There has been some good news from the Select Committee Stage on the Companies (Statutory Audits) Bill 2017 which was debated on 21st February 2018. Minister Heather Humphreys has stated that the Department intends to examine removing the requirement to make an application to the District Court to retain the audit exemption. Niall Collins made representations regarding the impact on companies that face losing the audit exemption and the representations made by the accountancy bodies.
It is now proposed that the audit exempt financial statements will be allowed to be filed late and the company will be required to have the next 2 sets of financial statements audited. This would protect members and creditors and also maintain the integrity of filing on time and the compliance of companies with their filing obligations.
This would be a massive and most welcome change to micro and small companies that often lose audit exemption which unfairly punishes these companies by imposing an audit on the current and next financial year with very little benefit to members or creditors.
These companies that go to court are trying to be proactive in bringing the company up to date and only a small number might be seen to be pulling a fast one. The 5,420 companies that are involuntarily struck off should be the focus of CRO and the ODCE for prosecution as they have walked away from the obligations to file on time to wind up the company correctly.
They have not addressed how they would deal with companies that are just seeking the waiver from paying the late filing fees.
The proposals were made at committee stage so nothing is set in stone yet. The first draft of the bill proposed going to the High Court to retain the audit exemption and the late filing waiver so these new proposal are not confirmed and further changes could be made. The CRO may not be supportive of this proposal but as soon as we have an update we will let you know.
We support any effort to support companies that are trying to comply with the Companies Act obligations to file on time while also retaining the integrity of filing on time and we feel this could strike a fair balance. The audit exemption should always be linked with companies filing on time otherwise there would be a significant drop in companies filing on time however we cannot unfairly punish companies that miss the deadline for legitimate reasons.
The summary of what the Minister said is below, to read the full discussion click here
Oireachtas Joint and Select Committees Wednesday, 21 February 2018
Heather Humphreys (Cavan-Monaghan, Fine Gael)
“While I accept the spirit of what Deputy Niall Collins has said, I ask him to withdraw his opposition to the section for now. During the debate on Second Stage I promised to consider the points made on the issue both during the debate and in representations I had received directly since the Bill had been published. Clearly, there are legitimate concerns where a company finds itself unable to file on time, but we should be able to find a way to address some of them. However, any way forward must also ensure the interests of third parties will be protected and not undermined by reduced transparency.
One aspect that strikes me is the way in which the loss of the audit exemption is applied in law. The position could be improved. In particular, the costs involved and burden imposed could be reduced by changing the years to which it applies. Currently, there is a need to go back in time, but the accounting and audit profession has made representations to the Department, as recently as this week, to the effect that making the audit more contemporary would save time and reduce costs. I intend to bring forward proposals on Report Stage for the introduction of measures to reduce the cost and lessen the impact of some of the more burdensome aspects of losing the audit exemption. I am also looking at ways by which we could further streamline the annual filing process. There may be scope to reduce or change the steps associated with filing such that there would be fewer reasons for a company to file late. I intend to consider amendments that would simplify the filing process and hope to be able to bring them forward on Report Stage.
In summary, we are looking at removing the requirement to make an application to the District Court. Companies will be allowed to file late, but they will lose their audit exemption and will have to have their accounts audited. However, audits will take place for the current and following year, which will remove the necessity to file documents for an historical audit. Companies have 28 days in which to file and a further 28 days in which to make a subsequent filing. We may change that figure and give companies 56 days in which to file their final statements and annual return. That is what I am hoping to bring forward on Report Stage, having considered what the Deputy has said. I hope that is acceptable to him.”