We would like to update you, our members, on information that has recently become available regarding audit registration status for those firms holding audit registration from Chartered Accountants Ireland (‘the Institute’) in the event of a ‘no-deal Brexit’. At present, the audit regulatory framework that exists between the UK and Ireland is such that firms holding audit registration from the Institute are able to hold audit appointments in respect of both UK and Irish entities. In simple terms, for example, this has enabled statutory audit firms ‘located’ in Northern Ireland or Great Britain to audit Irish registered entities while statutory audit firms ‘located’ in Ireland have been able to audit UK-registered entities.
In recent weeks, both the UK and Ireland have provided further information in respect of the recognition of statutory audit firms post Brexit. As regards the UK, the Department of Business, Energy, and Industrial Strategy (‘BEIS’) has confirmed that in the UK, the status quo will remain, deal or no-deal, at least until December 2020.
However, in late October the Irish Auditing and Accounting Supervisory Authority (‘IAASA’) announced that, in the absence of any transitional arrangements that might be contained in any withdrawal agreement, and based on advice received from Ireland’s Attorney General, UK-based audit firms would no longer meet the eligibility criteria for approval as EU statutory auditors and therefore would not be entitled to hold audit appointments for Irish companies post Brexit. After 29th March, therefore, UK-based auditors would be unable to sign audit reports on Irish entities and as such, will no longer be eligible for inclusion on the Irish audit register.
Irish company law does, of course, make provision for the recognition of statutory auditors from a ‘Third Country’, which is what the UK will become post-Brexit. However, such recognition is subject to appropriate regulatory arrangements being established between Third Country jurisdictions and Ireland (IAASA) which would include equivalence/reciprocity regimes etc. In spite of the existing arrangements essentially reflecting such a regime, formalising such new arrangements will take time and unlikely to meet the 29 March 2019 deadline.
While it is hoped that the above scenario can be avoided by virtue of appropriate transitional arrangements, I believe it is appropriate, and as counselled by IAASA, to advise those firms (UK-based) who may be impacted by the above to consider what action they may need to take as regards audit appointments of Irish companies they may have.
Specific issues firms will need to consider will include:
The need to make contingencies as regards the audits of Irish entities in the event of a no-deal Brexit – e.g. advising clients of this possibility and the logistics of the client identifying an alternative auditor located in Ireland;
Whether it might be possible to undertake and complete statutory audits of Irish entities, including signing the audit reports before 29th March 2019, having due regard to audit quality;
Whether the audit firm has an office ‘located’ in Ireland to which the audit appointment might be reassigned, or whether within the network of which the audit firm might be a member, there is an Irish located firm to which the appointment might be transferred. Note that there is at present no clarity or certainty to this particular point.This is one of a number of matters that have been raised with regulatory bodies.
Further information on the respective UK and Irish positions regarding statutory audit can be found:
Accounting and Audit if there is No-Brexit Deal; and
IAASA Breakfast Briefing Summary
The Institute continues to engage with relevant regulatory bodies and Governments on this issue and related issues with a view to obtaining further clarifications and explanations. In this regard, specifically, we have provided a series of questions and scenarios to IAASA. We shall keep you advised of additional information as it becomes known.
You can read our key questions here.
While the above is likely to arise only in the event of no ‘withdrawal agreement’ between the UK and the EU, it is important that firms be aware of the possible outcomes if such occurs.
If there is anyone with any queries or concerns, please contact Aidan Lambe, Director of Professional Standards, Chartered Accountants Ireland.
Aidan.lambe@charteredaccountants.ie