(a) in so far as they related to the conduct of statutory audits and the duties and powers of statutory auditors and audit firms in relation thereto for financial years commencing before that date, shall continue to apply to the conduct of statutory auditors and audit firms in relation thereto for those financial years, and (b) as regards each other matter provision for which was made by those Regulations before that date, shall continue to make such provision before that date.
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(2)For the purposes only of enabling the 2016 Audits Regulations to operate, for the financial years referred to in subsection (1), on and after the date referred to in that subsection, as those Regulations operated immediately before that date, a reference in those Regulations to this Act or a provision of this Act shall be read as a reference to this Act or such provision, as the case may be, as in force immediately before that date.
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Application 1463. Save where otherwise provided (including provided by Regulation (EU) No 537/2014), this Part applies— (a) in so far as it relates to the conduct of statutory audits and the duties and powers of statutory auditors and audit firms in relation thereto, to the conduct of statutory audits for financial years commencing on or after the date referred to in section 1462(1), and (b) as regards each other matter provision for which is made by this Part, on and from that date.
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Chapter 2
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Approval of statutory auditors and audit firms Applications for approval, general principle as to good repute, etc.
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1464. (1) A recognised accountancy body may, on application made to it by an individual or a firm, approve, under this Part, the applicant as a statutory auditor or audit firm.
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(2)A recognised accountancy body may, on foot of an application under subsection (1), grant approval under this Part only to— (a) individuals, or (b) firms, who are of good repute.
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(3)A recognised accountancy body may, on application made to it by a third-country auditor and in accordance with Chapter 20, approve, under this Part, the applicant as a statutory auditor.
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(4)Subsection (5) applies in the case of an application under subsection (1)— (a) by a firm that is a Member State audit firm in the circumstances where it is not seeking registration in accordance with section 1465, or (b) by a Member State auditor.
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(5)For the purposes of this section, the fact that the applicant is a Member State audit firm or Member State auditor shall constitute conclusive evidence that the applicant is of good repute unless, arising out of the cooperation that the State is required to engage in by virtue of Part VIII of the Audit Directive, the counterpart authority in the Member State where the applicant is approved as a statutory audit firm or auditor has notified the Supervisory Authority or a recognised accountancy body that the counterpart authority has reasonable grounds for believing that the good repute of the audit firm or auditor has been seriously compromised.
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(6)On approving a person as a statutory auditor or audit firm, a recognised accountancy body shall assign an individual identification number to the person.
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(7)The recognised accountancy body shall maintain a record in writing of all numbers assigned by it under subsection (6).
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Basis on which audit firms approved in other Member States may carry out audits in State 1465. (1) An audit firm which is approved in another Member State shall be entitled to carry out statutory audits in the State if the key audit partner who carries out those audits on behalf of the audit firm, both at the time of registration (in accordance with subsection (2)) and at all times during the registration of the firm, complies with the requirements of sections 1464 to 1472.
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(2)(a) An audit firm that wishes to carry out statutory audits in the State where the State is not its home Member State shall, before carrying out any such audit, register with the recognised accountancy body by which the key audit partner referred to in subsection (1) is approved. (b) The recognised accountancy body shall ensure that an audit firm which complies with subsection (1) is registered in accordance with the requirements of Chapter 5 and Schedule 20.
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(3)(a) The recognised accountancy body shall register the audit firm if it is satisfied that the audit firm is registered with the counterpart authority in the audit firm’s home Member State. (b) Where the recognised accountancy body intends to rely on a certificate, issued by the counterpart authority in the home Member State, attesting to the registration of the audit firm in the home Member State, the recognised accountancy body may require that such certificate be issued on a date falling within the 3 months immediately preceding that date on which the recognised accountancy body is given that certificate.
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(4)On registering the audit firm, the recognised accountancy body shall assign an individual identification number to the firm.
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(5)The recognised accountancy body shall maintain a record in writing of all numbers assigned by it under subsection (4).
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(6)The recognised accountancy body shall inform the counterpart authority in the home Member State of the registration of the audit firm.
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(7)Where a recognised accountancy body receives a notification from another Member State that an audit firm whose home Member State is the State has registered with the counterpart authority in the host Member State, the recognised accountancy body shall ensure that the registration is recorded in the public register.
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Restriction as to persons who may carry out statutory audits 1466. Statutory audits shall be carried out only by— (a) auditors or audit firms that are approved under this Part, or (b) audit firms registered in accordance with section 1465.
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Restriction on acting as statutory auditor 1467. A person shall not— (a) act as a statutory auditor, (b) describe himself or herself as a statutory auditor, or (c) so hold himself or herself out as to indicate, or be reasonably understood to indicate, that he or she is a statutory auditor, unless he or she has been approved in accordance with this Part.
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Restriction on acting as statutory audit firm 1468. A firm shall not— (a) act as a statutory audit firm, (b) describe itself as a statutory audit firm, or (c) so hold itself out as to indicate, or be reasonably understood to indicate, that it is a statutory audit firm, unless it has been approved in accordance with this Part or registered in accordance with section 1465.
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Offence for contravening section 1466, 1467 or 1468 1469. A person who contravenes section 1466, 1467 or 1468 shall be guilty of a category 2 offence.
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Conditions for approval as statutory auditor 1470. A person shall not be eligible for approval as a statutory auditor unless he or she is— (a) a member of a recognised accountancy body and holds an appropriate qualification as referred to in section 1472, (b) a Member State auditor and complies with section 1476, or (c) a third-country auditor and complies with section 1476 and Chapter 20.
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Transitional provisions applicable to certain deemed approvals under Regulation 44 of 2016 Audits Regulations 1471. (1) Subject to sections 1479, 1582 and 1583, a deemed approval of a person as a statutory auditor continued in force under the 2016 Audits Regulations by virtue of Regulation 44(1) of those Regulations and in force immediately before the commencement of section 3
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(6)of the Companies (Statutory Audits) Act 2018 shall continue in force under this Part as if it were a deemed approval of that person as a statutory auditor under this Part.
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(2)Subject to sections 1480, 1582 and 1583, a deemed approval of a firm as a statutory audit firm continued in force under the 2016 Audits Regulations by virtue of Regulation 44(2) of those Regulations and in force immediately before the commencement of section 3
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(6)of the Companies (Statutory Audits) Act 2018 shall continue in force under this Part as if it were a deemed approval of that firm as a statutory audit firm under this Part.
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Appropriate qualification for purpose of section 1470(a) 1472. (1) An individual holds an appropriate qualification, as required by section 1470(a), if he or she holds a qualification granted by a recognised accountancy body whose standards relating to training and qualifications for the approval of a person as a statutory auditor are not less than those specified in Schedule 19.
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(2)In subsection (1), ‘qualification’ means a qualification to undertake an audit of entity financial statements and group financial statements in so far as required by European Union law.
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(3)A recognised accountancy body may exempt in writing a person who has passed a university or equivalent examination, or who holds a university degree or equivalent qualification, in one or more of the subjects referred to in the test of theoretical knowledge specified in Schedule 19 if the body is satisfied that the passing of that examination, or the holding of that university degree or equivalent qualification, renders it unnecessary for the person to undergo that test in so far as those subjects are concerned.
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(4)The Supervisory Authority shall, at such times as it thinks it appropriate to do so, issue guidelines to recognised accountancy bodies as to the specific matters that should be given regard to in reaching a decision under subsection (3) whether or not to grant an exemption under that subsection to a person.
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Conditions for approval as statutory audit firm 1473. (1) In this section, references to a firm include references to a Member State audit firm if the firm is not seeking registration in accordance with section 1465.
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(2)A firm shall not be eligible for approval as a statutory audit firm unless— (a) the individuals who carry out statutory audits in the State on behalf of the firm are approved as statutory auditors in accordance with this Part, (b) the majority of the voting rights in the firm are held by— (i) individuals who are eligible for approval in the State or in any other Member State as statutory auditors, (ii) audit firms approved as statutory audit firms in the State or in any other Member State, or (iii) a combination of such individuals and audit firms, and (c) subject to subsection (3), the majority of the members of the administrative or management body of the firm are— (i) individuals who are eligible for approval in the State or in any other Member State as statutory auditors, (ii) audit firms approved as statutory audit firms in the State or in any other Member State, or (iii) a combination of such individuals and audit firms.
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(3)Where the administrative or management body of a firm has no more than 2 members, then, for the purposes of subsection (2)(c), one of those members shall satisfy at least the requirements of that subsection.
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Powers of Director 1474. (1) The Director may demand of a person— (a) acting as a statutory auditor or audit firm of an undertaking, or (b) purporting to have obtained approval under this Part, or registration in accordance with section 1465, to so act, the production of evidence of the person’s approval under this Part or, if applicable, registration in accordance with section 1465 in respect of any period during which the person so acted or purported to have obtained such approval.
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(2)If the person concerned refuses or fails to produce the evidence referred to in subsection (1) within 30 days after the date of the demand referred to in that subsection, or such longer period as the Director may allow, the person shall be guilty of a category 3 offence.
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(3)In a prosecution for an offence under this section, it shall be presumed, until the contrary is shown, that the defendant did not, within 30 days, or any longer period allowed, after the day on which the production was demanded, produce evidence in accordance with subsection (1).
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Evidence in prosecutions under section 1474 1475. (1) Subject to subsection (2), in proceedings for an offence under section 1474, the production to the court of a certificate purporting to be signed by a person on behalf of a recognised accountancy body and stating that the defendant is not approved under this Part or, if applicable, is not registered in accordance with section 1465, by that recognised accountancy body shall be sufficient evidence, until the contrary is shown by the defendant, that the defendant is not so approved or registered, as the case may be.
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(2)Subsection (1) shall not apply unless a copy of the certificate concerned is served by the prosecution on the defendant, by registered post, not later than 28 days before the day the certificate is produced in court in the proceedings concerned.
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(3)If the defendant in those proceedings intends to contest the statement contained in such a certificate, he or she shall give notice in writing of that intention to the prosecution within 21 days, or such longer period as the court may allow, after the date of receipt by him or her of a copy of the certificate from the prosecution.
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Chapter 3
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Aptitude test Aptitude test to be passed 1476. (1) Subject to subsection (2), a Member State auditor or third-country auditor applying for approval as a statutory auditor in the State is required to sit and pass an aptitude test to demonstrate his or her knowledge of the enactments and practice that are relevant to statutory audits in the State.
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(2)Subsection (1) shall not apply to a Member State auditor or third-country auditor if the recognised accountancy body is satisfied that he or she has otherwise demonstrated sufficient knowledge of the enactments and practice referred to in that subsection.
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(3)The Supervisory Authority shall, at such time as it thinks it appropriate to do so, issue guidelines to each recognised accountancy body as to the specific matters that should be given regard to in reaching a decision under subsection (2) whether or not a person has demonstrated the knowledge referred to in subsection (1).
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(4)A recognised accountancy body may charge and impose on a Member State auditor or third-country auditor a fee (of an amount specified from time to time by the Minister sufficient to meet the body’s administrative expenses in respect of the following) in respect of the administration of an aptitude test under this section in relation to him or her.
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(5)A fee imposed under subsection (4) may, in default of payment, be recovered from the Member State auditor or third-country auditor concerned as a simple contract debt in any court of competent jurisdiction.
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(6)The amount of a fee imposed under Regulation 49(4) of the 2016 Audits Regulations as those Regulations were in force immediately before the date of commencement of section 3
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(6)of the Companies (Statutory Audits) Act 2018 shall be the amount of the fee imposed under subsection (4) until such time as the Minister exercises his or her power under that subsection to specify a different amount of such fee.
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Scope of aptitude test 1477. (1) The aptitude test shall— (a) be conducted in either the Irish language or the English language, and (b) relate only to the applicant’s adequate knowledge of the enactments and practice that are relevant to statutory audits in the State.
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(2)Subject to subsection (3), the various matters that shall constitute the contents of the aptitude test shall be decided by the recognised accountancy body after it has received the approval of the Supervisory Authority to the contents of the test.
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(3)A recognised accountancy body shall not alter the contents of an aptitude test approved under subsection (2) unless such alteration has been approved by the Supervisory Authority.
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Adequate standards to be applied in administration of aptitude test 1478. (1) Subject to subsection (2), a recognised accountancy body shall apply adequate standards in the administration of the aptitude test.
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(2)No standards shall be used by a recognised accountancy body for the purposes of subsection (1) unless those standards have (with respect to that use) first been approved by the Supervisory Authority.
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Chapter 4
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Withdrawal of approval Grounds for mandatory withdrawal of approval in case of statutory auditor 1479. (1) For the purposes of this section, the cases that can constitute circumstances of an auditor’s good repute being seriously compromised include cases of professional misconduct or want of professional skill on the part of the auditor.
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(2)Without prejudice to section 1502 and subject to subsections (4) to (6), a recognised accountancy body shall withdraw an approval of an auditor under this Part if, but only if— (a) circumstances arise (involving acts or omissions on the part of the auditor) from which a recognised accountancy body can reasonably conclude that the auditor’s good repute is seriously compromised, (b) the auditor no longer falls within section 1470(a), (b) or (c), or (c) in the case of a person who is a statutory auditor referred to in section 1471(1)— (i) the auditor no longer falls within section 1470(a), (ii) the auditor is not registered as a statutory auditor in the public register, or (iii) the auditor is not subject to the regulation of a recognised accountancy body.
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(3)Unless there do not exist internal appeal procedures of a recognised accountancy body as referred to in subsection (8)(a), references in subsections (4) to (7) to a recognised accountancy body shall be read as references to a recognised accountancy body acting through the disciplinary committee that deals with matters at first instance.
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(4)Subject to subsection (7), subsection (5) applies where, having— (a) complied with the requirements of procedural fairness in that regard, and (b) served any notices required for that purpose or as required by its investigation and disciplinary procedures, a recognised accountancy body is satisfied that subsection (2)(a), (b) or (c) applies in the case of an auditor.
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(5)Subject to subsection (7), the recognised accountancy body shall serve a notice in writing on the auditor stating that— (a) it is satisfied that subsection (2)(a), (b) or (c) applies in the case of the auditor, (b) the auditor shall take specified steps to cause subsection (2)(a), (b) or (c) to cease to apply to him or her within a specified period (which shall be not less than one month), and (c) if those steps are not taken, it shall withdraw the approval of the auditor.
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(6)Where the recognised accountancy body has served a notice under subsection (5) on a statutory auditor and the auditor has not, before the expiration of the specified period referred to in subsection (5)(b), taken the steps referred to in subsection (5)(b), the recognised accountancy body shall withdraw the approval of the auditor under this Part.
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(7)The procedure specified in subsection (5) need not be employed if the acts or omissions concerned referred to in subsection (2)(a) are such as, in the opinion of the recognised accountancy body, constitute professional misconduct or want of professional skill on the part of the auditor of a degree that employing that procedure would not be in the public interest but nothing in this subsection affects the application of the requirements of procedural fairness to the withdrawal of approval.
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(8)If— (a) there exist applicable internal appeal procedures of the recognised accountancy body, and (b) the investigation and disciplinary procedures of the recognised accountancy body provide that a decision of its disciplinary committee, being a decision of a nature to which this section applies, shall stand suspended or shall not take effect until, as the case may be— (i) the period for making an appeal under those procedures has expired without such an appeal having been made, (ii) such an appeal has been made and the decision to withdraw the approval confirmed, or (iii) such an appeal that has been made is withdrawn, then, notwithstanding anything in the preceding provisions of this section, the operation of the withdrawal of approval by that disciplinary committee shall stand suspended until the occurrence of an event specified in paragraph (b)(i), (ii) or (iii).
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(9)Subsection (10) applies if— (a) there exist applicable internal appeal procedures of the recognised accountancy body, and (b) the investigation and disciplinary procedures of the recognised accountancy body do not provide, as referred to in subsection (8)(b), for the decision of the disciplinary committee referred to in that provision to stand suspended or not to take effect.
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(10)Notwithstanding the internal appeal procedures referred to in subsection (9)(a), the auditor to whom the decision referred to in subsection (8)(b) relates may apply to the High Court for an order suspending the operation of the withdrawal pending the determination by the relevant appellate committee of an appeal that he or she is making under those procedures and, where such an application is made, subsections (13) to (15) apply to that application with— (a) the substitution of references to an appeal under those internal appeal procedures for reference to an appeal under section 1481, and (b) any other necessary modifications.
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(11)If the relevant appellate committee referred to in subsection (10) is of the opinion, having regard to the particular issues that have arisen on that appeal, that, in the interests of justice, the disposal by it of an appeal referred to in that subsection ought to include its proceeding in the manner specified in subsections (5) and (6), then, in disposing of that appeal, it shall proceed in the manner so specified.
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(12)The recognised accountancy body shall take all reasonable steps to ensure that any appeal to the relevant appellate committee referred to in subsection (10) is prosecuted promptly and it shall be the duty of that appellate committee to ensure that any such appeal to it is disposed of as expeditiously as may be and, for that purpose, to take all such steps as are open to it to ensure that, in so far as is practicable, there are no avoidable delays at any stage in the determination of such an appeal.
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(13)Where the recognised accountancy body has made a decision to withdraw the approval of an auditor under this Part (that is to say, a final decision of the recognised accountancy body on the matter after the internal appeal procedures (if any) of it have been employed and exhausted), the auditor may apply to the High Court for an order suspending the operation of the withdrawal pending the determination by the High Court of an appeal under section 1481 that he or she is making against the withdrawal.
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(14)On the hearing of an application under subsection (13), the High Court may, as it considers appropriate and having heard the recognised accountancy body and, if it wishes to be so heard, the Supervisory Authority (which shall have standing to appear and be heard on the application)— (a) grant an order suspending the operation of the withdrawal, or (b) refuse to grant such an order, and an order under paragraph (a) may provide that the order shall not have effect unless one or more conditions specified in the order are complied with (and such conditions may include conditions requiring the auditor not to carry out statutory audits save under the supervision of another statutory auditor or not to carry out such audits save in specified circumstances).
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(15)The High Court may, on application to it by the auditor or the recognised accountancy body concerned, vary or discharge an order under subsection (14)(a) if it considers it just to do so.
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(16)The procedures under this section are in addition to those procedures in the cases to which section 930C(10) to (12) apply, that are required by section 930C(10) to (12) to be employed.
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Grounds for mandatory withdrawal in case of statutory audit firm 1480. (1) For the purposes of this section, the cases that can constitute circumstances of a statutory audit firm’s good repute being seriously compromised include cases of professional misconduct or want of professional skill on the part of the audit firm or any of the one or more auditors through whom it acts.
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(2)Without prejudice to section 1502 and subject to subsections (4) to (6), the recognised accountancy body shall withdraw an approval of an audit firm under this Part if, but only if— (a) circumstances arise (involving acts or omissions on the part of the audit firm or auditor or auditors through whom it acts) from which the recognised accountancy body can reasonably conclude that the firm’s good repute is seriously compromised, (b) the audit firm (not being a firm referred to in paragraph (c)) no longer falls within section 1473(2)(a), (b) and (c), or (c) in the case of a firm which is a statutory audit firm referred to in section 1471(2), the firm no longer falls within section 1473(2)(a).
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(3)Unless there do not exist internal appeal procedures of the recognised accountancy body as referred to in subsection (8)(a), references in subsections (4) to (7) to a recognised accountancy body shall be read as references to a recognised accountancy body acting through the disciplinary committee that deals with matters at first instance.
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(4)Subject to subsection (7), subsection (5) applies where, having— (a) complied with the requirements of procedural fairness in that regard, and (b) served any notices required for that purpose or as required by its investigation and disciplinary procedures, the recognised accountancy body is satisfied that subsection (2)(a), (b) or (c) applies in the case of an audit firm.
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(5)Subject to subsection (7), the recognised accountancy body shall serve a notice in writing on the audit firm stating that— (a) it is satisfied that subsection (2)(a), (b) or (c) applies in the case of the audit firm, (b) the audit firm shall take specified steps to cause subsection (2)(a), (b) or (c) to cease to apply to it within a specified period (which shall not be less than one month), and (c) if those steps are not taken, it shall withdraw the approval of the firm.
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(6)Where the recognised accountancy body has served a notice under subsection (5) on a statutory audit firm and the firm has not, before the expiration of the specified period referred to in subsection (5)(b), taken the steps referred to in subsection (5)(b), the recognised accountancy body shall withdraw the approval of the audit firm under this Part.
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(7)The procedure specified in subsection (5) need not be employed if the acts or omissions concerned referred to in subsection (2)(a) are such as, in the opinion of the recognised accountancy body, constitute professional misconduct or want of professional skill on the part of the audit firm (or the auditor or auditors through whom it acts) of a degree that employing that procedure would not be in the public interest but nothing in this subsection affects the application of the requirements of procedural fairness to the withdrawal of approval.
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(8)If— (a) there exist applicable internal appeal procedures of the recognised accountancy body, and (b) the investigation and disciplinary procedures of the recognised accountancy body provide that a decision of its disciplinary committee, being a decision of a nature to which this section applies, shall stand suspended or shall not take effect until, as the case may be— (i) the period for making an appeal under those procedures has expired without such an appeal having been made, (ii) such an appeal has been made and the decision to withdraw the approval confirmed, or (iii) such an appeal that has been made is withdrawn, then, notwithstanding anything in the preceding provisions of this section, the operation of the withdrawal of approval by that disciplinary committee shall stand suspended until the occurrence of an event specified in paragraph (b)(i), (ii) or (iii).
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(9)Subsection (10) applies if— (a) there exist applicable internal appeal procedures of the recognised accountancy body, and (b) the investigation and disciplinary procedures of the recognised accountancy body do not provide, as referred to in subsection (8)(b), for the decision of the disciplinary committee referred to in that provision to stand suspended or not to take effect.
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(10)Notwithstanding the internal appeal procedures referred to in subsection (9)(a), the audit firm to which the decision referred to in subsection (8)(b) relates may apply to the High Court for an order suspending the operation of the withdrawal pending the determination by the relevant appellate committee of an appeal that it is making under those procedures and, where such an application is made, subsections (13) to (15) apply to that application with— (a) the substitution of references to an appeal under those internal appeal procedures for reference to an appeal under section 1481, and (b) any other necessary modifications.
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(11)If the relevant appellate committee referred to in subsection (10) is of the opinion, having regard to the particular issues that have arisen on that appeal, that, in the interests of justice, the disposal by it of an appeal referred to in that subsection ought to include its proceeding in the manner specified in subsections (5) and (6), then, in disposing of that appeal, it shall proceed in the manner so specified.
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(12)The recognised accountancy body shall take all reasonable steps to ensure that any appeal to the relevant appellate committee referred to in subsection (10) is prosecuted promptly and it shall be the duty of that appellate committee to ensure that any such appeal to it is disposed of as expeditiously as may be and, for that purpose, to take all such steps as are open to it to ensure that, in so far as is practicable, there are no avoidable delays at any stage in the determination of such an appeal.
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(13)Where the recognised accountancy body has made a decision to withdraw the approval of an audit firm under this section (that is to say, a final decision of the recognised accountancy body on the matter after the internal appeal procedures (if any) of it have been employed and exhausted), the audit firm may apply to the High Court for an order suspending the operation of the withdrawal pending the determination by the High Court of an appeal under section 1481 that it is making against the withdrawal.
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(14)On the hearing of an application under subsection (13), the High Court may, as it considers appropriate and having heard the recognised accountancy body and, if it wishes to be so heard, the Supervisory Authority (which shall have standing to appear and be heard on the application)— (a) grant an order suspending the operation of the withdrawal, or (b) refuse to grant such an order, and an order under paragraph (a) may provide that the order shall not have effect unless one or more conditions specified in the order are complied with (and such conditions may include conditions requiring the audit firm not to carry out statutory audits save under the supervision of one or more statutory auditors or one or more statutory audit firms or not to carry out such audits save in specified circumstances).
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(15)The High Court may, on application to it by the audit firm or the recognised accountancy body concerned, vary or discharge an order under subsection (14)(a) if it considers it just to do so.
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(16)The procedures under this section are in addition to those procedures in the cases to which section 930C(10) to (12) apply, that are required by section 930C(10) to (12) to be employed.
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Appeals against withdrawal of approval 1481. (1) Subject to subsection (2), a person may appeal to the High Court against the withdrawal by the recognised accountancy body of approval under this Part of the person as a statutory auditor or audit firm.
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(2)An appeal shall not lie under subsection (1) unless and until any applicable internal appeal procedures of the recognised accountancy body have been employed and exhausted by the person referred to in that subsection.
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(3)An appeal under subsection (1) shall be made within one month— (a) unless paragraph (b) applies, after the date of the withdrawal of approval, or (b) after the confirmation of that withdrawal on foot of the internal appeal procedures of the recognised accountancy body having been employed.
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(4)On the hearing of an appeal under subsection (1), the High Court may— (a) cancel the withdrawal of the approval, or (b) confirm the withdrawal of the approval.
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(5)The High Court may, on the hearing of an appeal under subsection (1), consider evidence not adduced or hear an argument not made to the recognised accountancy body if the Court is satisfied that— (a) there are cogent circumstances justifying the failure to adduce the evidence or make the argument to the recognised accountancy body, and (b) it is just and equitable for the Court to consider the evidence or hear the argument, as the case may be.
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(6)A notification of the outcome of an appeal under this section (or of any appeal from a decision of the High Court thereunder) shall be made by the recognised accountancy body to the same persons to whom a notification of a withdrawal of approval shall be made by section 1482 and (where it applies) section 1483.
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Certain persons to be notified of withdrawal of approval 1482. Without prejudice to section 1483, where the approval under this Part of a statutory auditor or audit firm is withdrawn for any reason by a recognised accountancy body, that fact and the reasons for the withdrawal shall be communicated by the recognised accountancy body to— (a) the Supervisory Authority, and (b) the Registrar, as soon as possible, but not later than one month after the date of withdrawal of approval.
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Other persons to be notified of withdrawal of approval 1483. (1) Where the approval under this Part of a statutory auditor is withdrawn for any reason by a recognised accountancy body, the recognised accountancy body shall, in addition to making the communication specified in section 1482, notify the relevant competent authorities of the host Member States, where the statutory auditor is also approved and entered in the public registers of those States pursuant to Articles 15 to 19 of the Audit Directive, of the fact of the withdrawal and the reasons for it.
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(2)Where the approval under this Part of an audit firm is withdrawn for any reason by a recognised accountancy body, the recognised accountancy body shall, in addition to making the communication specified in section 1482, notify the relevant competent authorities of the host Member States, where the audit firm is also registered and entered in the public registers of those States pursuant to Articles 15 to 19 of the Audit Directive, of the fact of the withdrawal and the reasons for it.
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(3)If the approval under this Part of a statutory auditor or audit firm is withdrawn by the Supervisory Authority, this section and section 1482 (other than paragraph (a) of it) shall apply in relation to the withdrawal as if the references in them to the recognised accountancy body were references to the Supervisory Authority and with any other necessary modifications.
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(4)The notifications under this section shall be made as soon as possible, but not later than one month after the date of withdrawal of approval.
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Chapter 5
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Public register Public register 1484. (1) Subject to subsection (2) and sections 887(2), 934C(2)(h), 1506(1)(h), 1573 and 1575, the Registrar shall maintain a particular register (in this Part referred to as the ‘public register’) which shall contain the information set out in Schedule 20 in relation to— (a) statutory auditors and audit firms (other than audit firms which fall within paragraph (b) of the definition of ‘statutory audit firm’), (b) third-country auditors and third-country audit entities, and (c) audit firms approved in another Member State which have been registered in accordance with section 1465.
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(2)Subject to sections 1582 and 1583, the public register referred to in Regulation 84 of the 2016 Audits Regulations, as that register was in being immediately before the date of commencement of section 3
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(6)of the Companies (Statutory Audits) Act 2018, shall, on and from that date, be deemed to be the public register referred to in subsection (1), and the other provisions of this Part (including provisions relating to the removal or alteration of entries in the public register) shall apply to that register accordingly.
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Notification of information to Registrar 1485. (1) (a) An auditor or audit firm (other than a statutory audit firm which falls within paragraph (b) of the definition of ‘statutory audit firm’) shall, as soon as may be after he or she is approved under this Part as a statutory auditor or audit firm, notify the relevant information to the recognised accountancy body. (b) A Member State audit firm shall, as soon as may be after it is registered in accordance with section 1465, notify the relevant information to the recognised accountancy body. (c) A third-country auditor shall, as soon as may be after he or she is approved under this Part as a statutory auditor, notify the relevant information to the recognised accountancy body.
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(2)On receipt of a notification under subsection (1) and its having carried out any verification of the information as seems to it to be necessary, the recognised accountancy body, as appropriate, shall notify to the Registrar— (a) the relevant information contained in the notification, and (b) (i) subject to subparagraph (ii), the individual identification number assigned by it to the auditor, audit firm or third-country auditor under section 1464(6) or a Member State audit firm under section 1465(4), and (ii) where— (I) under section 1464(6) or 1465(4) such a number exists, and (II) by reason of the circumstances referred to in paragraph (b) of the definition of ‘relevant information’ in subsection (4), the relevant information notified to the recognised accountancy body or Supervisory Authority does not include that number, the number referred to in paragraph 1(c)(ii) or 2(g) of Schedule 20.
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(3)The notifications under subsections (1) and (2) shall each be made in such form and manner as the Registrar specifies.
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(4)In this section, ‘relevant information’ means the information set out in paragraph 1 or 2, as the case may be, of Schedule 20, other than that set out— (a) in subparagraph (b) of that paragraph 1 or 2, or (b) if, due to the simultaneous registration of a statutory audit firm and the statutory auditors that comprise that firm, the number there referred to is not available at that time, in subparagraph (c)(ii) of that paragraph 1 or subparagraph (g) of that paragraph 2.
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(5)For the avoidance of doubt, in the event that a recognised accountancy body is no longer recognised by the Supervisory Authority for the purposes of the relevant provisions or otherwise ceases to exist, the notifications under subsections (1) and (2) shall cease to have effect and the Registrar shall remove all information contained in such notifications from the public register.
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Prohibition on certain acts unless registered 1486. (1) A person shall not— (a) act as, or (b) represent himself or herself, or hold himself or herself out, as being, a person falling within a category of persons entered, or entitled to be entered, in the public register unless the person is entitled to be entered, and the name of the person is duly entered, in the public register.
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(2)A person who contravenes subsection (1) shall be guilty of a category 2 offence.
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Obligation of statutory auditor or audit firm to notify certain information 1487. (1) Each statutory auditor and audit firm and Member State audit firm shall, as soon as may be but not later than one month after the event, notify the recognised accountancy body of any change in the information contained in the public register relating to him or her.
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(2)On receipt of a notification under subsection (1) and its having carried out any verification of the information stated to have changed as seems to it to be necessary, the recognised accountancy body shall notify the change in information to the Registrar without undue delay.
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(3)The Registrar shall, as soon as may be but not later than one month after receipt of the notification referred to in subsection (2), amend the public register to reflect the change of information so notified.
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(4)A person who, without reasonable excuse, contravenes subsection (1) shall be guilty of a category 4 offence.
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Information shall be signed 1488. (1) Information notified under section 1485(1) or 1487(1) by a statutory auditor or audit firm (including a Member State audit firm) shall be signed by the statutory auditor or, as the case may be, a person on behalf of the statutory audit firm.
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(2)The signature referred to in subsection (1) may be an electronic signature (within the meaning of Article 3(10) of Regulation (EU) No 910/2014 of the European Parliament and of the Council of 23 July 20148 on electronic identification and trust services for electronic transactions in the internal market and repealing Directive 1999/93/EC) if the provision of a signature in that form complies with any requirements in that behalf of the Registrar of the kind referred to in section 13
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(2)(a) of the Electronic Commerce Act 2000 .
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(3)If information is notified under section 1485(1) or 1487(1) without being signed as required by subsection (1), the person concerned shall be guilty of a category 4 offence.
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Chapter 6
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Standards for statutory auditors Continuing education 1489. (1) It shall, by virtue of this section alone, be a condition of a statutory auditor’s approval (or, in the case of a statutory auditor referred to in section 1471, deemed approval) granted under this Part (or under any predecessor to this Part) that he or she shall take part in appropriate programmes of continuing education in order to maintain his or her theoretical knowledge, professional skills and values, including, in particular, in relation to auditing, at a sufficiently high level.
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(2)The Supervisory Authority shall, at such times as it thinks it appropriate to do so, issue guidelines to the recognised accountancy bodies with regard to what constitutes compliance with the condition referred to in subsection (1).
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Professional ethics 1490. A recognised accountancy body shall subject statutory auditors and audit firms to principles of professional ethics, including at least their public interest function, their integrity and objectivity and their professional competence and due care.
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Independence, objectivity and professional scepticism 1491. Statutory auditors and audit firms are subject to the independence, objectivity and professional scepticism requirements of sections 1533 to 1544 and 1547.
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Standards for purposes of sections 1489 to 1491 1492. (1) A recognised accountancy body shall, in respect of statutory auditors and audit firms— (a) have adequate standards requiring those auditors and audit firms to comply with the obligations specified in sections 1489 to 1491, and (b) institute adequate arrangements for the effective monitoring and enforcement of compliance with such standards.
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(2)No standards shall be used by a recognised accountancy body for that purpose unless those standards have (with respect to that use) first been approved by the Supervisory Authority in accordance with section 905(2)(c).
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Arrangements for enforcement of standards 1493. The arrangements for enforcement referred to in section 1492(1)(b) shall include, in accordance with sections 1501 and 1502, provision for— (a) sanctions which include— (i) at the discretion of the recognised accountancy body, in accordance with section 1501, the withdrawal of approval under this Part as a statutory auditor or audit firm, (ii) appropriate penalties, (iii) appropriate disciplinary measures, (iv) appropriate regulatory sanctions, and (b) making available to the public information relating to the measures taken and the penalties imposed in respect of statutory auditors and audit firms.
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Chapter 7
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Quality assurance Quality assurance by Supervisory Authority of statutory audit of public-interest entities and third-country auditors, etc.
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1494. (1) The Supervisory Authority shall put in place a quality assurance system as set out in Article 26 of Regulation (EU) No 537/2014.
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(2)The Supervisory Authority shall ensure that it has in place a quality assurance system of registered third-country auditors and third-country audit entities to whom this Part or Regulation (EU) No 537/2014 applies.
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(3)Sections 1496 and 1497 shall not apply to the statutory audit of entity and group financial statements of public-interest entities unless specified in Regulation (EU) No 537/2014.
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(4)The Supervisory Authority may publish on its website the findings and conclusions of individual inspections undertaken as part of the quality assurance system referred to in subsection (1).
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System of quality assurance to be put in place 1495. (1) The Supervisory Authority, in accordance with this Part, shall oversee the quality assurance system implemented by the recognised accountancy bodies.
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(2)A recognised accountancy body shall ensure that it has in place a system of quality assurance of— (a) the body’s members’ activities as statutory auditors and audit firms of entities not referred to in section 1494(1) and (2), and (b) the activities, as statutory auditors and audit firms, of persons who, though not members of the recognised accountancy body, are persons in relation to whom the body may perform functions under the relevant provisions.
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Organisation of quality assurance system 1496. (1) A recognised accountancy body shall organise its quality assurance system in such a manner that— (a) the system is independent of the reviewed statutory auditors and audit firms, (b) the funding for the system is secure and free from any possible undue influence by statutory auditors or audit firms, (c) the system has adequate resources, (d) the persons who carry out quality assurance reviews have appropriate professional education and relevant experience in statutory audit and financial reporting combined with specific training on quality assurance reviews, (e) the selection of reviewers for specific quality assurance reviews is effected in accordance with an objective procedure designed to ensure that there are no conflicts of interest between reviewers and the statutory auditor or audit firm under review, (f) the scope of quality assurance reviews of audits, supported by adequate testing of selected audit files, includes, except where otherwise agreed with the Supervisory Authority, an assessment of— (i) compliance with applicable auditing standards and independence requirements, (ii) the quantity and quality of resources spent, (iii) the audit fees charged, and (iv) the internal quality control system of the audit firm, (g) each quality assurance review is the subject of a report in writing which includes the main conclusions of the review, (h) a quality assurance review of each statutory auditor or audit firm takes place on the basis of an analysis of risk, at least, subject to subsection (5) and section 1497, every 6 years, (i) statutory auditors and audit firms take all reasonable steps to ensure that recommendations arising from quality assurance reviews of them are implemented within a reasonable period, (j) there is published annually by it the overall results of quality assurance reviews carried out by it in the year concerned, and (k) quality assurance reviews are appropriate and proportionate in view of the scale and complexity of the activity of the reviewed statutory auditor or audit firm.
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(2)For the purpose of subsection (1)(e), at least the following criteria shall apply to the selection of reviewers: (a) reviewers have appropriate professional education and relevant experience in statutory audit and financial reporting combined with specific training on quality assurance reviews; (b) a person does not act as a reviewer in a quality assurance review of a statutory auditor or audit firm until at least 3 years have elapsed since that person ceased to be a partner or an employee of, or otherwise associated with, that statutory auditor or audit firm; (c) reviewers shall declare (if such be the case) that there are no conflicts of interest between them and the statutory auditor and the audit firm to be reviewed.
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(3)For the purpose of subsection (1)(k), a recognised accountancy body, when undertaking quality assurance reviews of the statutory audits of entity or group financial statements of medium or small companies, shall take account of the fact that auditing standards adopted in accordance with Article 26 of the Audit Directive are designed to be applied in a manner that is proportionate to the scale and complexity of the business of the audited undertaking.
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(4)If a statutory auditor or audit firm fails to take all reasonable steps to ensure that recommendations arising from a quality assurance review of him or her are implemented within a reasonable period, the recognised accountancy body shall take appropriate action, including, where applicable, subjecting the statutory auditor or audit firm, as the case may be, to the system of disciplinary actions or penalties referred to in the relevant provisions.
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(5)The period of at least 6 years referred to in subsection (1)(h) shall be a continuation of the system that was in place under the 2010 Audits Regulations when the first quality assurance reviews were required to be completed and as that system was continued by the 2016 Audits Regulations.
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Quality assurance review deemed to include individual auditors in certain cases 1497. For the purpose of section 1496(1)(h), a quality assurance review conducted in relation to a statutory audit firm shall be regarded as a quality assurance review of all statutory auditors carrying out audits on behalf of the firm provided that the firm has a common quality assurance policy with which each such statutory auditor is required to comply.
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Right of recognised accountancy body as regards professional discipline 1498. A recognised accountancy body shall have the right to take disciplinary actions or impose sanctions in respect of statutory auditors and audit firms who carry out audits and shall have procedures in place to facilitate the taking or imposition of such action or sanctions.
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Chapter 8
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Investigations and sanctions System of investigation and penalties 1499. (1) Subject to subsection (2), each recognised accountancy body shall, in respect of those auditors and audit firms in relation to whom, by virtue of section 930C, it may perform functions, institute arrangements to ensure that there are effective systems of investigations and penalties to detect, correct and prevent the inadequate execution of a statutory audit by those statutory auditors and audit firms.
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(2)Subsection (1) shall not be construed to empower a recognised accountancy body referred to in that subsection to impose a penalty on a statutory auditor or audit firm of a public-interest entity in the case of a relevant contravention committed by that auditor or audit firm that relates (whether in whole or in part) to that entity.
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Privileges, etc.
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1500. (1) A witness before a recognised accountancy body is entitled to the same immunities and privileges as a witness before the High Court.
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(2)Nothing in the arrangements referred to in section 1499(1) compels the disclosure by any person of any information that the person would be entitled to refuse to produce on the grounds of legal professional privilege or authorises the inspection or copying of any document containing such information that is in the person’s possession or control.
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(3)Any information produced or answer given by a person (howsoever described) in compliance with arrangements referred to in section 1499(1) may be used in evidence against the person in any proceedings whatsoever, save proceedings for an offence (other than perjury in respect of such an answer).
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(4)A finding or decision of a recognised accountancy body under arrangements referred to in section 1499(1) is not a bar to any civil or criminal proceedings against the person (howsoever described) who is the subject of the finding or decision.
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Duty of each recognised accountancy body with regard to sanctions 1501. (1) Each recognised accountancy body shall ensure that the contractual and other arrangements that exist between it and its members are such as enable the imposition by it of effective, proportionate and dissuasive penalties in respect of statutory auditors and audit firms in cases where statutory audits are not carried out by them in accordance with the relevant provisions.
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(2)The contractual and other arrangements referred to in subsection (1) shall comply with the requirements of procedural fairness.
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(3)By virtue of this section, the contractual and other arrangements referred to in subsection (1) that subsist for the time being between a recognised accountancy body and its members shall operate and have effect so as to enable the imposition by the recognised accountancy body— (a) of penalties of a like character to those referred to in that subsection, and (b) in the cases referred to in that subsection, in respect of persons who, though not members of the recognised accountancy body, are persons in relation to whom it may, by virtue of section 930C, perform functions under the relevant provisions.
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Scope of penalties and publicity in relation to their imposition 1502. (1) The penalties referred to in section 1501, provision for which shall be made by the means referred to in that section, shall, where appropriate, include withdrawal of approval under this Part or, if applicable, withdrawal of registration under section 1465 and a temporary prohibition referred to in point (c) of Article 30a(1) of the Audit Directive and a temporary prohibition (in so far as it relates to a member of an audit firm) referred to in point (e) of that Article.
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(2)Subsection (1) is without prejudice to sections 1479 and 1480.
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(3)Unless there do not exist internal appeal procedures of a recognised accountancy body as referred to in section 1479(8)(a) or 1480(8)(a), the reference in subsection (4) to a recognised accountancy body shall be read as a reference to a recognised accountancy body acting through the disciplinary committee that deals with matters at first instance.
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(4)Without prejudice to section 930C(10) to (12), a recognised accountancy body may, save where, in its opinion, proceeding in this manner would not be in the public interest, adopt procedures analogous to those in section 1479(4) to (6) or 1480(4) to (6) as regards affording the statutory auditor or audit firm an opportunity to rectify the matters that have occasioned the investigation concerned and the proposed exercise of the power of withdrawal of approval referred to in subsection (1).
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(5)If— (a) there exist internal appeal procedures, as referred to in section 1479(8)(a) or 1480(8)(a), of a recognised accountancy body, and (b) the investigation and disciplinary procedures of the recognised accountancy body provide that a decision of its disciplinary committee referred to in subsection (3), being a decision of a nature to which this section applies, shall stand suspended or shall not take effect until, as the case may be— (i) the period for making an appeal under those procedures has expired without such an appeal having been made, (ii) such an appeal has been made and the decision to withdraw the approval confirmed, or (iii) such an appeal that has been made is withdrawn, then notwithstanding anything in the preceding provisions of this section, the operation of the withdrawal of approval by that disciplinary committee shall stand suspended until the occurrence of an event specified in paragraph (b)(i), (ii) or (iii).
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(6)If— (a) there exist internal appeal procedures, as referred to in section 1479(8)(a) or 1480(8)(a), of a recognised accountancy body, and (b) the investigation and disciplinary procedures of the recognised accountancy body do not provide, as referred to in subsection (5)(b), for the decision of the disciplinary committee referred to in that provision to stand suspended or not to take effect, then, notwithstanding anything in those procedures, the auditor or audit firm to whom that decision relates may apply to the High Court for an order suspending the operation of the withdrawal pending the determination by the relevant appellate committee of an appeal that he or she is making under those internal appeal procedures.
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(7)Where an application under subsection (6) is made to the High Court, subsections (10) to (12) apply to the application with— (a) the substitution of references to an appeal under those internal appeal procedures for references to an appeal under section 1481, and (b) any other necessary modifications.
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(8)If the relevant appellate committee referred to in subsection (6) is of the opinion, having regard to the particular issues that have arisen on that appeal, that, in the interests of justice, the disposal by it of an appeal referred to in that subsection ought to include procedures analogous to those, as referred to in subsection (4), provided by section 1479(4) to (6) or 1480(4) to (6) being adopted by it, then, in disposing of that appeal, it shall adopt procedures analogous to those in section 1479(4) to (6) or 1480(4) to (6).
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(9)A recognised accountancy body shall take all reasonable steps to ensure that any appeal to the relevant appellate committee referred to in subsection (6) is prosecuted promptly and it shall be the duty of that appellate committee to ensure that any such appeal to it is disposed of as expeditiously as may be and, for that purpose, to take all such steps as are open to it to ensure that, in so far as is practicable, there are no avoidable delays at any stage in the determination of such an appeal.
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(10)Where a recognised accountancy body has made a decision to withdraw the approval of an auditor or audit firm under this section (that is to say, a final decision of the recognised accountancy body on the matter after the internal appeal procedures (if any) of it have been employed and exhausted), the auditor or audit firm may apply to the High Court for an order suspending the operation of the withdrawal pending the determination by the High Court of an appeal under section 1481 that he or she is making against the withdrawal.
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(11)On the hearing of an application under subsection (10), the High Court may, as it considers appropriate and having heard the recognised accountancy body concerned and, if it wishes to be so heard, the Supervisory Authority (which shall have standing to appear and be heard on the application)— (a) grant an order suspending the operation of the withdrawal, or (b) refuse to grant such an order, and an order under paragraph (a) may provide that the order shall not have effect unless one or more conditions specified in the order are complied with (and such conditions may include conditions requiring the auditor or audit firm not to carry out statutory audits save under the supervision of one or more other statutory auditors or audit firms or not to carry out such audits save in specified circumstances).
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(12)The High Court may, on application to it by the auditor or audit firm or recognised accountancy body concerned, vary or discharge an order under subsection (11)(a) if it considers it just to do so.
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(13)The fact of one or more— (a) measures having been taken against, or (b) one or more penalties having been imposed on, a statutory auditor or audit firm by a recognised accountancy body shall be disclosed by the recognised accountancy body to the public and that disclosure shall, if the recognised accountancy body considers it appropriate, include such further particulars with respect to the matter as it thinks fit.
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(14)Subject to subsection (15), the manner of such disclosure, and the time at which it is made, shall be such as the recognised accountancy body determines to be appropriate.
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(15)The recognised accountancy body shall establish, in writing, criteria the purpose of which is to govern the determination by it of the matters referred to in subsection (14), and those criteria shall require the prior approval of the Supervisory Authority.
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Chapter 9
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Actions to be taken after decision by recognised accountancy body that statutory auditor or audit firm of public-interest entity has committed relevant contravention Definitions (Chapter 9) 1503. In this Chapter— ‘contravention concerned’, in relation to a specified person, means the relevant contravention committed by the specified person in consequence of which the relevant decision was made; ‘monetary sanction’ means the monetary sanction referred to in section 1506(1)(g); ‘public notice of relevant sanction imposed’, in relation to a specified person, means the publication in accordance with section 1508(1) of the specified person’s particulars referred to in that section together with the other particulars referred to in that section; ‘relevant decision’, in relation to a specified person, means a decision under section 1504(6) by the Supervisory Authority to impose a relevant sanction on the specified person for the relevant contravention committed by the specified person; ‘relevant sanction’ means a sanction referred to in section 1506(1); ‘specified person’ means the statutory auditor or audit firm the subject of a relevant decision.
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Initial actions to be taken after decision by recognised accountancy body that statutory auditor or audit firm of public-interest entity has committed relevant contravention 1504. (1) Without prejudice to the generality of sections 933, 934 and 934E and subject to subsection (9), this section applies where— (a) a recognised accountancy body has completed an investigation of a statutory auditor or audit firm of a public-interest entity and— (i) has found that the auditor or audit firm has committed a relevant contravention that relates (whether in whole or in part) to that entity, and (ii) would, but for section 1499(2), be minded to impose a penalty on the auditor or audit firm for that contravention, and (b) the period within which an appeal (if any) referred to in Chapter 8 may be made against the decision referred to in paragraph (a) has expired without any such appeal having been made or, if such an appeal has been made, that decision has been confirmed or the appeal has been withdrawn.
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(2)The recognised accountancy body shall, as soon as is practicable after this section applies to a statutory auditor or audit firm of a public-interest entity and a relevant contravention committed by the auditor or audit firm, give the Supervisory Authority— (a) particulars of the auditor or audit firm, the public-interest entity and the relevant contravention, (b) copies of any reports arising out of the investigation, together with copies of any other documents relevant to the investigation, that explain how the recognised accountancy body conducted the investigation and reached the decision referred to in subsection (1)(a), and (c) particulars of the penalty referred to in subsection (1)(a)(ii).
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(3)Where the Supervisory Authority receives from the recognised accountancy body the particulars and copies referred to in subsection (2) but is not satisfied that it has sufficient information to perform its functions under subsections (5) to (8), it may, by notice in writing given to the recognised accountancy body, require the body to provide it with such further information specified in the notice within the period (being a period of not less than 30 days from the body’s receipt of the notice) specified in the notice.
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(4)The recognised accountancy body shall comply with a notice under subsection (3) given to it.
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(5)Subsection (6) applies where the Supervisory Authority receives from the recognised accountancy body the particulars and copies referred to in subsection (2) (and, if applicable, any further information required by a notice under subsection (3) given to that body) and, after considering those particulars and copies (and, if applicable, that further information), it is satisfied that the statutory auditor or audit firm has committed the relevant contravention and the Supervisory Authority is minded to impose a relevant sanction on the auditor or auditor firm for that contravention.
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(6)Subject to section 1511(3) and (4), the Supervisory Authority may impose a relevant sanction on the statutory auditor or audit firm of the public-interest entity for the relevant contravention and, for that purpose, it shall have regard to (but is not bound by) the penalty referred to in subsection (1)(a)(ii).
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(7)Where under subsection (6) the Supervisory Authority imposes a relevant sanction on the statutory auditor or audit firm of the public-interest entity for the relevant contravention, it shall, as soon as is practicable after so imposing such sanction, by notice in writing given to the recognised accountancy body, give particulars of the sanction imposed.
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(8)Where the Supervisory Authority is not satisfied as referred to in subsection (5), it shall, as soon as practicable after reaching that decision, by notice in writing given to the recognised accountancy body, advise the body that it is not so satisfied and the reasons therefor.
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(9)(a) Subject to paragraph (b), where a recognised accountancy body is minded to commence an investigation of a statutory auditor or audit firm in respect of a statutory audit of a public-interest entity, it shall, before commencing such investigation and in the interests of assisting the Supervisory Authority to make a decision as to whether or not, instead of the investigation, it would be more appropriate for the Supervisory Authority to take action under section 934 or 934E, give the Supervisory Authority particulars of the auditor or audit firm and the public-interest entity and the grounds on which it is so minded. (b) The recognised accountancy body shall not commence an investigation referred to in paragraph (a) until it has the consent in writing of the Supervisory Authority to do so.
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Appeal against relevant decision 1505. (1) Subject to subsection (2), the specified person may appeal to the High Court against the relevant decision.
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(2)An appeal under subsection (1) shall be brought within 3 months after the date on which the specified person was notified by the Supervisory Authority of the relevant decision.
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Sanctions which Supervisory Authority may impose on specified person 1506. (1) Subject to section 1507, the Supervisory Authority may impose on the specified person one or more of the following sanctions in relation to the contravention concerned: (a) a direction by the Supervisory Authority to the specified person that he or she cease the conduct giving rise (whether in whole or in part) to the contravention and to abstain from any repetition of that conduct; (b) a direction by the Supervisory Authority to the specified person to remediate the conduct giving rise (whether in whole or in part) to the contravention; (c) a reprimand or severe reprimand by the Supervisory Authority to the specified person in relation to the conduct giving rise (whether in whole or in part) to the contravention; (d) a declaration by the Supervisory Authority that the statutory auditors’ report concerned does not meet the requirements of section 336 or 337 or, where applicable, Article 10 of Regulation (EU) No 537/2014; (e) a direction by the Supervisory Authority to the specified person (being any one or more of a statutory auditor or key audit partner) prohibiting him or her, for the period specified in the direction (which may be up to and including an indefinite period), from carrying out statutory audits or signing statutory auditors’ reports, or both; (f) if the specified person is an audit firm, a direction by the Supervisory Authority to the firm, or to an officer, member or partner of the firm, or to both, prohibiting the firm or, as the case may be, the officer, member or partner, for the period specified in the direction (which may be up to and including an indefinite period) from performing functions— (i) in the case of the firm, as an audit firm, or (ii) in the case of the officer, member or partner, in audit firms or public-interest entities; (g) subject to section 1509, a direction by the Supervisory Authority to the specified person to pay an amount, as specified in the direction but not exceeding— (i) €100,000 in the case of a specified person who is an individual, or (ii) in the case of a specified person which is an audit firm, €100,000 multiplied by the number of statutory auditors in the firm at the time that the relevant contravention occurred (and irrespective of whether any particular statutory auditor was or was not a party to the relevant contravention), to the Supervisory Authority; (h) an order excluding the specified person from having his or her particulars entered, or continuing to be entered, in the public register in respect of one or more recognised accountancy bodies.
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(2)In default of payment of an amount referred to in subsection (1)(g), the Supervisory Authority may recover that amount as a simple contract debt in any court of competent jurisdiction.
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(3)A person the subject of a direction under subsection (1) shall comply with the direction.
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(4)Where applicable, the Supervisory Authority shall direct the recognised accountancy body of which the specified person is a member to take any necessary action on foot of the imposition of a relevant sanction on the person and that body shall comply with the direction.
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Relevant circumstances to be considered in imposing relevant sanctions on specified person 1507. In imposing a relevant sanction on a specified person, the Supervisory Authority shall consider the following circumstances: (a) the gravity and duration of the contravention concerned; (b) the degree of responsibility of the specified person; (c) the financial strength of the specified person (including, in the case of a specified person who is not an individual, the total turnover of the specified person or, in the case of a specified person who is an individual, the annual income of the individual); (d) the amount of profits gained or losses avoided by the specified person in consequence of the contravention concerned, in so far as they can be determined; (e) the level of cooperation of the specified person with the Supervisory Authority and the recognised accountancy body of which the specified person is a member; (f) previous relevant contraventions committed by the specified person.
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Publication of relevant sanction imposed on specified person, etc.
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1508. (1) Subject to subsections (2) and (3), the Supervisory Authority shall, in so far as a relevant decision imposes a relevant sanction on a specified person, as soon as is practicable after— (a) that decision has been confirmed by the High Court as referred to in section 1511(3), or (b) a decision of the High Court under section 1511(2)(b) has been made to impose a different relevant sanction on the specified person, publish on its website particulars of the contravention concerned, particulars of the relevant sanction imposed and particulars of the specified person on whom the relevant sanction was imposed.
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(2)Subject to subsection (4), if there is an appeal from the High Court from a confirmation referred to in subsection (1)(a), or a decision referred to in subsection (1)(b), the Supervisory Authority shall as soon as may be, as it considers appropriate, publish particulars on its website of the status or outcome of the appeal.
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(3)The Supervisory Authority shall publish the particulars, comprising a public notice of relevant sanction imposed, on an anonymous basis on its website in any one or more of the following circumstances: (a) the Supervisory Authority, following an assessment of the proportionality of the publication of those particulars in accordance with subsection (1) in so far as personal data are concerned, is of the opinion that, in relation to the relevant sanction imposed on a specified person who is an individual, such publication would be disproportionate; (b) the Supervisory Authority is of the opinion that the publication of those particulars in accordance with subsection (1) would jeopardise the stability of financial markets or an ongoing criminal investigation; (c) the Supervisory Authority is of the opinion that the publication of those particulars in accordance with subsection (1) would cause disproportionate damage to the specified person.
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(4)Subsection (2) shall not apply in any case where subsection (3) applies.
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(5)The Supervisory Authority shall ensure that particulars published on its website in accordance with subsection (1) or (2) remain on its website for at least 5 years.
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Limitations on imposing monetary sanctions on specified person 1509. (1) If the Supervisory Authority decides to impose a monetary sanction on a specified person, the Supervisory Authority shall not impose an amount— (a) that would be likely to cause the specified person to cease business, or (b) that would, if the specified person is an individual, be likely to cause the person to be adjudicated bankrupt.
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(2)If the conduct engaged in by the specified person has given rise (whether in whole or in part) to 2 or more contraventions concerned, the Supervisory Authority shall not impose more than one monetary sanction on the person in respect of the same conduct.
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Specified person not to be liable to be penalised twice for same relevant contravention 1510. (1) If the Supervisory Authority imposes a monetary sanction on a specified person and the conduct engaged in by the person that has given rise (whether in whole or in part) to the contravention concerned is an offence under the law of the State, the person shall not be liable to be prosecuted or punished for the offence under that law.
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(2)The Supervisory Authority shall not impose a monetary sanction on a specified person if— (a) the person has been charged with having committed an offence under a law of the State and has either been found guilty or not guilty of having committed the offence, and (b) the offence involves the conduct engaged in by the person that has given rise (whether in whole or in part) to the contravention concerned.
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Appeals to and orders of High Court, including orders confirming relevant decisions of Supervisory Authority 1511. (1) In an appeal under section 1505, the High Court may consider any evidence adduced or argument made, whether or not adduced or made to the Supervisory Authority or recognised accountancy body concerned.
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(2)On the hearing of such an appeal, the High Court may make any order or give any direction as it thinks fit, including an order— (a) confirming the decision under appeal, or (b) modifying or annulling the decision.
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(3)A relevant decision does not take effect until that decision is confirmed by the High Court either— (a) on appeal under section 1505, or (b) on application by the Supervisory Authority under subsection (4).
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(4)On application by motion on notice by the Supervisory Authority for an order confirming a relevant decision, the High Court may make an order confirming the decision or may refuse to make such an order.
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Chapter 10
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Appointment of statutory auditors or audit firms Prohibition of contractual clauses restricting choice of auditors 1512. (1) Section 380(6) shall, with any necessary modifications, apply to an audited undertaking which is not a company and to which this Part applies as that section applies to an audited undertaking which is a company and to which this Part applies.
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(2)An audited undertaking that is a public-interest entity shall directly and without delay report to the Supervisory Authority any contractual clause referred to in section 380(6) that purports to affect it and the circumstances which gave rise to that clause.
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(3)The Supervisory Authority, on receipt of a report under subsection (2), may share the report with— (a) the Director, (b) the Revenue Commissioners, (c) the Workplace Relations Commission, (d) the Central Bank, or (e) any body responsible for the regulation of the public-interest entity.
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Selection procedures for statutory auditors or audit firms by public-interest entities 1513. (1) Subject to subsection (2), the following selection procedures apply, for financial years commencing on or after 17 June 2016, to the appointment of a statutory auditor or audit firm to a public-interest entity: (a) the audit committee shall prepare a recommendation for the directors of the entity by carrying out the selection procedure specified in Article 16(3) of Regulation (EU) No 537/2014; (b) the audit committee shall submit a recommendation to the directors of the entity for the appointment of statutory auditors or audit firms; (c) the recommendation— (i) shall be justified and contain at least 2 choices for the audit engagement and shall express a duly justified preference for one of them, and (ii) shall state (if such be the case) that the recommendation is free from influence by a third party and that, on and from 17 June 2017, no clause of the kind referred to in section 380(6) has been imposed upon it; (d) the proposal by the directors to the general meeting of shareholders or members of the entity for the appointment of statutory auditors or audit firms— (i) shall include the recommendation referred to in paragraph (b) and the preference referred to in paragraph (c)(i), (ii) if it departs from the preference of the audit committee, shall justify the reasons for not following the recommendation of the audit committee, and (iii) shall state if the statutory auditor or audit firm recommended by the directors participated in the selection procedure referred to in subsection (2)(a).
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(2)Subsection (1) shall not apply if— (a) a selection procedure in accordance with Article 16(3) of Regulation (EU) No 537/2014 has been carried out in respect of the appointment of the statutory auditor or audit firm in relation to one or more of the preceding 9 financial years, and (b) the statutory auditor or audit firm appointed by the public-interest entity was appointed for the previous financial year.
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(3)Where the public-interest entity is exempt from the requirement for an audit committee under section 1551, this section applies to the directors of the public-interest entity.
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(4)Where a public-interest entity relies on the provisions of section 382, 384 or 385, the public-interest entity shall, as soon as is practicable, inform the Supervisory Authority of that fact.
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(5)The appointment of an auditor or audit firm shall be invalid if the appointment contravenes a provision of this section.
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(6)(a) Subject to paragraph (b), a public-interest entity shall keep records demonstrating that the selection procedures referred to in subsection (1) have been carried out. (b) The public-interest entity shall keep those records for at least 6 years from the date on which the selection procedures were completed.
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(7)A person who contravenes subsection (6)(a) or (b) shall be guilty of a category 4 offence.
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Appointment of statutory auditors or audit firms by public-interest entities - informing the Supervisory Authority 1514. (1) Subject to subsection (2)— (a) where a statutory auditor or audit firm is first appointed by a public-interest entity on or after 17 June 2016, the statutory auditor or audit firm shall inform the Supervisory Authority within one month after the date of such appointment that the statutory auditor or audit firm has been appointed to hold office, and (b) where a statutory auditor or audit firm which has complied with paragraph (a) is subsequently appointed by the same or a different public-interest entity, the statutory auditor or audit firm shall inform the Supervisory Authority within one month after the date of such appointment that the statutory auditor or audit firm has been appointed to hold office only if, immediately before the time of such appointment, the statutory auditor or audit firm held no such office with any public-interest entity.
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(2)The information shall be submitted in such form and manner as the Supervisory Authority specifies and may be used by the Supervisory Authority in the performance of its functions.
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(3)A person who contravenes subsection (1) shall be guilty of a category 3 offence.
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Removal of statutory auditors or audit firms by public-interest entities - supplementary provisions 1515. (1) In the case of a statutory audit of a public-interest entity— (a) shareholders representing 5 per cent or more of the voting rights or of the share capital, or (b) the Supervisory Authority, may bring a claim before the High Court for the removal of the statutory auditor or audit firm subject to there being good and substantial grounds for bringing such a claim before the Court.
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(2)The grounds for bringing the claim before the High Court shall relate to— (a) the conduct of the auditor or audit firm with regard to the performance of his or her duties as auditor of the public-interest entity or otherwise, or (b) the petitioner’s opinion that it is in the best interests of the public-interest entity to do so.
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(3)For the purposes of subsection (2)— (a) diverging opinions on accounting treatments or audit procedures cannot constitute the basis for the passing of any resolution for the purposes of that subsection, and (b) ‘best interests of the public-interest entity’ shall not include any illegal or improper motive with regard to avoiding disclosures or detection of any contravention by the entity of this Act.
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Directors’ report to include date of last appointment of statutory auditor or audit firm 1516. (1) The directors’ report shall contain details of the date of appointment of the public-interest entity’s statutory auditor or audit firm.
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(2)Where a public-interest entity has sought an extension from the Supervisory Authority under section 1548, pursuant to Article 17(6) of Regulation (EU) No 537/2014, the directors’ report shall also contain details of the extension granted.
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(3)In this section, ‘directors’ report’ means the directors’ report required by section 325.
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Chapter 11
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Confidentiality and professional secrecy Rules of confidentiality to apply 1517. (1) The rules of confidentiality and secrecy of a recognised accountancy body (of which the statutory auditor or audit firm concerned is a member) shall apply with respect to information and documents to which a statutory auditor or audit firm has access when carrying out a statutory audit.
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(2)The statutory auditor or audit firm, as the case may be, shall comply with those rules of confidentiality and secrecy.
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(3)In the case of an audit firm registered in accordance with section 1465, the rules of confidentiality and secrecy of the recognised accountancy body of which the key audit partner who carries out the statutory audit on behalf of the audit firm is a member shall apply with respect to information and documents to which the audit firm (or a statutory auditor on behalf of the firm) has access when carrying out a statutory audit.
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Supplemental provisions in relation to section 1517 1518. (1) Section 1517 shall continue to apply with respect to the carrying out of a statutory audit notwithstanding— (a) that the statutory auditor or audit firm referred to in that section has ceased to be engaged in that audit, or (b) that the auditor or audit firm referred to in that section ceases to be— (i) a statutory auditor or audit firm, or (ii) an auditor or audit firm.
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(2)Accordingly, in such a case— (a) the statutory auditor or, as the case may be, audit firm, or (b) the former such auditor or, as the case may be, audit firm, shall continue to comply with the rules of confidentiality and secrecy concerned.
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Saving 1519. (1) Nothing in section 1517 or 1518 shall operate to prevent the recognised accountancy body from complying with its obligations under the relevant provisions.
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(2)Nothing in section 1517 or 1518 shall operate to impede the enforcement of the relevant provisions.
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Rules of confidentiality in relation to entities in third countries 1520. (1) Where a statutory auditor or audit firm carries out a statutory audit of an undertaking which is part of a group whose holding undertaking is situated in a third country, the confidentiality and professional secrecy rules referred to in section 1517(1) shall not impede the transfer by the statutory auditor or the audit firm of relevant documentation concerning the audit work performed to the group auditor situated in a third country if such documentation is necessary for the performance of the audit of consolidated financial statements of the holding undertaking.
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(2)A statutory auditor or an audit firm that carries out the statutory audit of an undertaking which has issued securities in a third country, or which forms part of a group issuing statutory consolidated financial statements in a third country, may only transfer the audit working papers or other documents relating to the audit of that undertaking that he or she holds to the competent authorities in the relevant third countries under the conditions set out in Chapter 19.
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(3)The transfer of information to the group auditor situated in a third country shall comply with the Data Protection Acts 1988 to 2018 and Regulation (EU) 2016/679.
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Incoming statutory auditor or audit firm to be afforded access to information 1521. Where a statutory auditor or audit firm is replaced by another statutory auditor or audit firm, the former statutory auditor or audit firm shall provide access to all relevant information concerning the audited undertaking and the most recent audit of that undertaking to the incoming statutory auditor or audit firm.
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Access by recognised accountancy body to audit documents 1522. (1) Where it considers it reasonably necessary to do so for the purpose of performing a particular function under the relevant provisions, a recognised accountancy body may inspect and make copies of all relevant documents in the possession or control of a statutory auditor or audit firm; for that purpose, it may, by notice in writing served on a statutory auditor or audit firm, require the auditor or firm either (as shall be specified) to— (a) furnish to it specified documents, or (b) permit it to have access, under specified circumstances, to all relevant documents in the possession or control of the auditor or firm, within a specified period.
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(2)Without prejudice to the generality of subsection (1), the powers under that subsection are exercisable in relation to a statutory auditor or audit firm where a complaint is made to a recognised accountancy body that the statutory auditor or audit firm has contravened a requirement of the relevant provisions.
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(3)Where the powers under subsection (1) are exercisable, the following additional power may be exercised by a recognised accountancy body if it considers that the exercise of it is reasonably necessary to enable it to clarify any matter arising from its inspection of the documents concerned, namely a power to require the statutory auditor or a member of the statutory audit firm to— (a) attend before it, and (b) explain any entry in the documents concerned and otherwise give assistance to it in clarifying the matter concerned.
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(4)In this section, ‘specified’ means specified in the notice concerned.
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(5)Without prejudice to subsection (6), if a person fails, without reasonable excuse, to comply with a requirement under subsection (1) or (3), the person shall be guilty of a category 3 offence.
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(6)Where a person fails to comply with a requirement under subsection (1) or (3), the recognised accountancy body concerned may apply to the High Court for an order compelling compliance by the person with the requirement, and, on the hearing of such application, the Court may make such an order or such other order as it thinks just.
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Access by Supervisory Authority to information and documents held by recognised accountancy bodies or relevant persons 1523. (1) Where it considers it reasonably necessary to do so for the purposes of performing a particular function under the relevant provisions, the Supervisory Authority may request information and inspect and make copies of all relevant documents in the possession or control of a recognised accountancy body or a relevant person; for that purpose, it may, by notice in writing served on the recognised accountancy body or relevant person, require the recognised accountancy body or relevant person either (as shall be specified) to— (a) furnish to it specified documents or information, or (b) permit it to have access, under specified circumstances, to all relevant documents in the possession or control of the recognised accountancy body or relevant person, within a specified period.
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(2)In this section, ‘relevant person’ means— (a) a member of a recognised accountancy body, (b) a client or former client of the member, (c) if the client or former client is a body corporate, a person who is or was an officer, employee or agent of the client or former client, or (d) any person whom the Supervisory Authority reasonably believes has information or documents in relation to the particular function other than information or documents the disclosure of which is prohibited or restricted by law.
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(3)Without prejudice to the generality of subsection (1), the powers under that subsection are exercisable in relation to a recognised accountancy body or relevant person where a complaint is made to the Supervisory Authority that the recognised accountancy body or relevant person has contravened a requirement of the relevant provisions.
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(4)Where the powers under subsection (1) are exercisable, the following additional power may be exercised by the Supervisory Authority if it considers that the exercise of it is reasonably necessary to enable it to clarify any matter arising from its inspection of the information or documents concerned, namely a power to require an officer of the recognised accountancy body or relevant person to— (a) attend before it, and (b) explain any entry in the information or documents concerned and otherwise give assistance to it in clarifying the matter concerned.
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(5)In this section, ‘specified’ means specified in the notice concerned.
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(6)If a person fails, without reasonable excuse, to comply with a requirement under subsection (1) or (4), the person shall be guilty of a category 3 offence.
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(7)Nothing in this section derogates from the powers exercisable by the Supervisory Authority in the circumstances, and under the conditions, specified in section 933 or 934.
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Professional privilege 1524. Nothing in this Chapter compels the disclosure by any person of any information that the person would be entitled to refuse to produce on the grounds of legal professional privilege.
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No liability for acts done in compliance with obligations imposed by relevant provisions 1525. (1) No professional or legal duty to which a statutory auditor or audit firm is subject by virtue of his or her appointment as a statutory auditor or audit firm shall be regarded as contravened by reason of compliance with the obligations imposed by the relevant provisions.
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(2)No liability to the undertaking audited or being audited, its shareholders, creditors, or other interested parties shall attach to the statutory auditor or audit firm by reason of such compliance.
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(3)For the avoidance of doubt, nothing in this section affects the liability of a statutory auditor or audit firm for negligence or breach of duty in the conduct of a statutory audit by him or her.
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Chapter 12
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Auditing standards and audit reporting Auditing standards to be applied 1526. (1) The Supervisory Authority shall adopt the auditing standards to be applied and statutory auditors and audit firms shall carry out statutory audits in accordance with those standards.
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(2)On and from the adoption of international auditing standards, statutory auditors and audit firms shall carry out statutory audits in accordance with those standards.
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(3)The reference in subsection (2) to the adoption of international auditing standards is a reference to the adoption by the Commission, in accordance with the procedure referred to in Article 26 of the Audit Directive, of international auditing standards.
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(4)The Supervisory Authority may prescribe by regulations audit procedures or requirements, in addition to the international auditing standards adopted by the Commission under Article 26 of the Directive, only— (a) if those audit procedures or requirements are necessary in order to give effect to legal requirements in the State relating to the scope of statutory audits, or (b) to the extent necessary to add to the credibility and quality of financial statements.
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(5)The Supervisory Authority shall communicate the audit procedures or requirements referred to in subsection (4) to the Commission at least 3 months before their entry into force or, in the case of requirements already existing at the time of adoption of an international auditing standard, at the latest within 3 months of the adoption of the relevant international auditing standard.
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(6)In the case of the statutory audit of small companies, the Supervisory Authority may provide that the application of the auditing standards referred to in subsection (1) is to be proportionate to the scale and complexity of the activities of such companies and may take the measures necessary in order to ensure the proportionate application of the auditing standards to the statutory audits of small companies.
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(7)In this section, ‘standards’ include standards on professional ethics and internal quality control in addition to standards on auditing.
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Audit of group accounts - responsibility of group auditor 1527. (1) Where a statutory audit of the group financial statements of a group is carried out— (a) in relation to the group financial statements, the group auditor shall bear the full responsibility for the statutory auditors’ report, and (b) where the holding undertaking is a public-interest entity, the group auditor shall bear the full responsibility for ensuring that the requirements of Articles 10 and 11 of Regulation (EU) No 537/2014 are met in relation to the audit carried out on that public-interest entity.
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(2)The group auditor shall— (a) evaluate the audit work carried out by any auditors for the purpose of the group audit, and (b) document the nature, timing and extent of the work carried out by those auditors, including the group auditor’s review of the relevant parts of audit documentation.
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(3)For the purposes of the group audit, auditors may be one or more of the following: (a) statutory auditors; (b) statutory audit firms; (c) Member State auditors; (d) Member State audit firms; (e) third-country auditors; (f) third-country audit entities.
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(4)The group auditor shall carry out a review, and maintain documentation of such review, of the work of whoever referred to in subsection (3) performed audit work for the purposes of the group audit.
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(5)The documentation referred to in subsections (2)(b) and (4) to be retained by the group auditor shall be such as enables the Supervisory Authority, or the recognised accountancy body where applicable, to conduct a quality assurance inspection or review, as the case may be, under Chapter 7.
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(6)The group auditor shall request the agreement of the auditors concerned referred to in subsection (3)(a) to (f) to transfer relevant documentation during the carrying out of the audit of group financial statements as a condition of the reliance by the group auditor on the work of such auditors.
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(7)(a) Where the group auditor is unable to secure an agreement referred to in subsection (6), he or she shall take appropriate measures in order to form an audit opinion and inform the relevant Supervisory Authority or the recognised accountancy body where applicable. (b) Such measures shall, as appropriate, include carrying out additional statutory audit work, either directly or by outsourcing the additional statutory audit work, in the relevant subsidiary.
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(8)(a) The group auditor who is subject to a quality assurance inspection or review or an investigation concerning the statutory audit of the group financial statements of a group shall, when requested, make available to the Supervisory Authority or the recognised accountancy body where applicable the relevant documentation he or she retains concerning the audit work performed by the auditors concerned referred to in subsection (3)(a) to (f) for the purpose of the group audit, including any working papers relevant to the group audit. (b) The Supervisory Authority may request additional documentation on the audit work performed by a statutory auditor or audit firm for the purpose of the group audit from the competent authorities in other Member States where applicable pursuant to Chapter 17.
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Further responsibility of group auditor 1528. (1) Subject to subsection (2), the Supervisory Authority may request additional documentation on the audit work performed by any third-country auditor or third-country audit entity on a holding undertaking or on a subsidiary undertaking of a group from the relevant competent authorities from third countries through the working arrangements referred to in section 1568(1)(c) or 1569(c).
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(2)Where— (a) a statutory audit of the group financial statements of a group is carried out, and (b) a holding undertaking or subsidiary undertaking of the group is audited by one or more third-country auditors or third-country audit entities that have no working arrangements as referred to in section 1568(1)(c) or 1569(c), the group auditor is responsible for ensuring proper delivery, when requested, to the Supervisory Authority of the additional documentation of the audit work performed by those auditors or audit entities, including the audit working papers relevant to the group audit.
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(3)To ensure such delivery, the group auditor shall retain a copy of such audit documentation, or alternatively— (a) agree, with one or more third-country auditors or third-country audit entities concerned, arrangements for the group auditor’s proper and unrestricted access, upon request, to the documentation, or (b) take any other appropriate action.
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(4)Where audit working papers cannot, for legal or other reasons, be passed from a third country to the group auditor, the documentation retained by the group auditor shall include— (a) evidence that he or she has undertaken the appropriate procedures in order to gain access to the audit documentation, and (b) in the case of an impediment other than a legal one arising from legislation of the third country or countries concerned, evidence supporting the existence of such an impediment.
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Additional report to audit committee 1529. (1) Where a public-interest entity is exempt from the requirement to have an audit committee, as provided for under this Part, the additional report to the audit committee shall be submitted to the directors of the public-interest entity.
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(2)Subject to subsection (1), the audit committee of a public-interest entity shall submit the additional report to the audit committee to the directors of the public-interest entity.
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(3)The Supervisory Authority may set out additional requirements to those listed in points (a) to (p) of Article 11(2) of Regulation (EU) No 537/2014 in relation to the content of the additional report to the audit committee, or directors, as applicable, only where this provides further information to the audit committee on the audit work undertaken.
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(4)The audit committee (or, if there is no audit committee, the directors of the public-interest entity) shall disclose the additional report to any of the following persons upon request where the information is required in order for the person to perform the person’s functions: (a) the Supervisory Authority; (b) the Director; (c) the Revenue Commissioners; (d) the Workplace Relations Commission; (e) the Central Bank; (f) any body responsible for the regulation of the public-interest entity.
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(5)A disclosure by the audit committee (or, if there is no audit committee, the directors of the public-interest entity) in accordance with subsection (4) shall not be treated, for any purpose, as a breach of any restriction of disclosure by that committee (or, as appropriate, such directors) imposed by or under any other enactment, rule of law or otherwise.
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Auditors’ reporting obligations under Article 12 of Regulation (EU) No 537/2014 1530. (1) Reports by statutory auditors or audit firms referred to in Article 12 of Regulation (EU) No 537/2014 shall be submitted to the Supervisory Authority unless they are already required to be submitted to the Central Bank under— (a) Regulation 134(1) of, or Schedule 16 to, the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011 ( S.I. No. 352 of 2011 ), (b) Regulation 52 of the European Union (Capital Requirements) Regulations 2014 ( S.I. No. 158 of 2014 ), or (c) Regulation 78 of the European Union (Insurance and Reinsurance) Regulations 2015 ( S.I. No. 485 of 2015 ).
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(2)The obligation imposed on a person by subsection (1) to disclose information that he or she has to the Supervisory Authority is in addition to, and not in substitution for, any other obligation that the person has to disclose information to the Supervisory Authority or any other person, but that subsection shall not require the first-mentioned person to disclose that information to the Supervisory Authority more than once.
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(3)(a) The Central Bank may, by notice in writing given to a statutory auditor or audit firm, require the auditor or firm to give it, within the period specified in the notice, additional information if such information is necessary for effective financial market supervision as provided for in the law of the State. (b) The statutory auditor or audit firm the subject of a notice under paragraph (a) shall comply with the notice.
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Chapter 13
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Record keeping Record keeping 1531. (1) Statutory auditors and audit firms shall keep the documents and information referred to in Article 15 of Regulation (EU) No 537/2014 for a period of at least 6 years.
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(2)Where a transaction, act or operation is the subject of an investigation, inquiry, claim, assessment, appeal or proceeding which has already commenced within that 6 year period, then the relevant documents and information shall be retained until such time as the investigation, inquiry, claim, assessment, appeal or proceeding has been concluded or for a period of at least 6 years, whichever is the longer.
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Chapter 14
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Objectivity Future viability 1532. Without prejudice to the reporting requirements referred to in sections 336, 337 and 391 and, where applicable, Articles 10 and 11 of Regulation (EU) No 537/2014, the scope of the statutory audit shall not include assurance on the future viability of the audited undertaking or on the efficiency or effectiveness with which the directors of the undertaking have conducted or will conduct the affairs of the undertaking.
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Chapter 15
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Independence Requirement for independence - general 1533. (1) During the period in which a statutory audit is being carried out— (a) the statutory auditor or audit firm, as the case may be, (b) in the latter case, any statutory auditor of the statutory audit firm, and (c) any individual in a position to directly or indirectly influence the outcome of the statutory audit, shall be independent of, and not involved in the decision-taking of, the audited undertaking.
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(2)During the period in which a statutory audit is being carried out, a statutory auditor or audit firm, as the case may be, shall take all reasonable steps to ensure that his or her independence is not affected by— (a) any existing or potential conflict of interest, or (b) any business or other direct or indirect relationship, involving the statutory auditor or audit firm carrying out the statutory audit.
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(3)Subsection (2) also applies, with any necessary modifications, to— (a) the network of the statutory auditor or audit firm, (b) the managers, auditors, employees or any other individuals whose services are placed at the disposal or under the control of the statutory auditor or audit firm, (c) any person directly or indirectly linked to the statutory auditor or audit firm by control, and (d) managers, auditors, employees or any other individuals whose services are placed at the disposal or under the control of a person linked to the statutory auditor or audit firm by control.
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(4)The obligations referred to in subsections (1) and (2) shall be required at least during both the period to which the financial statements to be audited relate and the period during which the statutory audit is carried out.
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Professional scepticism 1534. (1) When carrying out a statutory audit, the statutory auditor or the audit firm shall— (a) maintain professional scepticism throughout the audit, (b) maintain professional scepticism when reviewing management estimates relating to fair values, the impairment of assets, provisions, and future cash flow relevant to the audited undertaking’s ability to continue as a going concern, and (c) recognise the possibility of a material misstatement due to facts or behaviour indicating irregularities, including fraud or error, notwithstanding the statutory auditor’s or the audit firm’s past experience of the honesty and integrity of the audited undertaking’s management and of the persons charged with its governance.
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(2)For the purposes of this section, ‘professional scepticism’ means an attitude that includes a questioning mind, being alert to conditions which may indicate possible misstatement due to error or fraud, and a critical assessment of audit evidence.
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Prohibited relationships - specific provisions to secure independence 1535. (1) A statutory auditor or audit firm shall not carry out a statutory audit if there is any threat of self-review, self-interest, advocacy, familiarity, or intimidation, created by any direct or indirect financial, personal, business, employment or other relationship between— (a) the statutory auditor or audit firm or network to which he or she belongs or any individual in a position to influence the outcome of the statutory audit, and (b) the audited undertaking, as a result of which an objective, reasonable and informed third party, taking into account the safeguards applied, would conclude that the statutory auditor’s or audit firm’s independence is compromised.
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(2)Without prejudice to the generality of subsection (1), a person shall not act as a statutory auditor of an undertaking if he or she is— (a) an officer or servant of the undertaking, (b) a person who has been an officer or servant of the undertaking within a period in respect of which accounts would fall to be audited by the person if he or she were appointed auditor of the undertaking, (c) a parent, spouse, brother, sister or child of an officer of the undertaking, (d) a person who is a partner of or in the employment of an officer of the undertaking, (e) a person who is disqualified under this subsection for appointment as auditor of a body corporate that is a subsidiary or holding undertaking of the undertaking or a subsidiary of the undertaking’s holding undertaking, or would be so disqualified if the body corporate were a company, or (f) a person in whose name a share in the undertaking is registered, whether or not that person is the beneficial owner of the share.
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(3)Without prejudice to the generality of subsections (1) and (2), a statutory audit firm, regardless of its legal structure, shall not carry out a statutory audit of an undertaking if— (a) any principal of the audit firm is an officer or servant of the undertaking, (b) any principal of the audit firm has been an officer or servant of the undertaking within a period in respect of which accounts would fall to be audited by the firm if the firm was appointed auditor of the undertaking, or (c) the firm is disqualified under this subsection for appointment as auditor of any other body corporate that is a subsidiary or holding undertaking of the undertaking or a subsidiary of the undertaking’s holding undertaking, or would be so disqualified if the body corporate were a company.
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(4)Without prejudice to the generality of subsections (1) to (3), a person shall not carry out a statutory audit of an undertaking on behalf of a statutory audit firm if he or she is— (a) a person in whose name a share in the undertaking is registered, whether or not that person is the beneficial owner of the share, or (b) a parent, spouse, brother, sister or child of an officer of the undertaking.
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Prohibited relationships - financial or beneficial interest 1536. (1) A statutory auditor, an audit firm, the key audit partner of an audit firm, the employees of the statutory auditor or audit firm, and any other individual whose services are placed at the disposal or under the control of the statutory auditor or audit firm and who is directly involved in statutory audit activities, and persons closely associated with them within the meaning of Article 1(2) of Commission Directive 2004/72/EC of 29 April 20049 implementing Directive 2003/6/EC of the European Parliament and of the Council as regards accepted market practices, the definition of inside information in relation to derivatives on commodities, the drawing up of lists of insiders, the notification of managers’ transactions and the notification of suspicious transactions, shall not— (a) hold or have a material and direct beneficial interest in, or (b) engage in any transaction in any financial instrument issued, guaranteed, or otherwise supported by, any audited undertaking within their area of statutory audit activities, other than interests owned indirectly through diversified collective investment schemes, including managed funds such as pension funds or life assurance.
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(2)A statutory auditor, an audit firm, the key audit partner of the audit firm, the employees of the statutory auditor or audit firm, and any other individual referred to in subsection (1), shall not participate in or otherwise influence the outcome of a statutory audit of any particular audited undertaking if he or she— (a) owns financial instruments of the audited undertaking, other than interests owned indirectly through diversified collective investment schemes, (b) owns financial instruments of any undertaking related to the audited undertaking, the ownership of which may cause, or may be generally perceived as causing, a conflict of interest, other than interests owned indirectly through diversified collective investment schemes, or (c) has had an employment, business or other relationship with the audited undertaking within the period to which the financial statements to be audited relate and the period during which the statutory audit is carried out that may cause, or may be generally perceived as causing, a conflict of interest.
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(3)A statutory auditor, an audit firm, the key audit partner of the audit firm, the employees of the statutory auditor or audit firm, and any other individual referred to in subsection (1), shall not solicit or accept pecuniary or non-pecuniary gifts or favours from the audited undertaking or any undertaking related to an audited undertaking unless an objective, reasonable and informed third party would consider the value thereof as trivial or inconsequential.
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Prohibited relationships - mergers and acquisitions 1537. (1) If, during the period to which the financial statements relate, an audited undertaking is acquired by, merges with, or acquires, another undertaking, the statutory auditor or audit firm shall identify and evaluate any current or recent interests or relationships, including any non-audit services provided to that undertaking, which, taking into account available safeguards, could compromise the statutory auditor’s or audit firm’s independence and ability to continue with the statutory audit after the effective date of the merger or acquisition.
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(2)As soon as possible, and in any event within 3 months of the merger or acquisition referred to in subsection (1), the statutory auditor or audit firm shall take all such steps as may be necessary to terminate any current interests or relationships that would compromise his or her independence and shall, where possible, adopt safeguards to minimise any threat to his or her independence arising from prior and current interests and relationships.
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Threats to independence and other information to be recorded 1538. A statutory auditor or audit firm shall document in the audit working papers all significant threats to his or her independence as well as the safeguards applied to mitigate those threats.
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Preparation for statutory audit and assessment of threats to independence 1539. A statutory auditor or audit firm shall, before accepting or continuing an engagement for a statutory audit, assess and document the following: (a) whether he or she complies with the requirements set out in sections 1533 and 1535 to 1538; (b) whether there are threats to his or her independence and the safeguards applied to mitigate those threats; (c) whether he or she has the competent employees, time and resources needed in order to carry out the statutory audit in an appropriate manner; (d) whether, in the case of an audit firm, the key audit partner is approved as statutory auditor in the Member State requiring the statutory audit.
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Non-intervention by certain persons in execution of audit 1540. Neither— (a) the owners or shareholders of a statutory audit firm or the owners or shareholders of an affiliated firm, nor (b) the members of the administrative, management or supervisory body of such a firm or of an affiliated firm, shall intervene in the execution of a statutory audit in any way which jeopardises the independence and objectivity of the statutory auditor who carries out the statutory audit on behalf of the statutory audit firm.
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Internal organisation of statutory auditors and audit firms 1541. (1) A statutory auditor or audit firm shall comply with the following organisational requirements: (a) the audit firm shall establish appropriate policies and procedures to ensure that no person, including any partner, director, member or shareholder of the audit firm or of a firm in its network, intervenes in the carrying out of a statutory audit in any way which jeopardises the independence and objectivity of the statutory auditor who carries out the statutory audit on behalf of the audit firm; (b) the statutory auditor or audit firm shall have sound administrative and accounting procedures, internal quality control mechanisms, effective procedures for risk assessment, and effective control and safeguard arrangements for information processing systems; (c) the statutory auditor or audit firm shall establish appropriate policies and procedures to ensure that his or her employees and any other individuals whose services are placed at his or her disposal or under his or her control, and who are directly involved in the statutory audit activities, have appropriate knowledge and experience for the duties assigned; (d) (i) the statutory auditor or audit firm shall establish appropriate policies and procedures to ensure that the undertaking by other persons of important audit functions is not done in such a way as to impair the quality of the statutory auditor’s or audit firm’s internal quality control and the ability of the competent authorities to supervise the statutory auditor’s or audit firm’s compliance with the obligations laid down in the relevant provisions; (ii) the statutory auditor or audit firm shall ensure that any audit functions carried out by such other persons does not affect his or her responsibility towards the audited undertaking; (e) the statutory auditor or audit firm shall establish appropriate and effective organisational and administrative arrangements to prevent, identify, eliminate or manage and disclose any threats to his or her independence as referred to in sections 1533, 1535 to 1539 and 1547; (f) the statutory auditor or audit firm shall establish appropriate policies and procedures for carrying out statutory audits, coaching, supervising and reviewing employees’ activities and organising the structure of the audit file as referred to in section 1543; (g) the statutory auditor or audit firm shall establish an internal quality control system to ensure the quality of the statutory audit so that—
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(i) such system includes, at least, the policies and procedures referred to in paragraph (f), and (ii) responsibility for such system lies with a person who is qualified as a statutory auditor; (h) the statutory auditor or audit firm shall use appropriate systems, resources and procedures to ensure continuity and regularity in the carrying out of his or her statutory audit activities; (i) the statutory auditor or audit firm shall also establish appropriate and effective organisational and administrative arrangements for dealing with and recording incidents which have, or may have, serious consequences for the integrity of his or her statutory audit activities; (j) the statutory auditor or audit firm shall have in place adequate remuneration policies, including profit-sharing policies, providing sufficient performance incentives to secure audit quality but the amount of revenue that the statutory auditor or audit firm derives from providing non-audit services to the audited undertaking shall not form part of the performance evaluation and remuneration of any person involved in, or able to influence the carrying out of, the audit; (k) the statutory auditor or audit firm shall monitor and evaluate the adequacy and effectiveness of his or her systems, internal quality control mechanisms and arrangements established in accordance with the relevant provisions and take appropriate measures to address any deficiencies; (l) the statutory auditor or audit firm shall— (i) carry out an annual evaluation of the internal quality control system referred to in paragraph (g), and (ii) keep records of the findings of that evaluation and any proposed measure to modify the internal quality control system.
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(2)A statutory auditor or audit firm shall communicate, in writing, his or her policies and procedures referred to in subsection (1) to the employees of the statutory auditor or audit firm.
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(3)A statutory auditor or audit firm shall take into consideration the scale and complexity of his or her activities when complying with the requirements set out in subsection (1).
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(4)A statutory auditor or audit firm shall be able to demonstrate to the recognised accountancy body or Supervisory Authority that the policies and procedures designed to achieve compliance with this section are appropriate given the scale and complexity of activities of the statutory auditor or audit firm.
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Organisation of work of statutory auditors and audit firms 1542. (1) An audit firm, when carrying out a statutory audit of an undertaking, shall designate at least one key audit partner who shall be actively involved in the carrying out of the statutory audit.
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(2)An audit firm shall— (a) provide the key audit partner with sufficient resources and with personnel that have the necessary competence and capabilities to discharge his or her duties appropriately, and (b) ensure that the main criteria in selecting the key audit partner are securing audit quality, independence and competence.