What is an Audit?
In brief, an audit is an independent official examination of a company’s financial accounts. The auditors produce a report which is filed in the Companies Registration Office (“CRO”) with the financial statements and annual return.
Why Is An Exemption Available To Certain Companies?
An exemption was introduced as it was deemed that for small firms an audit can be an undue burden and in some cases the cost of an audit can outweigh the benefits derived.
Conditions To Be Satisfied In Respect Of The Financial Year Concerned:
The company is a private limited company;
Turnover of the company must not exceed €8.8 million;
The balance sheet total must be less than €4.4 million; and
The average number of employees must not exceed 50.
Companies That Cannot Avail Of The Exemption Include:
Private companies limited by guarantee without share capital;
Parent companies and subsidiary companies;
Companies which come within one of 19 classes of companies listed in the Second Schedule to the 1999 Act;
Companies which have failed to comply with the filing requirements of their annual return in respect of the year concerned or the preceding year; or
Companies which did not satisfy the audit exemption threshold levels in the preceding financial year.
Procedure To Avail Of The Audit Exemption:
The directors of the company may elect to dispense with the audit requirement in respect of the current financial year or a future financial year. The directors must be of the opinion that the company will meet the exemption conditions and the decision must be documented. The decision to avail of the exemption must be taken within the year the exemption is first claimed. The prescribed audit exemption statements must be stated on the balance sheet of the financial statements which are filed with the CRO.
Shareholders & The Audit Exemption
The decision to avail of the audit exemption may be vetoed by members holding at least 10% of the collective voting rights of a company. To veto the decision, the members must serve notice on the company at least one month in advance of the financial year end.
The Current Auditor & The Audit Exemption
Once a company decides to avail of the exemption, they must ask their auditor to resign. Upon notification of their termination the auditor must notify the company in writing, within 21 days, that there are no circumstances connected with the decision to terminate their appointment that they consider should be brought to the notice of the members or creditors of the company. However, if the auditor does consider there to be such circumstances, they must detail these within the notice and they must send a copy of the notice to the Registrar of Companies within 14 days.
Audit Exeption Compliance
A company must ensure that it complies with the relevant conditions in order to avail of the audit exemption and the directors should note that a company cannot retrospectively avail of the audit exemption. It is important to remember that the exemption is only in connection with having the accounts audited. There is no exemption available in respect of the statutory requirement to prepare the full accounts of a company.
Images Source: www.istockphoto.com