Guidance in relation to audit experience and impending Brexit

As we are all facing Brexit and the uncertainty this creates, the Institute has written to training firms to advise them regarding the specific implications for trainees in relation to audit experience and potential audit rights post Brexit should a no deal Brexit arise.  

Should a final agreement along the line of the proposed Brexit/EU agreement be in place, the good news is that the current regime (status quo) will effectively remain in place and provide an opportunity to agree new arrangements.  However this appears to be unlikely at this time.

Read the letter sent to training firms.

Implications for audit registration in the event of a no deal Brexit

Dec 03, 2018

We would like to update you on information that has recently become available regarding audit registration status for those firms holding audit registration from Chartered Accountants Ireland 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 Chartered Accountants Ireland 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 29 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, we 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 29 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:   

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.

We would like to update you on information that has recently become available regarding audit registration status for those firms holding audit registration from Chartered Accountants Ireland 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 Chartered Accountants Ireland 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 29 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, we 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 29 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:   

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.

Important Notice re Audit Experience and Brexit

The attached notice is being issued by the Director of Education  to all trainees to provide assurance regarding the Chartered Accountancy qualification and Brexit.

It is important to be aware that while Brexit will not impact on the overall qualification, it is in the area of audit experience that the matter becomes more complicated and the main purposes of this notice is to provide  additional clarity  for those  trainees working in practice gaining audit experience and  how Brexit may impact. 

To access this document, please click/tap on the following hyperlink: Link to guidance note for trainees audit experience & Brexit

Ireland & UK accountancy bodies appeal for Brexit deal

Chartered Accountants Ireland has joined other accountancy bodies ICAEW, ICAS and ACCA in a public statement on Brexit, stressing the “critical importance” of making use of the remaining time on the Brexit countdown to strike a deal, and highlighted the impact that a ‘no deal’ would have on accountancy and audit, including a potential collapse in mutual recognition arrangements. The joint statement came as the UK Govt released its latest Technical Paper ‘Accounting and audit if there’s no Brexit deal’.

Audit qualification – will you be recognised?  October 2018

 

The UK continued to release a raft of papers to deal with a no-deal Brexit. One of the papers; entitled Accounting and Audit if there’s no Brexit deal might be of interest to members.

The paper says that the UK government will ensure that as far as possible the same laws and rules that are currently in place will continue to apply. 

Specifically for corporate reporting, the regime will remain unchanged aside from necessary changes to reflect that the UK is no longer an EU Member State.

In the area of audit, as expected, there will be additional requirements when it comes to carrying out the audits of UK companies that operate cross border.  In the event of a no-deal, the UK will provide a transitional period until the end of December 2020. During this period individuals can continue to apply for their EU audit qualifications to be recognised in the UK and vice versa.  More detail of this is provided in the paper.

In order to sign audit reports on behalf of an audit firm approved in the UK, the auditor must have an audit qualification that is recognised in the UK.  Individuals with EU qualifications may need to sit an aptitude test in the UK to have their qualifications recognised and this, the paper says, should be done during the transition period.   At the end of the transition period however, EU auditors will cease to benefit from automatic recognition of their qualifications in the UK and may no longer be offered an aptitude test.  The paper is silent on what happens in these situations.

Auditors with Irish qualifications will not need to take an aptitude test as the Republic of Ireland uses audit qualifications granted by UK qualifying bodies.

For UK auditors, the paper says “In a ‘no deal’ scenario an individual’s UK audit qualification may no longer be recognised in an EU Member State. There are exceptions such as Ireland where qualifications used are those offered by UK qualifying bodies and so they will continue to be recognised as professional qualifications. Similar arrangements may apply for some UK qualifications in some other Member States.”

It’s important to note that these provisions are only in the case of a no deal Brexit. We will continue to update members of developments in this area as they become clearer. 

The Brexit issue: mutual recognition of professional qualifications

The European Professional Qualifications Directive provides recognition of regulated professions such as architects, doctors, civil engineers and auditors.

This directive allows people in these professions to move freely across the EU/EEA and have their qualifications recognised by passing a local aptitude test. The Audit Directive makes further provisions for auditors. These arrangements allow Ireland, and Irish professionals, to support international businesses effectively.

Risks

  • If the UK does not remain within the EEA, professionals potentially face significant challenges in  terms of recognition and mobility, which may increase skills shortages

  • Registered auditors may not have inter-jurisdictional audit rights without specific agreements, which could be an impediment to cross-border business

  • Irish auditors may in future need to undergo additional work experience and examinations in order to work as auditors in the UK

Recommended actions

  • If the UK remains outside the EEA, Ireland should be part of the EU team negotiating a recognition policy for professional qualifications

  • Chartered Accountants Ireland, as an all-island body with 26,500 members, has a potential unique role to play and is willing to brief and support Irish negotiators

  • As a contingency, a third country agreement should be negotiated by the UK Financial Reporting Council and the Irish Auditing and Accounting Supervisory Authority (IAASA). This would require that all recognised Institutes gain access rights in both countries and facilitate present mobility