Companies (Audit and Accounting) Amendment Bill 2003

This Companies (Audit and Accounting) Amendment Bill, 2003 was published in February of this year. The Bill principally relates to the duties of auditors and establishes the Irish Auditing and Accounting Supervisory Authority (‘the Authority’). Due to become law by the end of the year, the Bill also contains a number of key provisions of which company directors should be aware.

Accounts compliance

  • Every director is deemed to have approved the company’s accounts unless he shows he took all reasonable steps to prevent their approval;
  • At the request of the Authority, directors may be required to explain company’s accounts or to prepare revised accounts;
  • If a satisfactory explanation is not given, the Authority may apply to the court for order(s) for explanation of accounts or for preparation of revised accounts;
  • In making an order, the court will have regard to whether directors knew or ought to have known that accounts were defective and may order that directors inform people likely to rely on previous accounts of the revision/defect;
  • Directors can be held liable for all expenses incurred in relation to revision of accounts.

Audit committees

  • Directors are required to establish an audit committee (one committee per group of companies). The committee (which will be answerable to the directors) will set out in writing the role of the committee in relation to the company’s audit and financial management.
  • The committee is to be made up of a majority of non-executive directors who are not otherwise employees of the company or the chairperson of the board.

Directors compliance statement

  • Directors must prepare a statement in writing entitled the “Directors Compliance Statement”.
  • The statement must set out the company’s policies in relation to compliance with relevant obligations; illustrate the company’s internal financial and other procedures in relation to compliance with relevant obligations and arrangements for implementing and monitoring these policies.
  • The statement must be approved by the board of directors, published in annual accounts and reviewed at least every three years.
  • The directors’ report attached to the annual financial statements must note whether the policies set out in the compliance statement have been fulfilled.

Auditors obligation

  • Where the compliance statement is not fair and reasonable the auditor must report this to the directors.
  • The auditor is obliged to report to the Director of Corporate Enforcement where directors fail to fulfil their obligations pursuant to the compliance statement.

Orla Keane/Catherine Tarrant
August 2003