlier date, within 28 days of that earlier date. i.e.it must not be late in the current year;
  • Furthermore, where an annual return to which accounts for the immediately preceding financial year was delivered to the CRO, that return must also have been filed on time. i.e. it must not be late in the previous year;
  • The year in question must be the current year - section 32 provides that the directors must be of the opinion that the company "will satisfy" the conditions - use of the future tense precludes the decision being taken in respect of a year that has already ended.
  • A company which satisfies the revised exemption threshold levels in a current financial year, the year in respect of which the audit exemption is being claimed, must also have satisfied those revised threshold levels in the preceding financial year.

Unless the financial year in respect of which the audit exemption is being claimed is the first financial year of the company, the company must also have satisfied all the conditions set out in section 32(3) in respect of the preceding financial year. For example, if the most recent company's annual return with accounts was delivered late to the CRO or if the current years return is being delivered late, the company is not entitled to the audit exemption, notwithstanding that it may satisfy all the remaining conditions.

Remember, a company can lose audit exemption at any time, if it breaks any of the above conditions. In such cases the company must appoint an auditor and commission them to complete a statutory audit.  Now you have extra hassle, extra cost, extra time and frustration.  It's a situation a micro or small business should not find itself in.

Before claiming audit exemption, the directors need to be sure that an audit isn’t required for other purposes, for example, as a condition of a grant claim. Banks may also require audited accounts.

How does a company apply for audit exemption?

The directors need to:

  1. Pass a resolution stating that the company is taking advantage of audit exemption.
  2. Keep a written record of the resolution which is available for inspection.
  3. Make certain declarations on the face of the audit exempt Balance Sheet stating that the company is availing of audit exemption.
  4. Inform the auditor of the decision to claim audit exemption.

Shareholders have the right to object to the company availing itself of audit exemption by serving notice on the company. Shareholders holding in excess of 10% of the voting rights (in aggregate) must serve notice of the objection in the year prior to the year in which exemption is being availed of or during that financial year (at least one month before the year end).

What happens to the auditor?

Once the auditor has received notification that the company will claim audit exemption, he/she must serve notice on the company within 21 days. The notice specifies whether there are any circumstances that need to be brought to the attention of members or creditors in relation to the company’s decision to avail of audit exemption. The auditor must send a copy of this notice to the CRO within 14 days.

The auditor can be retained as an accountant to prepare the Financial Statements, annual return to the CRO and corporation tax return.  The accountant does not need to be concerned with following international auditing standards although he/she will need to prepare Financial Statements in accordance with accounting standards and company law. The accountant may attach an “Accountants Report” to the audit exempt Financial Statements but an opinion is no longer given on the Financial Statements. Qualifications are not given and as such there is no “qualified” report. However, if the accountant considers that the Financial Statements contain errors or are misstated, he/she will not issue an Accountants Report.

Auditing standards are getting more strict every year and an audit can place disproportionate burden on a small company. Therefore it is vital for directors of small companies to claim audit exemption where possible and to keep it by submitting annual returns on time.

What The Synergy Group can do for you:

  • Examine the conditions to assess whether you meet the criteria for audit exemption.
  • If you don’t need an audit, we can have our accountants prepare your accounts as required and submit them to the necessary bodies.
  • Have our auditors carry out audits as required

Call The Synergy Group to get a free overview of your situation and we will advise you on a way forward. Then, if you wish, we will hold your hand to make sure it works.

 

T: +353 1 8215189
F: +353 1 8215191
E: This email address is being protected from spambots. You need JavaScript enabled to view it.
M: +353 87 2326927

There are five menus on this site.
At the very top of the page in the black strip, you will find information on our Company. Below that, in the red strip, is the main menu.  On the bottom RHS, you will find details about our Company. Just above in the red strip are the articles. Just to your right here in black we are experimenting with menus that will change regularly. 
If you have any comments, please send them to This email address is being protected from spambots. You need JavaScript enabled to view it.