Paula Nyland considers how Chartered Accountants involved in the third sector can improve transparency and prosperity to the benefit of charities and society at large. The third sector on the island of Ireland impacts directly or indirectly on the work of every Chartered Accountant, whether as a director/trustee, audit practitioner, employee or volunteer. In the Republic of Ireland alone, the sector includes 9,500 non-profits that are incorporated as companies, more than 4,000 primary or secondary schools, and 800 friendly societies, co-operatives, trade unions, professional associations, political parties or charter bodies. Another 15,000 or so are unincorporated associations, clubs and societies. Chartered Accountants are critical to supporting and directing this sector, and it’s important that they are aware of some of the impacts of changing regulatory conditions on their practice.  Greater financial transparency and accountability Since 2014, when it was established under the Charities Act, 2009, the Charities Regulator in the Republic of Ireland has been working to bring greater public transparency and regulatory accountability to the work of the charity sector – about one-third of all non-profits. The Regulator now plans to introduce new regulations that will clarify the reporting requirements for charities in the form of an Irish version of Charities SORP. Charities SORP is a module of FRS 102, which provides guidance on financial accounting and reporting for charitable entities. It is currently mandatory for UK charities, but only recommended for charities in Ireland. Based on our analysis of all of the financial statements filed by Irish non-profits since 2015, Benefacts has discovered that just 12% of Ireland’s incorporated charities currently file financial statements using Charities SORP on a voluntary basis. This will change when the forthcoming regulations are introduced. All larger incorporated charities (more than €250,000 in income or expenditure) will be required to meet these higher standards of disclosure, and will no longer be permitted to file abridged accounts. Currently, the level of abridgement in charities’ accounts here is running at 37%, and this is something the Charities Regulator has repeatedly spoken out on – most recently after the launch of Benefacts’ Sector Analysis Report in April 2019. For the audit profession, there is a clear need to become familiar with these reporting standards, because the question is no longer whether Charities SORP will become a requirement for larger charities in the Republic of Ireland, but when. Guidelines on fundraising and internal control Even in advance of the new regulations on financial reporting, the Charities Regulator has been active in setting standards for the charity sector, with guidelines for fundraising from the public issued in November 2017 and a governance code issued at the end of 2018. These measures, coupled with the Internal Financial Controls Guidelines for Charities, have created a strong foundation for control within the regulated charity sector, in particular for the people serving on the boards of charities and non-profits. VAT repayment scheme  Elsewhere in Government, there have been measures to respond to campaigns from within the sector. Following years of lobbying to change the VAT regime for charities, Government introduced a new scheme that has made €5 million available for recovery annually by charities against VAT paid from non-statutory or non-public funds for costs after 1 January 2018. The deadline for 2018 claims was 30 June 2019. DPER Circular 13 of 2014 Without having the full force of regulations, the standards for financial disclosures promulgated by the Department of Public Expenditure and Reform (DPER) nonetheless deserve to be more widely understood by the accountancy profession. Circular 13 of 2014 is the most important statement of the disclosure standards that are expected of all entities receiving State aid, and it is the responsibility of every government funder to ensure that these are being followed. They set out the requirements for reporting every source of government funding, the type of funding provided (loan, current or capital grant, service fee), the purposes of the funding and the year in which funding is being accounted for. Abridged accounts do not meet the standards of DPER 13/2014, nor do accounts prepared using the new standard for micro-enterprises, FRS 105. FRS 105 (micro entities) When the Companies (Accounting) Act 2017 was commenced on 9 June 2017, it introduced the concept of the Micro Companies Regime, which is provided for in Section 280 of the Companies Act 2014. This allows smaller companies (with two of the following conditions: turnover of €700,000 or less, balance sheet total of €350,000 or less, and no more than 10 employees) to prepare financial statements under FRS 105 instead of FRS 102. FRS 105 provides for minimum disclosures: no directors’ report, no requirement to disclose directors’ remuneration, no disclosure of salary costs or employee numbers. In 2017, 5% of non-profit companies reported to the CRO using this standard, including some that receive funding from the public or from the State.  Charities in the UK are not permitted to report using FRS 105, but as yet there is no such regulation in the Republic of Ireland. The burdens of disclosure Many Irish non-profit organisations receive funding from more than one source – some from many sources, as will be clear from even a cursory glance at the listings of well-known names on www.benefacts.ie. As well as multiple funding sources, most major charities are regulated many times over, if you count the oversight responsibilities of the CRO/ODCE, the Charities Regulator, the Housing Regulator, Revenue, HIQA et al. The high administration and compliance burden represents a real cost – including, of course, the cost of audit fees. At a minimum, of course, company directors must confirm that the company can continue as a going concern; Charities SORP requires that trustees disclose their policy for the maintenance of financial reserves and it is expected that these will reflect a prudent approach to maintaining funds to see them through periods of unexpected difficulty. These are sensible, indeed fundamental, principles and the annual financial reporting cycle is intended to give confidence to all stakeholders that the directors/trustees fully understand their responsibilities and are fulfilling the duties of care, diligence and skill enjoined on them. The €20 million or so currently spent by non-profit companies on audit fees (as yet the public has no access to the accounts of unincorporated charities) should be money well spent. The better the quality of the financial statements, the more these can play a role in initiatives being explored by a number of Government agencies to explore cost-saving “tell-us-once” solutions, supported by Benefacts. Who is accountable? Using current data from filings to the CRO and the Charities Regulator, Benefacts reported in Q1 2019 that 81,500 people are currently serving in the governance of Irish non-profit companies and charities. 49,000 of these serve as the directors of 9,500 non-profit companies, and the rest are the trustees of unincorporated charities. All are subject to regulation, and they include many members of Chartered Accountants Ireland.  By any standard, this is a large sector with more than 163,000 employees and an aggregate turnover in 2017 of €12 billion, €5.9 billion of which came from the State (8.4% of all current public expenditure in that year). Most of this funding was concentrated in only 1% of all the bodies in the sector. Voluntary bodies enjoy some of the highest levels of trust in our society, but it has become clearer in recent years that this trust does not spring from an inexhaustible reservoir. It must be continuously invested in and replenished by the work of every non-profit, most especially in the form of ample and transparent public disclosure – about their values, their work, its impacts, and the sources of their funding. Above all, the board carries responsibility for setting a tone of transparency and accountability, and directors/trustees need to be aware of their personal responsibilities in this regard. As professionals, we are often looked to by our friends and family, by our clients, or by our fellow directors/trustees for advice or leadership. We all know that in any kind of business, the consequence of a loss of public confidence can be dire; in non-profits, it can be fatal.   Paula Nyland FCA is Head of Finance & Operations at Benefacts and Co-Chair of the Non-Profit and Charities Members Group at Chartered Accountants Ireland.

Paul Smith breaks down the three most significant changes in the latest edition of Revenue’s R&D tax credit scheme guidelines. In a recent Oireachtas debate, Deputy Mary Butler asked the Minister for Business, Enterprise and Innovation: “What is being done to ensure we reach the EU average spend? Will Ireland meet the 2020 target to spend 2.5% of GNP on research and development annually?” To which the Minister replied: “It is unlikely that many European countries will reach the target of 2.5%. Where Ireland stands and how well we are doing, we can only go on the European and global statistics we get. Under the heading, Excellent Science, a report from Science Foundation Ireland (SFI) noted that Ireland is tenth in the global scientific ranking. A few examples of our global rankings in different areas are: second in animal and dairy, immunology, and nanotechnology; third in material science; fourth in agricultural science; fifth in chemistry; and sixth in basic medical research… I have been all over the world and our 18 research centres are recognised as being par excellence throughout Europe and the world. We are doing exceptionally well.” A key part of Ireland’s national development strategy is to develop “a strong economy supported by Enterprise, Innovation and Skills”. The research and development (R&D) tax credit scheme forms part of the overall corporation tax offering aimed at fulfilling this strategy. The primary policy objective behind the tax credit is to increase business in Ireland, as R&D is considered an important factor for increased innovation and productivity. Reflecting these considerations, the Government’s Innovation 2020 Strategy aims to achieve the EU 2020 target of increasing overall (i.e. public and private) R&D expenditure in Ireland to 2.5% of GNP by 2020. The R&D tax credit scheme is administered by the Office of the Revenue Commissioners, which issued its latest guidelines on 6 March 2019. It is almost four years since the previous guidelines were published (April 2015) and in the interim, a number of significant events relating to the wider research, development and innovation (RD&I) landscape have happened: The Knowledge Development Box was introduced in 2015; The updated OECD Frascati Manual was issued in 2015; The Department of Finance reviewed the R&D tax credit scheme in 2016; An R&D Discussion Group was formed in 2017; and The Department of Business Enterprise and Innovation’s Disruptive Technologies Innovation Fund was introduced in 2018. It was expected that the latest guidelines would provide additional clarity on issues set out in previous ones, insight from the increased number of audits, and recommendations for continued best practice. There are 14 changes in all, most of which are relatively minor, and are therefore not discussed in this article. I will instead evaluate the more significant changes and briefly comment on the upcoming Department of Finance review of the R&D tax credit scheme. Change 1: Suggested file layout for supporting documentation An important consideration is that in defending a claim, the burden of proof is on the claimant to evidence their entitlement to tax credits. It should therefore come as little surprise that the principal focus of many audits is on supporting documentation. Although the legislation is silent on the nature of the documentation required to support an R&D tax credit claim, Revenue conducts audits using its own guidelines and provides a copy to the experts appointed to assist Revenue. The guidelines give indications of records that should be maintained to satisfy the science and accounting tests. The latest guidelines have, for the first time, introduced a “suggested” file layout for supporting documentation. This should be of benefit to existing claimants who have inadequate record-keeping and who are considering upgrading their systems and processes to be audit-ready. It may also be of benefit to potential claimants who are assessing what must be done to prepare a robust claim and, in time, defend it – the adage being that “your first step to claiming is also your first step to audit”. Revenue also benefits by potentially standardising the audit process and its inherent costs. At a recent audit this author attended, the Revenue inspector commented: “If we knew then what we know now, there may have been less need for the audit”. With Revenue’s increased adoption of e-auditing, a standardised R&D file structure could reduce the time and cost of on-site audits for both Revenue and claimants. Although the suggested file layout has advantages, it could be costly and administratively difficult for claimants to adopt. Furthermore, although the words “suggested” and “non-obligatory” are used, we can but assume that in time it could become a de facto requirement. This raises the question as to whether claimants would be disadvantaged in not using it or in having an incomplete file. In addition, claimants frequently receive an Aspect Query (Revenue’s R&D questionnaire, comprising 23–25 questions) into their claim in advance of a full audit. In answering the Aspect Query, a report setting out one’s entitlement to claim is typically furnished. That report is often laid out in the same format as the Aspect Query and although additional questions may be raised, the reports are not generally rejected by Revenue. Therefore, if reports in the Aspect Query format are broadly acceptable to Revenue, a suggestion is for Revenue to consider amending its Aspect Query rather than asking claimants to amend their processes. The R&D tax credit was introduced to defray the cost for claimants in the carrying on of R&D activities. There is no tax credit for the costs of record-keeping or file management. Change 2: Eligibility to claim for sub-contracted R&D activity The guidelines have reversed Revenue’s position that “outsourced activity must constitute qualifying R&D activity in its own right”. In the past, outsourced activities needed to be the R&D of the company carrying on the activities. With this change, they now must be the R&D of the claimant. This is constructive as it considers entitlement to tax credits from the claimant’s standpoint and reflects the reality of sub-contracting where the claimant lacks specific expertise and requires outside assistance to support its in-house R&D activity. The positive impact of this change will be the confidence it gives claimants to include sub-contracted activities that may previously have been omitted from claims, as the claimant could not determine whether the outsourced activities constituted R&D when performed by the contracted party. Change 3: Materials used in R&D activities, which may be subsequently sold R&D tax credit/relief schemes in other jurisdictions (such as Canada, Australia and the UK) have a legislative requirement to deduct from claims saleable products resulting from R&D activities. In Ireland, there is no such legislation, but the 2015 guidelines introduced this requirement without worked examples. The latest guidelines have updated the wording to read “where it is reasonable to consider that there will be a saleable product” and have provided three examples. Revenue is effectively placing the onus on the claimant to assess, based on a “reasonable to foresee” test, whether the materials were utilised “wholly and exclusively in the carrying on by the company of R&D activities”. This assessment seems to be at odds with the legislation, wherein other than a requirement to make a deduction for expenditure met by grant assistance, there is no reference to eligible expenditure having to be reduced for income from the sale of materials or saleable product derived from R&D. In the author’s opinion, whether materials have a post-R&D resale value should not detract from the fundamental and legislative reason for which their cost was incurred – namely, to carry on R&D activities. Guidelines do not make the law, and are but an aid to its interpretation. Department of Finance Review The Department of Finance has a duty of care over public expenditure and this year, in co-operation with the Office of the Revenue Commissioners, it will conduct its triennial review of whether R&D tax expenditure remains fit for purpose. The R&D tax scheme benefits not only claimants, but wider society also through development, employment, education and so on. However, the R&D headline cost figures do not reflect the full cost of the scheme to the Exchequer. It will be a full review (unlike 2016, which was economic only) and will cover four pillars – relevance, cost, impact and efficiency – to determine if the scheme remains valid. It will be conducted along two strands: A cost-benefit analysis (statistical in nature); and A tax policy unit analysis, involving a public consultation. It is encouraging that since the last review:  There has been no change in the R&D legislation; The OECD-compliant Knowledge Development Box scheme has come into operation; Ireland is ranked tenth in the 2018 Global Innovation Index; Ireland is ranked ninth in the 2018 European Innovation Scorecard; and Ireland is ranked fourth in the OECD Tax Database in terms of R&D tax incentives (tax and grants). Conclusion The expectations of the latest guidelines have largely been met, and hopefully the R&D Discussion Group will function as a collaborative forum to influence future updates.Yes, there is increased focus on supporting documentation, but broadly, the status quo remains. For now, you could say of the RD&I landscape in Ireland and the R&D tax credit guidelines respectively: “You rock. You rule!” The big three The three significant changes to Revenue’s R&D tax credit guidelines of which claimants should be aware are as follows: Change 1:  Suggested file layout for supporting documentation. The layout will benefit existing claimants who have inadequate record-keeping and who are considering upgrading their systems and processes to be audit-ready. A standardised R&D file structure could also reduce the time and costs of on-site audits for both Revenue and claimants. Change 2:  Eligibility to claim for sub-contracted R&D activity. The guidelines have reversed Revenue’s previous position that “outsourced activity must constitute qualifying R&D activity in its own right”. This is constructive as it considers entitlement to tax credits from the claimant’s standpoint and reflects the reality of sub-contracting, in that the claimant lacks specific expertise and requires outside assistance to support its in-house R&D activity. Change 3:  Requirement to deduct the cost of materials used in R&D and having resale value. The guidelines update the wording and provide three examples regarding saleable materials used in R&D activities. Revenue is effectively placing the onus on the claimant to assess, based on a “reasonable to foresee” test, whether the materials were utilised “wholly and exclusively in the carrying on by the company of R&D activities”. Paul Smith is Senior Tax Manager, Global Investment & Innovation Incentives (Gi3), at Deloitte.

Recent multi-million euro fines for breaches of GDPR have reconfirmed the need for a watertight data management strategy. By Angela Craigan Just over a year ago, one of the main concerns for businesses and organisations operating in the European Union was the impending implementation of the General Data Protection Regulation (GDPR). Its introduction in May last year brought major changes to the way personal data could be handled. The run-up to its implementation saw an influx of email requests from organisations requesting permission to hold data. GDPR increased the obligations on those holding data to protect it and gave individuals more control over how their information is collected, used and stored. Businesses must ensure that all reasonable steps are taken to secure data, train staff and disclose breaches. They must be clear about how they use personal data. Individuals can demand to see what data is held on them and can also request that this data is deleted at any time. Now one year down the line, with our GDPR policies embedded into our businesses, the recent news that British Airways has been fined £183 million by the Information Commissioner’s Office (ICO), closely followed by a notice of intent for almost £100 million for the hotel group, Marriott, reminds us all of the importance of making sure we are not falling foul of the regulations. While the fines are huge, neither are the maximum amount that could have been levied by the ICO, which can fine up to 4% of annual global turnover or €20 million (£18 million) – whichever is greater. Security arrangements With British Airways, the breach was caused when hackers diverted users to a fraudulent website and harvested information such as login, payment card, name, address and travel booking information. With Marriott, personal data including credit card details, passport numbers and dates of birth had been stolen in a hack of guest records. There was no issue in relation to reporting the breach; both were reported within the mandatory 72 hours of discovery. With British Airways, the problem was the fact that hackers were able to gain access to the information. The ICO reported that the data breach occurred because British Airways had “poor security arrangements” in place to protect customer information. This again highlights the importance of protecting the data we hold on individuals; it needs to be protected through its lifecycle. This will require working closely with IT departments or external IT suppliers to make sure the systems are water-tight. We also need to be very careful about the disposal of data and IT equipment that has held data. Achieving compliance The simplest way to ensure compliance is to have a data management strategy. This should set out what information you need, how long you need it for and where it is stored. It is understood that with Marriott, the breach had already occurred in a hotel group it purchased prior to the sale, although it was only discovered last year. When considering the acquisition of another company, it is essential to make sure sufficient due diligence is carried out to ensure the company being acquired is GDPR-compliant. Although these recent cases involve large global companies, the legislation applies to all businesses and organisations regardless of size. The data-rich information age that we all now inhabit has been the trigger for GDPR. As members of Chartered Accountants Ireland, the role we play in the organisations in which we work has always been built on a foundation of ethical behaviour and trust in all matters – including that of data protection. As a result, the foundation of our profession continues to be relevant in the midst of an ever-evolving business landscape. Angela Craigan FCA is a Partner with Harbinson Mulholland, the accountancy and business advisory firm.

Directors faced with a court application to restrict them  as a director must be able to demonstrate clearly that they acted responsibly at all times to avoid restriction.  By Claire Lord A liquidator of a company that is unable to pay its debts is required to apply to court for a declaration that any director of that company, either at the time of commencement of its winding up or during the period of 12 months before that date, cannot be appointed or act as a director of a company or be concerned in or take part in the formation or promotion of a company, for a period of five years. This requirement does not apply where the Director of Corporate Enforcement relieves the liquidator of the obligation, or the company in question meets certain share capital requirements. In addition, the court is not required to make a declaration of restriction where it is satisfied that the director in question acted honestly and responsibly in relation to the conduct of the affairs of the company, whether before or after it became unable to pay its debts. The concept of “acting responsibly” was recently considered by the Irish High Court in connection with an application made by the liquidator of IQ Content Limited for a declaration of restriction against two of its directors. One of these directors was Morgan McKeagney, the founder and former managing director of IQ Content Limited.  The case IQ Content Limited was an IT consulting and web design firm that had enjoyed considerable success until 2014, when an unfortunate coincidence of events caused it to suffer an unprecedented collapse in revenues. As a consequence, in July 2014, a decision was made to wind up the company. At that time, Morgan McKeagney remained as a director of the company but was no longer involved in its day-to-day operations. Representing himself, and assisted by a successful application for an order of discovery of documents held by the company, Morgan McKeagney presented evidence of “a story of intrigue” to the court. The evidence presented by Mr McKeagney demonstrated that his colleagues had acted in a coordinated and calculated manner to drive the company into liquidation while at the same time, establishing a new company into which they planned to move all of the company’s assets. Mr McKeagney was also able to show the court that throughout this period of crisis, he had been deliberately removed from decisions that were made and otherwise isolated within the company. The judgment The application for Morgan McKeagney to be declared by the court as being restricted from acting as a director was declined. The presiding judge instead declared that Mr McKeagney had acted responsibly and with integrity throughout the process. The judgment notes that the court was highly impressed with Mr McKeagney’s actions in his role as a director of IQ Content Limited and in opposing the restriction application. In this regard, it is stated in the judgment that Mr McKeagney had presented his case in a clear and articulate manner and had presented clear evidence that he had acted in the best interests of the company at all times. This case demonstrates that the court will decline to make an order for restriction in circumstances where a director has acted responsibly in relation to the conduct of the affairs of a company in liquidation. However, a director in this situation needs to be able to clearly demonstrate to the court that this was the case. Morgan McKeagney went to impressive lengths to contest the application being made to restrict him as a director, and he was successful in demonstrating that he had truly acted responsibly in relation to the conduct of the affairs of IQ Content Limited. These lengths are indicative of the burden of proof placed on directors that find themselves in a similar position to successfully argue a positive outcome.   Claire Lord is a Corporate Partner and Head of Governance and Compliance at Mason Hayes & Curran.

Des Peelo explains why a trust or an overseas holding company is rarely a good idea. The ownership of wealth and related capital taxes go together, and there are lessons to be learned in trying to distance one from the other. Nothing stands still over time, except the Great Pyramid and similar edifices. This simple fact can escape legal and financial advisors when it comes to wealth and capital taxes. First, let us consider the history of capital taxes briefly. The 1970s brought a slew of capital taxes, much of it modelled on UK precedents. The government of the day introduced capital gains tax, capital acquisitions tax replaced estate duties, and there was a short-lived wealth tax. A wide range of tax measures involving the relationships between companies and the individuals who owned them also came along in successive Finance Acts, while 1988 saw the introduction of self-assessment on income and capital taxes. There was relatively little personal wealth in Ireland at that time, and it was the mid-1980s before the capital taxes realised much revenue, with the result that planned tax avoidance (and illegal tax evasion) became an unstated industry in itself. Schemes were thought up by legal and tax advisors until a Finance Act caught up with them. Even so, on occasion, the combatting legislation itself created another loophole, and so on. The use of trusts (usually through what is known as a discretionary trust) and overseas holding companies became fairly widespread, the repercussions of which were not always wisely thought through – a resonance that is still valid today. The ownership of businesses, properties and investments were held in companies and trusts in places like Jersey and the Isle of Man. Others were based further afield in Bermuda, Cyprus and the Cayman Islands. It was not unusual to have pyramids of ownership across several jurisdictions. Revenue probes, the Ansbacher Enquiry, tribunals, several tax amnesties and the Panama Papers subsequently revealed the widespread use of overseas structures. Fast forward from those earlier years and the anxiety to avoid capital taxes, or to keep control after the demise of the founder or owner of a business, overwhelmed common sense as to what was likely to happen in the long run. Subsequent legislative and practice changes, in Ireland and overseas, were not always known or understood. The rigidities in the original tax schemes, over time, frequently created obstacles to addressing subsequent tax challenges and change. As to the designated beneficiaries of the underlying wealth, the elapse of time created its own dysfunctions. Sibling rivalry and inter-generational fighting continue to be common outcomes; not to mention the complications of divorce and remarriage, poor behaviour within a family and possible inadequate management performance as to the underlying business or assets. Trustees also pass on in time, being usually older than the intended beneficiaries, and replacement trustees may have different attitudes. Indeed, some were not replaced in a timely or legally permitted manner. As stated at the outset of this article, nothing stands still and what started as a tax-planning decision is now a tangled legal, financial and tax imbroglio. There are instances of ‘orphan assets’, which arise from the failure to address legislative or practice changes over time. This failure can lead to paralysis or an inability to access the underlying assets. A particular problem with trusts – as identified in several UK court cases – was the continuity of trustees, meaning that overseas trustee companies went out of business without any succession or replacement structures in place. Similarly, individuals acting as directors of holding companies in foreign jurisdictions became incapacitated or died. What is not always readily understood is that if something goes wrong, such as an unexpected event or a dispute of some kind, the Irish courts are unlikely to have any jurisdiction. Trust and/or company law can be opaque or vague in foreign jurisdictions. For example, it may be the case that the shareholders in an overseas holding company have not been filed in the local equivalent of the Irish Companies Registration Office, or indeed disclosed or accessed in any other way. This failure may lead to uncertainty as to actual ownership, and the articles or constitution are likely to diverge from what is set out in Irish company law. In any event, the point is that the use of trusts and overseas companies will often fall foul – and usually do – in the long run. This reality keeps accountants and lawyers busy all over again in trying to sort it out; usually with significant legal and tax bills to follow. In summary, a trust or an overseas holding company is rarely a good idea. Des Peelo FCA is the author of The Valuation of Businesses and Shares, which is published by Chartered Accountants Ireland and now in its second edition.

Welcome to a special 50th anniversary edition of Accountancy Ireland. As this is my first comment piece in the magazine since our AGM, I’d like to say what a tremendous honour it is to follow in the footsteps of a long list of remarkable Presidents. I would also like to congratulate my predecessor, Feargal McCormack, for a tremendously successful year. The audit challenge As a member who has spent his career working in audit, it will come as no surprise that I am keen to address the challenge that currently faces the audit profession. I have been looking to our nearest neighbour in the UK and reflecting on the fractured relationship with the regulator, the Financial Reporting Council, and with politicians. Many of the reforms recommended by Sir John Kingman’s recent independent review have now been accepted. However, the wider review by the Competition and Markets Authority and also the independent review into ‘The Quality and Effectiveness of Audit’ being conducted by Lord Brydon will be fundamental to our future, and the future of business more broadly. We must remember that what may be required to work in the UK is not necessarily or automatically right for Ireland. We must work hard to ensure good communication between the profession, politicians and regulators to ensure that the very particular strengths we have in Ireland are protected and nurtured. Routes to our profession My second area of focus will be around access to the profession. I see this as having three different strands. Firstly at graduate level, secondly by facilitating more graduates to train in industry and public sector, and thirdly by opening up a route to non-graduate entry. Over many years, the Institute’s dependence on the audit functions of the big accounting firms has become more and more accentuated. I believe there is real opportunity both to widen our graduate pool, but also to work with Ireland’s largest corporates – and, indeed, our influential senior members – to revitalise and enhance the ‘training in business’ route to the qualification. The other thing we need to get right is our school-leaver route. It is inevitable that college fees for university education will be reintroduced at some stage, making third-level education inaccessible to many. Through Accounting Technicians Ireland, we already have a ready-made route for school-leavers to Chartered Accountancy, which presents a fantastic opportunity. Strategy My third area of focus will be strategy. We are now working with our Strategy Board to make sure that by the end of the year, we have progressed a new strategy up to 2025. In doing this, we will engage with the full spread of our membership. We have so many business leaders who are Chartered Accountants and who play a very significant role in Irish business life – creating value, creating opportunities for careers, and sustaining families. With your help, we will deliver a strategy that secures our reputation and delivers important services to members. I am very confident that together, we can deliver on our themes and strategy for all of our membership. Conall O’Halloran President

Trainees are the lifeblood of the profession and rather than expect conformance, accountancy firms must  continually evolve to meet their needs. By Sinead Donovan In today’s environment, the role and route to becoming an accountant has changed compared to when I initially started my training contract. I don’t mean in respect to the professional exams or length of training contracts, but more the expectation of the future accountant in their day-to-day work environment and, likewise, in the expectation we have from them. In fact, the question I am asking is: what is the primary role of an accountant? Wikipedia defines an accountant as “a practitioner of accounting or accountancy, which is the measurement, disclosure or provision of assurance about financial information that helps managers, investors, tax authorities and others make decisions about allocating resources”. The rounded accountant Technically, as accountants, we need to be able to provide the above services – but this is no longer our sole role. Today, we need to be experts in project management, forensic accounting, cybersecurity, fintech, negotiation settlements – the list  goes on. To service these needs, it is becoming increasingly critical that we train very rounded and evolved accountants, and that we arm ourselves in our teams with skillsets to build a sustainable relationship with the client, have the foresight to envisage what they need, and be able to address their needs. An evolving industry We are all aware that the professional service environment is changing at rapid speed. To meet these changes, there is a high expectation from the future generation of accountants. This future generation of accountants will be key to the evolution of the professional services industry. We want and need our accountants to have vast experience and other interests, and we want to see how this can be used and applied in our changing environment. This requirement is well served by trainee accountants who come through the non-traditional accounting route and often have a primary degree in something completely different – science, arts, engineering or marketing. Their unique skill will add to the learning experience they will encounter and give a different perspective on the work being performed for clients. Trainees’ concerns Trainees want to learn, but they also want to be supported throughout their career to ultimately achieve the goals and targets they set for themselves. They are not afraid to address issues or concerns they may have. Sometimes we may bemoan this as a millennial or Gen X requirement. However, it should be welcomed and embraced. These students are headstrong, determined and not afraid to voice their opinion. They want a fully rounded experience and the opportunity to get involved in other aspects of the business. We as training firms need to be positioned to address their needs – and there is no doubt that we are being interviewed by the students. A number of things are important to them, not least company polices in respect of CSR, career progression, the different service offerings we provide as professional services firms and how we keep up-to-date with change and technology. They are also keenly driven by the work-life conundrum, which can be difficult to navigate as a trainee accountant. Our responsibility And indeed, accountancy firms must simultaneously pivot their own expectations of trainees. We need to: Help them set stretch goals and put supports in place to enable the achievement of these goals; Keep pace with changes in technology and develop our service offerings to support our clients and our trainees; Communicate and share our strategies and objectives with them – they need to understand what their investment can reap; and Be open to being challenged and questioned. Most importantly, we need to do all this while remembering that ethics is the cornerstone of our profession – a fact that, thankfully, hasn’t changed. Sinead Donovan FCA is a Partner in Financial Accounting and Advisory Services at Grant Thornton.

The FAE Core curriculum is undergoing significant changes in order to maintain the Irish  ACA’s global reputation for excellence. By Ronan O'Loughlin   Members and students will be aware of the significant technological changes impacting on the work and careers of Chartered Accountants. It isn’t just the technological changes that are significant, but the increasing pace of change. Against this backdrop, the Institute’s Education Training and Lifelong Learning Board (Education Board) and Exam Committees have been adapting and enhancing the ACA curriculum to meet these challenges. This article outlines the changes to the FAE Core examination, which will be rolled out from autumn 2019. From a practical perspective, this can be viewed as a first step and will be further enhanced in the years ahead. The journey At a global level, the profession is paying significant attention to the impact of technology on the education needs of students and qualified accountants. Technology is impacting what we learn, how we learn and how we are assessed. The skillsets of Chartered Accountants must be further developed to cope with these changes. The Institute launched a new syllabus in 2018, which featured new FAE electives. These are: the Public Sector elective, which is aimed at students working or advising in this sector; the Financial Services elective, which is targeted at students training in the Financial Services sector; and the Advisory elective. With the other existing Audit and Tax electives, students now have a choice of five electives. This innovative structure recognises the changing nature of the work of the profession and in the case of those working in practice, the increasing importance of Advisory in particular. The 2018/9 structure is summarised in Table 1. Students completing FAE must complete FAE Core and one elective. This structure is unique amongst our reciprocity partners and supports a level of pre-qualification specialisation. All electives can be completed at the time of qualification and additional electives can be completed post-qualification to support career changes. The Education Board and the relevant examination committees are also mindful of the work currently underway with our reciprocity partners in the Global Accounting Alliance, which will frame the skillsets and requirements that will be necessary for Chartered Accountants in the future. This work will conclude in 2019 and will inform the new reciprocity agreements, which will be rolled out in the years ahead. In the meantime, the FAE Core syllabus will be further developed in anticipation of likely reciprocity developments and emerging technological developments. This will be rolled out in 2019/20. Changes to the FAE Core syllabus The Core syllabus is being restructured, with a reduction in modules from five to four (see Table 2). This new structure reflects a desire to create ‘space’ for the new material and to better reflect the changes in our key training firms and organisations. These changes include an increased focus on advisory work and the re-framing of audit practice. There are a number of reasons for these changes: Financial Reporting in terms of syllabus requirements remains as before; it is a key skill for all Chartered Accountants. The slight change in weighting reflects its importance. Assessment will take place within the Core exam and, separately, in an interim Advanced Application of Financial Reporting Principles (AAFRP) assessment; Strategic Management and Leadership contains the areas of strategy (analysis, choice and implementation), as before, with the addition of the Strategic Finance Management Accounting (SFMA) topics previously examined under a separate heading. In terms of the SFMA topics, the focus will be on dealing with the key strategic aspects of these topics; Data Analytics, Artificial Intelligence and Emerging Technologies represent new material, which reflects the current and emerging technological developments that will impact businesses and clients of Chartered Accountants. The topic covers data analytics, with particular reference to determining the data set and its integrity and the interpretation of the outcome of the data analysis. Artificial intelligence will be explored, given its significant impact on business processes. The Emerging Technologies focus specifically on blockchain and cryptocurrency developments, which are creating significant new opportunities for the processing of financial information. The aim is to ensure that newly qualified Chartered Accountants are equipped to understand these developments and their impact on their clients and employers; and Risk Management and Sustainability focuses on the area of audit process, risk management and internal control rather than the traditional external audit focus. Extended coverage of audit and assurance will occur in the Audit Elective. Other new topics include professional scepticism, sustainability and integrated reporting. This rebalancing reflects the evolving nature of audit and the emergence of topics that are altering the role of today’s Chartered Accountant. Feedback received We shared these developments recently with our students and other stakeholders, and the feedback was fully supportive. Students recognise that these developments will future-proof their careers and enhance their career prospects. One recently admitted member said: “I wish I was completing the FAE in 2020”. These changes are just the first step in the planned evolution of our syllabus to reflect the ongoing rapid changes in technology. The education programme in 2019/20 will be supported by a suite of new learning materials. Other changes In addition to the FAE Core changes, a new e-assessment platform will be launched on a pilot basis at CAP1 level. The initial pilot will be conducted in 2019/20 and will be limited to the CAP1 interim assessments and Law. If successful, it will be expanded to all of CAP1 and all interim assessments from CAP1, CAP2 and FAE in 2020/21 and to all CAP1, CAP2 and FAE assessments in 2021/22.  The new platform allows students to complete their exam in an appropriate environment (including their home) with an online live moderation of their exam by an invigilator supported by artificial intelligence. This replaces the current online double entry examination and will include a new CAP1 Law paper and the Management Accounting interim assessment on the same platform. The new platform will not only facilitate increased security and efficiencies, but enhanced student and customer service – and it is fully GDPR compliant. It will also lay the foundation for future enhancements to the Institute’s examination offering. Conclusion The enhanced syllabus and planned developments in FAE Core and e-assessments are significant developments that seek to retain the Irish ACA’s standing in the global business landscape. This output reflects significant work and investment on the part of Chartered Accountants Ireland and forms part of a plan of continuous enhancement. Ronan O’Loughlin FCA is Director of Education and Training at Chartered Accountants Ireland.

Accountancy Ireland started out as a replacement for the members’ and students’ bulletins. 50 years on, it is one of the most valued member services provided by the Institute. In June 1969 – the same month that General Franco closed Spain’s frontier with Gibraltar, Georges Pompidou was sworn in as President of France, and Joe Frazier knocked out Jerry Quarry in round eight to win the heavyweight boxing title – the Institute of Chartered Accountants in Ireland published the first issue of Accountancy Ireland. In an understated ‘Word of Introduction’ on page 10, the magazine’s founding editor Ben Lynch described the magazine’s objective as being a “communications link” between the Institute and its members and students. 50 years and three editors later, the magazine remains faithful to its founding principle. Constancy amid change In the intervening years, Accountancy Ireland has helped the profession navigate a business and economic landscape that has changed utterly. From Ireland’s accession to the European Economic Community to dealing with the fallout from the financial crisis, our members – in sharing their insights and expertise through Accountancy Ireland – have supported and informed each other through one evolution after another. In this anniversary issue, we look back on some of the seismic events that have challenged the profession over the past five decades. Some are technical in nature while others are social and geopolitical, but the most striking thing about leafing through old issues is the realisation that, despite the changes brought about by technology, Chartered Accountants have been consistently driven by the same core value of integrity – which to this day remains one of the Institute’s five core values as outlined in Strategy 2020. “It is your journal” The pages that follow will take readers down memory lane with, we hope, a sense of nostalgia and enjoyment. And while looking back is always a useful exercise, it is incumbent on the editorial team to remain focused on the future. The information needs of the profession will continue to evolve, and we will endeavour to meet those needs as admirably as our predecessors did, but we will also consider how to share information in a way that is accessible, convenient and in keeping with modern news consumption as both trends and technologies change. While we can of course benchmark ourselves against similar publications and other international publications to which we aspire, our best source of guidance are the members we serve. Over the years, your input has driven many innovations within Accountancy Ireland – not least the launch of our podcast, which is now listened to around the world, and an increasingly tailored suite of publications that includes Briefly, Vision and Chartered Accountants Abroad. As we look to the next 50 years, your views and suggestions will help us shape our strategy and deliver information and insight in a way that meets your needs. To that end, please share your thoughts with us at editor@accountancyireland.ie – and criticism will be equally welcome, if not more so. As Mr Lynch quoted in 1969, “It is your journal. Contribute to it if you are able, praise it if it serves you well and criticise it if you must. By these actions you can help to make the journal a live force in the progress of the profession.” His words are as valid today as they were 50 years ago. You can see look into the past 50 years of Accountancy Ireland here.

While time management is important, attention management is how you make sure your priorities stay prioritised. Moira Dunne explains how you can make your productivity soar by identifying what is stealing your attention. Most people I know in business have very good time management skills. They set out their goals, prioritise their work and make a daily task list to get things done. In days gone by that was enough. Forward planning meant that work could be scheduled into the time available. By and large, an organised person could get all their work done quite routinely. However, those time management techniques were designed for a business world where people had control over their time. Blocks of uninterrupted time were easier to find and, in general, the plan for the day could be completed as expected. It was a business world without email, mobile phones, iMessage, WhatsApp, apps and social media. Technology has completely changed our work environment. Constant communication brings a steady stream of new requests and ever-changing deadlines. So allocating time to a task doesn’t mean it gets done. As soon as we check our email in the morning, our task list is already out of date, and when everything seems urgent, it is impossible to stick to our priorities. The steady stream of requests comes with an expectation of almost instant response time. So we generally work in a reactive, responsive mode. This is great for customer service and team cooperation, but it’s not conducive tor the achievement of plans and goals. Ultimately, the focus becomes less strategic and more operational, and business growth is affected. Attention management Right now, time management techniques have never been so important, but we have to supplement these techniques with skills to manage our attention. You have to ask yourself: how good are my attention management skills? Here are some tips on how you can become more aware of your attention and how to manage it. 1. Understand your attention Do some initial work to understand where your attention is going throughout the day. To spot patterns, track who and what distracts you. Use a time log for a few days to get the data on this. Make a list of those attention stealers to remind you what to avoid. 2. Protect your attention We often feel obliged to respond to new requests, emails and interruptions. It can be hard to say no to your customers or your colleagues. But we often end up working on something that has a lower priority than the work we planned to do. Empowerment over your time can give you the confidence to make decisions about client and office engagement. Decide on a reasonable request response time and communicate that to your clients and co-workers. It’s also important to ask yourself what tasks you’re doing that are outside of your specific role and priorities. With this knowledge, it can be easier to say no to others in the office. 3. Develop the right environment If you run your own business or manage a team, take a look at how easy or difficult it is for people to focus. Is there a noise level that can be improved? Can you work together to give each person some uninterrupted time throughout the week? Encourage people to focus on one task rather than multi-tasking. If your business allows it, turn off the phones at least some of the time. Provide a quiet room as a contrast to the open-plan office. Offer your office to your team when you are not there. Allow the use of noise-blocking headphones if it doesn’t compromise your service delivery. Above all, be creative. Come up with your own solutions for attention management that will suit your business. Be proactive, take control and be productive Let’s give some time to attention management. It is one of the most important business skills in today’s workplace. Combine this with the classic time management techniques and watch your productivity soar. Moira Dunne is the Founder of beproductive.ie

By Dawn Leane If the thought of networking brings on a cold sweat, you’re not alone. For many women, networking is a challenge. It’s not the activity of networking itself – research shows that women are at an advantage in this area. However, it’s the concept of networking that women often find uncomfortable. Networking is one of the most dreaded developmental challenges that female leaders must address, especially as most senior leadership roles are still filled by men and it’s hard for women to find others in the same position at an event. Regardless, networking is one of those things that we know we ought to do, but never quite get around to. We tend to see it as – at best – a poor use of time, or – at worst – self-serving and inauthentic. Yet, creating and maintaining a network of influential people is essential for success in business. Networks are key to hearing about role opportunities, advances and developments, and introductions and business opportunities in your sector. Connecting and communicating with a wide range of stakeholders is not a distraction from the ‘real work’ but actually at the heart of a leaders’ responsibilities. Simple mistakes Qualifications, experience and reputation will only take you so far. When you need someone to go the extra mile – to make an introduction, recommend your business or take a leap of faith – they must know you. In business, people do not extend trust easily. Even those who describe themselves as networkers make some basic errors. Things like: failing to be strategic; building networks of people like themselves; building narrow and deep networks; and failing to follow-up. Reframe your mindset The good news is that everyone can learn to network well. Networking is not just for extroverted people; some of the most successful networkers I know – the super-connectors – are introverts at heart. The key is to be strategic and intentional. If I could offer just one piece of advice to those who hate networking, it would be to reframe the exercise and adopt a new mind-set. Stop using the word ‘networking’ and, instead, think of it as building your guiding coalition. Reciprocity is key Don’t think about conferences and events as the places to start networking: the best connections are with people with whom you share an interest. View every meeting and every conversation as a potential contact. Most importantly, don’t think about what you need from your network: think about what you can offer. When we take every opportunity to give to our network (whether we need help or not) it stops feeling like networking. As the golden rule of networking is reciprocity, those you helped will look for opportunities to help you in return. Build first Finally, it is crucial to build your network before you need it. If you’re about to apply for your ideal job, become self-employed or grow an existing business, that’s not the time to start building your network. That’s the time to leverage it. Dawn Leane is Founder of LeaneLeaders. She will be teaching a course: Networking for women who hate networking.

Ever gotten a group together to brainstorm and felt like it was a waste of time? Anne Byrne feels your pain. She provides some practical tips to banish the brainstorming blues and to make your next brainstorming session more effective and innovative. I have a confession to make: I hate brainstorming sessions. I often find them unproductive, a bit chaotic and leave me wondering – what was the point? I used to think this made me a lousy innovator. Surely, brainstorming was the epitome of innovating? Lots of people in a room, coming up with lots of ideas – that’s innovation, right? As time has gone on, and I’ve learned more about innovation, I’ve come to realise two things: Brainstorming isn’t innovation, but it is an essential step in the innovation process. Brainstorming isn’t bad; it’s often just not done right! So, here are my tips for better brainstorming, learned from my own mistakes and experience. Tip 1: I wouldn’t start from here... Getting lots of people in a room and writing down loads of ideas isn’t productive unless those people understand the problem at hand and user's needs. Too often we rush to brainstorm when we haven’t entirely defined the problem. We need to understand the issue at hand before we start. Next time you’re thinking about holding a brainstorming session, take a moment to think about whether it’s the right time to do so: do you and the team understand the issues and trends? Have you articulated the problem? Have you spoken to the impacted users? Sometimes it’s a matter of timing. If you can get the groundwork done first, you’ll find brainstorming more productive, relevant and engaging. Tip 2: Stay quiet! I’m one of those people who will rush to fill any silence in a room – but one of the things that I’ve learned is that sometimes I need to zip it. Silence in brainstorming is powerful. Five or ten minutes of silent thinking and idea generation at the beginning of a brainstorming session works wonders. It allows people who may be more naturally introverted to gather their thoughts and more actively participate, and for more ideas to be generated, and it avoids the group getting sucked into “group think” around the first few ideas thrown into the ring before anyone has fully thought them through. Tip 3: Bold is beautiful To be truly innovative, we need to be bold, to put forward the big ideas that seem a bit scary or silly. Many innovations sound ridiculous or unfeasible when first pitched. The innovation process is about taking the big, bold, ludicrous ideas and refining them to make it work. Sometimes, we filter ourselves, and therefore limit the ideas that put forward when brainstorming. We are afraid of being criticised or ridiculed, so we stay in the safe zone.The challenge is to silence that inner voice; the one that tells us to play it safe or stay quiet. Taking a bit of time at the beginning of a brainstorming session, or at the formation of an innovation team, to focus on establishing trust is essential. Simple measures, like developing a team charter of behaviours or conducting an ice-breaker designed to build trust, can make a big difference. Tip 4: Be ruthless! Too often I’ve left brainstorming sessions with a wad of post-it notes, but no real idea what any of them mean, and too many ideas to feel like I can do anything useful. Brainstorming is itself a process: step one is creating lots and lots of ideas free from constraints, but step two is to whittle these down and start to tease them out further. By narrowing down your ideas, you can focus on developing the strongest ones. Tip 5: Let go Letting go of ideas is hard, so how do we do it? Set some rules and limits, apply them in a fun way, and do so in an environment of trust. Fostering psychological safety in a group is a key factor for letting go. People need to understand that it is an idea that is being rejected, not the individual who came up with it. A team that can trust and let go together can also foster critique and challenge ideas constructively.  Anne Byrne is the GovLab lead in Deloitte.

After a bout of bad governance in charities and not-for-profit organisations in Ireland, trust in the sector is at an incredible low. For charities to continue their work, they need to build back the public's confidence. Diarmaid Ó Corrbuí explains how accountability and transparency can achieve that goal. Only 50% of the public trusts Irish charities, according to recent research by nfpSynergy. This is below the level of trust in our schools (74%), the Garda (62%), the EU (55%) and the civil service (53%). Some consolation might be taken from the fact that trust in charities was above that of the banks (41%), but our banking institutions are on the long journey of trust-recovery after the banking failures 10 years ago. Back in April 2012, charities were getting a trust score of 74% but they fell to a low of 43% in November 2016 after the fallout from the Console scandal, and upward progress has been ever since. Charities need to continually work on generating and building back public confidence. Major failures in corporate governance by charities, such as Console and not-for-profits like the Football Association of Ireland, are extremely damaging for the sector as a whole, particularly given the criticality of public trust for charitable organisations and their sustainability. Restoring the public trust To restore and build public trust, charities need to be strongly committed to the principle of accountability and transparency – one of the six core principles in the new Charities Governance Code. Grappling with change and implementation of a new governance code is not always easy, especially with limited resources. The Charities Regulator itself has said that 2019 will be a year of learning before registered charities are expected to fully comply with the Code in 2020, or report on it in 2021. Taking the steps to apply the six principles of the Code will make its implementation – and, in turn, building the public trust – that much smoother. Luckily, there is a good range of guidance available from the Charities Regulator that can assist, as well as a number of resources from other organisations (e.g. Carmichael, The Wheel, Chartered Accountants Ireland, etc.) that can help charities develop and embed good governance practices. Charities could also consider entering the Good Governance Awards. Investing time and effort in such an initiative can really build the public’s confidence while showing the charity’s commitment to improving its organisation’s accountability and transparency. The charity and not-for-profit sector has long been an important backbone of our society and communities across Ireland. The selfless desire to help others is core to what they do as trustees, volunteers and staff working in the sector. Through good governance and transparency, those within the sector will earn back the trust they deserve. Diarmaid Ó Corrbuí is the CEO of Carmichael. Carmichael established the Good Governance Awards for Charities and Not-for-profits in 2016. The 2019 awards are now open for entries, closing date 13 September. For more information, see the awards website at www.goodgovernanceawards.ie.

While cybercrime tends to hog the headlines in this digital age, low-tech fraud continues to be a risk for most organisations, says Teresa Campbell. Virtually all business owners encounter fraud at some stage. While technology enabled scams like invoice redirection and telecom fraud tend to grab the headlines, traditional low-tech scams have not gone away. Here are some common examples of low-tech fraud, along with some tips on how to guard against them. Payroll fraud Payroll fraud can be very costly, especially if issues go unnoticed for a long period of time. Some examples of payroll fraud include: Staff members lying about hours worked or commissions earned; Payroll operators keeping a former employee on the payroll and diverting the salary to their own account; and Staff members asking for a pay advance and not repaying it. Having good internal controls with robust approval procedures that are consistently applied, along with checking payroll reports to verify payments, can help protect your organisation against payroll fraud. Expense account fraud There are various ways in which a dishonest employee can fiddle business expenses – from submitting forged receipts to double-claiming for expenses, or staying in cheap accommodation but submitting expenses for an expensive hotel. Again, the best way to protect against this type of fraud is to implement appropriate checks and approval procedures before reimbursing employee expenses. Theft Theft doesn’t always involve loss of cash. Misuse of company facilities such as photocopying or taking stationery for personal use, inappropriate use of company vehicles, theft of customer information, stock or intellectual property are all examples of theft that can cost your business money. Regardless of whether it’s situations like these, or stealing from petty cash or messing with accounts, theft by employees can be very difficult and time consuming to deal with. As is always the case, prevention is better than cure. Strong policies and good communication can help prevent problems arising. Employees should be aware of your expectations regarding honesty and integrity, your disciplinary code, and the consequences of failing to adhere to company policies. Supplier fraud This can occur where a supplier invoices for an amount in excess of the agreed price for a product or service. Supplier fraud sometimes involves collusion with an employee. For example, where VAT is paid to a non-VAT registered supplier or an employee accepts an inducement from a potential supplier. Implementing robust procurement procedures is the best way to protect your business against these types of fraud. Customer fraud Customers can attempt to defraud your business by claiming that a delivery has not arrived or that a product is faulty, returning a product that they did not purchase from you or even attempting to return a product that they stole from you. While it is difficult to eliminate these types of fraud, policies such as requiring receipts can help to protect your business. Other ways to protect against low-tech fraud Depending on your business, there are various other tactics you can use to spot problems and defend against fraud. These include: Daily/weekly bank reconciliations; Robust approval/authorisation procedures for payments; Security training for staff; Shredding confidential waste paper; and Controlling visitors entering your premises, e.g. requiring them to sign in at reception. Think about where the fraud opportunities exist in your business as this will help you work out what protective measures need to be put in place. It’s a good idea to seek professional advice as there can be potential pitfalls in areas such as breaching privacy rights or failing to comply with legal requirements. Teresa Campbell is the People and Culture Director at PKF-FPM Accountants Limited.

The structural changes to the EII Scheme proposed in Budget 2019, which took effect in January, led to a significant increase in investor interest in EIIS funds. Terry McGrenaghan explains the changes to the scheme and the impact on investors and investees. For three decades, the Employment Investment Incentive Scheme (EIIS) (originally the Business Expansion Scheme (BES)), has provided a vital source of alternative (non-bank) funding for businesses in Ireland. Despite many welcomed reforms to the scheme in recent years, the application of certain EU State Aid rules (GBER) has led to increased complexity, resulting in administrative delays for both investee companies and investors. Budget 2019 proposed significant structural changes to address these issues and streamline the scheme to reaffirm the EIIS as an effective tax relief for investors and a vital source of funding for SMEs. EIIS past and present Since its inception, the EIIS has mainly proved consistent in terms of its offer to qualifying SMEs and investors. Investee companies enjoy an alternative source of finance with no capital repayment until the end of the four-year investment period with the advantage of the investment being equity rather than debt. This coincides with investors receiving an all-income tax shelter for their investment, allowing individuals who have sufficient income tax taxable at 40% to obtain tax relief up to that level. Historically, the EIIS operated on a pre-approval basis, which involved a qualifying company submitting an application to Revenue for review which, in turn, issued tax relief certificates to investors. With the increase in complexity came delays and an inevitable backlog of applications. To address this, Budget 2019 updated the scheme to operate on a self-certification basis, which now requires qualifying companies to self-certify and issue tax relief certificates or statements of qualification directly to investors to enable a claim for tax relief. If required, a company may still apply to Revenue for compliance confirmation but only in relation to specific aspects of the legislation. In addition, investors are now issued redeemable preference shares rather than ordinary shares, which should provide for a more structured exit mechanism and greater security throughout the investment period. These changes to the scheme have recalibrated the EIIS for the opportunity ahead, and both investors and investee companies should be looking closely at how this proven source of funding can play a central role in their financial planning. Opportunity With the Irish economy now the fastest growing in Europe, progressive and innovative SMEs will continue to look at alternatives to traditional funding sources as they develop their growth plans. For example, the 2018 Davy EIIS Fund has raised over €11.5 million and continues to experience significant demand from ambitious companies seeking funding. It is interested in companies with strong growth potential, a well-defined market strategy, and potential to realise the investment after four years along with a capable and industry experienced management team. It’s a prime time for SMEs to look into these funds to grow their future. Terry McGrenaghan ACA is an Assistant Manager with BES Management DAC, the fund manager of The 2018 Davy EIIS Fund.

Since the turn of this century, the accountancy profession has undergone exponential development and evolution. Not so long ago the stereotypical view (rightly or wrongly) of an accountant was of a dull, old, grey-haired man (not a typo!) crunching the numbers in a back office. Expectations were low; these accountants were not ‘people people’. They probably didn’t interact with customers. They had limited contact with other departments within organisations. Decision-making and the setting of the strategy was not the role of the accountant but of the sales and commercial team, which was the driving force in most organisations. Fast-forward to 2019, and there are some interesting facts concerning Chartered Accountants. Consider this, from the Institute’s 2018 Annual Report: Eight of the top 10 Irish companies have a Chartered Accountant as either CEO or Chief Financial Officer; 41% of the roughly 27,300 members of Chartered Accountants Ireland as at 31 December 2018 were aged 37 or under; 64% of the membership work in business with further analysis of the membership suggesting that roughly 700 are CEOs, 900 are business owners, and 2,800 are directors; and At 31 December 2018, women constituted 41.5% of the membership. Chartered Accountants are business leaders. Accountancy practices are recording unprecedented growth rates in both fees and employee numbers. So, what has happened in the last 20 years that revolutionised our profession and how we are perceived? A few key drivers have changed the skill set of the successful accountant: The impact of technology on record-keeping; The effect of technology on how we do things; The availability of data; and The expectations of clients/stakeholders. The impact of technology on record-keeping It is no secret that technology has changed the nature of accounting. The transition from the manual capture of transactions to the use of computerised application packages is one of the most significant changes in recent years. I remember my first assignment vividly as a trainee accountant. I had to prepare an organisation’s year-end financial statements.  The process went as follows: Record purchase and sales invoices manually onto a paper-based sales and purchases ledger daybook; Record all the payments made during the year by manually writing up all payments in the paper-based payments ledger using the cheque stubs; and Manually prepare a bank reconciliation, and so on and on. I wrote everything in pencil: no typing, no Excel formulas – all manual. One mistake in totting and I had to start over. My trainee days were not all that long ago, and it has been exciting to observe the changes in record-keeping in the intervening years. The accountant has evolved from a data processor to an analyst. Mundane processing no longer consumes his or her time, allowing the accountant to step out of the detail and begin to analyse, interpret, question and provide insights thereby meeting the current expectations of the accountant. While technical ability is still an assumed skill, analytical and problem-solving skills are now a standard requirement on any job description for an accountant both in practice and business. The form of examinations for trainee Chartered Accountants has changed in recent years, particularly at FAE level, to meet this expectation of our qualified accountants. The exams, through case study scenarios, reward students for their ability to apply technical knowledge to given situations and resolve problems identified rather than just regurgitating memorised material.  The effect of technology on how we do things In recent years, there have been significant changes in how we “do” our work (outside of record-keeping, as set out above) with advancements in technology. Basics such as email and social media have enabled easier and quicker communication and information flow. Take the audit profession as an example, which has transformed in the last decade due to an increased focus on technology in audit methodologies or simply as a tool to collate our audit documentation. It is impossible to avoid the phenomena of blockchain, robotic process automation (RPA) and artificial intelligence. All these have begun to change how we do things, but more is to come as these technologies start to unfold and usage gathers pace. RPA, for example, automates high-volume, low-complexity administrative tasks.  The use of RPA will not replace the entire job of the accountant, but it will save time in performing specific basic tasks which, as alluded to earlier, will allow the accountant to concentrate on analysing and interpreting data rather than producing it. The spread of digital technologies and their impact on business has transformed, and will continue to transform, accounting and the competencies that professional accountants require. Accountants will need to be technology-aware and embrace technology as part of their day-to-day work. 57% of those members who completed the Chartered Accountants Leinster Society Annual Salary Survey 2018 believed that automation would have a positive impact on their career. 40% felt that the same was true for artificial intelligence. Judging by these statistics, we possibly have further ‘embracing’ to do. The availability of data With the increased use of technology also comes a vast increase in data. Accountants are now required to decipher large volumes of data promptly and be capable of summarising and presenting that data in an understandable manner for the end user, often non-accountants. Presentation skills are, therefore, another critical capability. Data analytics is now an industry in its own right, with many of the larger accountancy firms employing hundreds of analysts to assist their accountants in analysing and interpreting data. 51% of members who completed the Chartered Accountants Leinster Society Annual Salary Survey 2018 believe big data will have a positive impact on their career. The expectations of clients/stakeholders With the advances in technology and the ever-changing world of business, the expectations from our clients and stakeholders have changed. We are no longer assumed to be in the back office processing but instead on the front line advising and challenging the status quo. Communication and interpersonal skills are no longer ‘nice to have’ qualities. They are now required competencies for successful accountants. The building of relationships with our clients and stakeholders is vital as we make that transition from back-office operatives to front-line advisors. Conclusion Technology will continue to influence the work of accountants into the foreseeable future, and application of existing and emerging technologies will be necessary. Technology should, therefore, be embraced and not seen as a threat. The role of the accountant will continue to be exciting and challenging. Technical ability will become an assumed skill alongside other skills such as analytical skills, problem-solving skills and presentation skills. These will become the ‘must have’ skills for the successful accountant of the future. Brian Murphy is Director, Audit and Assurance, at Deloitte and incoming Chair of Chartered Accountants Ireland Leinster Society.

Here are the 14 ways Chartered Accountants and the wider profession are likely to evolve into the future. In 1996, chess grandmaster Garry Kasparov was famously beaten by IBM’s supercomputer, ‘Deep Blue’. This event was heralded as the real dawn of the age of artificial intelligence (AI) and the beginning of the eclipse of human intelligence. Kasparov sees it differently. He believes that while the rise of AI heralds a change, this change will not see human intelligence becoming redundant. Instead, AI will “help us to release human creativity. Humans won’t be redundant or replaced; they’ll be promoted.” Kasparov’s vision is one where machines and humans work together to create smarter tools, and where human work will evolve and adapt to open up new careers and industries in fields that are yet to be invented. Although machines won’t replace humans, the impact of technology on the accountancy profession will be significant. Many reports have trumpeted the imminent arrival of new and powerful learning machines that will replace accountants. While accountancy remains one of the occupations liable to disruption, the future is less dramatic with a transformation of the role and impact of accountants more likely than wholesale replacement. Here are some of the changes we can predict. 1. The gig economy The concept of the ‘job’ is fundamentally changing with professional service firms increasingly utilising flexible resources such as contingent workers and freelancers. Platforms such as Upwork.com allow professionals to sell their services to a global audience. According to Forbes, there were 53 million freelancers in the US in 2016. By 2020, this will rise to 50% of workers (this does not mean they will be full-time freelancers, however). 2. No-code AI  Software engineers and data scientist are expensive and in demand, but a new generation of technology is emerging. No-code AI will remove the need for engineers, making AI far more accessible. Some tools, such as Lobe.ai, use simple ‘drag and drop’ interfaces while others require no more technical ability than that needed to create a simple macro. These tools will enable skilled but not specialist users such as accountants to develop fully automated scripts with no coding know-how required.   3. The end of reconciliations  The good news is that the end of reconciliations is in sight with the rise of distributed ledger technology. Blockchain is one such technology and is probably most associated with cryptocurrency. One of blockchain’s most exciting aspects is that it is immutable, meaning a blockchain ledger will be permanent with an unalterable but transparent history of all transactions. Each verified transaction is timestamped and embedded into a ‘block’ of information, cryptographically secured and joined to the chain as the next chronological update. Blockchain’s applications potentially include decentralised digital, secure identity systems; the verification of qualifications through personal ‘skills wallets’ and reliable records of property ownership. Another new application already happening in real estate is tokenisation, which, as the name suggests, is the representation of an asset or equity in token form, which can be fractionally divided and held. A tokenised property would be similar to a real estate investment trust (REIT), but more flexible and low-cost due to the reduction in intermediary fees. 4. No more late night month-ends As processes are automated and systems post data from several sources, consolidate and reconcile it, month-end cycles will become far quicker and more accurate. 5. The end of sample auditing Audits will become more efficient and accurate as the audit of 100% of companies’ financial transactions becomes possible instead of a sample. AI will provide unique insights and a complete view of the financial health of the company, uncover fraud, highlight inefficiencies and provide further value from the audit. 6. Drones and robots  Amazon is already embracing using robots in its warehouses and testing drones for customer deliveries. Power utilities use drones to survey their lines while surveyors use them for mapping terrain. Just this year, PwC used drones during the audit of RWE, a German energy company, to measure stock, including coal reserves at a power station in Wales. 7. From compliance to insight Technology will simplify many processes and augment our human capabilities. Over the next 20 years, there will be less focus on technical skills alone and a higher requirement for critical thinkers and those who can provide insights. Clients will likely prefer to deal with a human over a robot, and Chartered Accountants will have the opportunity to become a financial storyteller by bridging the gap between computers and the business. 8. Real-time, self-service data Cloud technology has made accounting software accessible to non-specialists on any device and in any location. Information is available in a format that most business owners can finally understand. As this becomes the norm, the role of the accountant will be to give peace of mind, to provide reassurance, and to act as a sounding board. He or she will also be someone who understands the capabilities of the technology, can ask the right questions, and can find the right solutions. 9. Lifelong learning will become an imperative Speaking at this year’s Influence conference, Ravin Jesuthasan, a thought leader on the future of work and automation, spoke about the impending changes to work. He said that while “we don’t know what is coming, we need to keep retooling ourselves”. We must change our mindset, he said, as the old model of ‘learn, do, retire’ is replaced by ‘learn, do, learn, do – repeat’. In this situation, lifelong learning is no longer optional; it will be necessary to remain relevant and employable.  10. The pyramid is collapsing  The familiar pyramid-shaped organisational structure will change. Traditional entry-level roles are unlikely to be needed in the same volume as routine tasks become automated. Conversely, the requirement for qualified staff is likely to increase. The challenge for organisations will be balancing these needs: how to train and develop individuals to the required level with fewer entry-level positions. The question for educators and those entering the workforce is how to bridge this gap effectively. 11. Thinking differently  While technical skills will remain crucial, a premium will be placed on soft skills, which are the skills that differentiate us from robots. Emotional intelligence, presentation skills and critical thinking will become even more valuable in the years ahead. 12. Chatbots and decision-making Instead of diving into CHARIOT for technical information, accountants may have a unit on their desk – think Alexa or Google Assistant – which will be there to answer questions instantly. We could also see AI take a role in the review of complex documents so that, rather than spend hours poring over a 500-page contract, a machine will scan a document in seconds and determine whether it contains compliance and risk issues, for example. 13. Planning cycles will contract Speaking at the Influence conference, Valerie Daunt, Human Capital Partner at Deloitte, said: “Long-term plans are gone”. Instead, organisations must be able to change course quickly. To underline this point, Standards and Poor’s recently reported that the average lifecycle of companies is shrinking, with the average lifecycle of companies on the S&P 500 expected to be just 12 years by 2027 – down from 33 years in 1964. 14. The changing nature of the workforce The workforce is fast becoming more diverse, more international and with different values. Today, over 20% of the Irish population was not born in Ireland, and this rises to 33% of the working-age population in Dublin. Attitudes are changing too – one recently published survey found that 60% of workers are willing to take a pay cut to work in an empathetic company, while 35% said they would consider taking a reduction in salary in exchange for more annual leave. It was also reported that 50% of millennials would take a pay cut to work for a company that matches their values and that this cohort values “experiences over stuff”. Joe Carroll is Head of Professional Development at Chartered Accountants Ireland.

Networking is a discomforting prospect for many, but don’t wait until it’s too late to start.   Experts tell us that strong professional networks are essential to career development. Knowing the key players in your sector and being seen at professional events gives you a competitive edge in today’s fast-paced recruitment market. But there is no denying that for some of us, networking isn’t at the top of our must-do lists. It is awkward, draining and time-consuming. Making small-talk with strangers doesn’t come easy to everyone. Yet, research tells us that the most connected people are also the most successful. Being connected means investing in relationships. When we are happy at work, we tend to disconnect from wider networks. We invest in the relationships that are closest to us. We reconnect to these wider networks when we are thinking of advancing in our career. This is one of the reasons why networking is a discomforting prospect. Networking tends to be something we associate with our time out of the office and with job hunting. Networking when we need something plays tricks with our mind. We are at a psychological disadvantage when we network – we tell ourselves that our colleague’s time is more valuable than ours; we need them more than they need us. There may be some truth in that if we only network when we need a new job or some new connections. So, the best way to think about networking, or the best time to network, is when we don’t need to do it. Cultivating relationships At its simplest, networking is about developing relationships – building, fostering and developing a professional group of colleagues. The important aspect of networking is the fostering and developing piece. If we forget to do this when we are in employment, it becomes even more difficult to reconnect when we want to change career. Individuals cultivate relationships throughout their careers and investing in your professional network when times are good provides benefits when you need them in the future. So, how can you extend and develop your network? Welcome new hires Welcoming new co-workers is the easiest networking task. You have a wealth of information about how your organisation works. Offer some recommendations for local coffee shops and lunch spots. Offer to take your new colleague to lunch in their first week and ask about their experience. It doesn’t need to be more than this. You have met a new colleague and you may have lots in common or very little. If nothing else, you have practised the art of having conversations with strangers. Use LinkedIn  Almost everyone has a LinkedIn page, but most people don’t use it strategically. Update your profile and make it authentic, relevant and compelling. Assume that people will check you out on LinkedIn before talking to you in person. Make direct connections to people with whom you want to network and don’t forget to personalise the invitation. Ask your contacts for personal introductions to their contacts that are relevant to your search. Do lunch Yes, I know you eat lunch every day but how many of those days are you eating alone or with the same friends? Make an effort (say, twice a month for starters) to invite somebody you don’t know very well to join you for a sandwich and a chat. Or, if there is a common lunch area in your workplace, join a conversation and practice your small talk. Networking doesn’t have to evoke fears of warm wine and excruciating conversation, but it does need to be practised and finessed. Professional networks are an important feature of career development. The best way to build and develop them is to make them an ordinary aspect of your professional life, most particularly when you don’t need them. The first step may be as simple as sharing a sandwich with a co-worker.   Dr Annette Clancy is Assistant Professor at UCD School of Art, History and Cultural Policy. Annette’s research focuses on emotions in organisations.

Past issues of Accountancy Ireland have examined the transformative effect of technology on how we work, but what about the impact of technology on workplace culture? Technology is not only transforming the way we work; it is also changing how we work together. As technology companies flocked to Ireland to take advantage of the talent pool, they also introduced many new perks such as on-site gyms, free food and festival-style summer parties to name but a few. How can small and medium-sized enterprises (SMEs) and the start-up community compete with such perks when it comes to attracting and retaining talent? In this article, I examine some of the ‘smart working’ initiatives deployed by companies to win the war on talent. Flexible working arrangements Today’s workforce is now more connected than ever. With the promise of 5G on the horizon, this connectivity is only going to improve. As long as we have an internet connection we can, therefore, work from any location on the planet. Removing the need to be physically present in the office enables employers to introduce flexible working arrangements. Remote working, for example, has increased in popularity over the last few years. There are many benefits for both employees and employers, such as cost savings and increased productivity. Utilising collaborative working tools such as G Suite or One Drive enables individuals in different locations to work together and, should they need to meet as a team, video conferencing makes that possible. Some business leaders still struggle to get comfortable with the idea of their employees working remotely (i.e. from home). This mindset tells your team that you don’t trust them, and it needs to change. Otherwise, employees are more likely to seek employment with an organisation that offers remote working. Many organisations also afford their employees the flexibility to set their working schedule provided employees work a minimum of 37.5 hours per week. How those hours are completed is the responsibility of the employee. This flexibility enables employees with a long commute to utilise that time as part of their working day. Organisational benefits There are many reasons why organisations should consider flexible working arrangements for their employees. They include: Higher output: organisations that focus on outputs, not inputs or attendance, tend to have a highly engaged and efficient workforce; Attract talent: traditional rules on office hours and attendance serve to limit the talent pool available to organisations. In a fast-changing world that requires a high degree of specialisation, flexible working arrangements can attract more talent; Employee retention: employees who feel more empowered and trusted with their working day will be loyal to the organisation that gives them the flexibility they desire; and Sustainability: organisations can do their bit to help save the planet. If employees who drive to work each can work from home at least one day a week, this will reduce carbon emissions. Unlimited annual leave Netflix led the way when it introduced an unlimited annual leave policy, with many organisations now choosing to adopt this policy as a means of attracting and retaining talent. Whenever I mention this to business leaders, the word “unlimited” brings fear to their eyes. It is a bit misleading; it would be more apt to describe it as a ‘take what you need’ annual leave policy. The overall aim of an unlimited annual leave policy is to create a results-driven culture of trust. The intention is not for employees to take weeks or months off work without proper notice and approval. However, it does remove the need to track annual leave, overtime and time owed in lieu. Employees can benefit from being able to easily take time off for personal needs, such as medical appointments or school visits. They will also be less likely to call in sick because they can take breaks when needed. This flexibility, if set up correctly, can help increase employee engagement and improve efficiency. The Don Draper clause The latest talent-attraction trend is to add a provision to employees’ contracts so that employees regularly receive a strange, funny or creative personalised gift paid for by ‘The Don’. The clause, which is negotiated by the employee, can include chocolates or vouchers. It could also include a day off work for the employee’s birthday, spa days or rollercoaster rides. Check out #DonDraperClause on Twitter for some inspiration. The thinking behind this trend, which has been around since 2014, is to reward employees and make them feel part of an organisation that treats them well and as human beings. Conclusion From the trends emerging from the tech and start-up community, one critical thing is the importance of treating employees as individuals, not as a resource.w Organisations need to stop using phrases like “our employees are our greatest assets”. They should instead focus on the individual if they genuinely want to create a workplace culture that is fit for the future. Michael J. Walls ACA is the Founder and CEO of Dappr and the 2018 Young Chartered Star. A new world of work A variety of emerging workplace trends can now be seen in non-tech environments. Here are five of the most notable developments: Ditch annual appraisals: back in 2014, Deloitte reported that only 8% of companies believe that appraisals are worth the time and effort devoted to them. So why are we still doing them? New approaches under consideration include a move towards employee-led coaching and mentoring, which is less formal and enables real-time feedback on performance. Bonuses aren’t the only way to reward employees: organisations are beginning to reject traditional bonus schemes in favour of reward practices based on a different set of assumptions. Bonuses now have an element of surprise. They are timely and based on what people value and want, and they are personal and not always about money. Chill-out area: modern offices are now setting aside space to encourage employees to take micro-breaks from work. The chill-out space is a designated relaxation area where employees can unwind. Usually furnished with soft seating like cushioned chairs, bean bags and sofas, it should be a stress-free zone and not merely a more comfortable seating area for high-powered business meetings. Digital learning: employees can get additional training from anywhere with the emergence of online learning. Tools such as LinkedIn Learning or the Institute’s online CPD courses enable employees to access courses from anywhere to learn a new skill or keep up-to-date with the latest CPD. Diversity and inclusion: it isn’t enough for organisations to tick boxes on their diversity checklist, ensuring that they have the desired quota of minorities for reporting. The inclusion part is now more critical than ever. I for one am delighted that employees and society are now ensuring that organisations follow through when making statements regarding diversity and inclusion.

Accountants involved in preparing financial statements can expect increased scrutiny and challenge of their accounting estimates from their auditors. I suspect that most accountants would agree that non-accountants believe the numbers in financial statements are more precise than they really are. Accountants, on the other hand, are much more conscious of the level of estimation that goes into many of those reported numbers. I must admit I didn’t become aware of the level of estimation involved until I entered the real world of auditing and accounting. I certainly don’t recall gleaning it from my accounting lectures or from the texts I read for my exams. I spent many long days patrolling the aisles and shelves of warehouses and stockrooms torturing myself about the best estimate of just how much could be realised from excess and out-of-date lines of inventory, conscious that they had to be written down to their estimated selling price less estimated costs to complete and sell.   What followed was long hours quizzing credit controllers while worrying about whether the 5% bad debt provision was the best estimate of the extent to which the amounts due from customers would not be collected, and whether the credit controller was too optimistic or too pessimistic. Estimating the useful life of buildings and plant is key to the depreciation charge, an area of estimation where you might think an engineer would be more qualified than an accountant, though a futurologist might be better when it comes to the question of technological obsolescence. On the liabilities side of the balance sheet, significant judgement is applied in estimating the amount of defined benefit pension obligations, including mortality and inflation assumptions, as well as assessing the likely outcome of legal claims and court cases, where the assumption about success or failure can be critical to the numbers included in the financial statements. These are the some of the traditional areas of estimation uncertainty an accountant needs to consider. And, all of this was before the challenge of estimating value in use and fair values poked its head into so many areas of accounting.  The implications of the new auditing rules for accountants in business So, why is it appropriate to focus on estimation at this point? Well, since the issue of IFRS 9 and its emphasis on expected credit losses on loans and receivables upped the ante on estimation still further, auditing standard setters have seen fit to upgrade the rules on how to audit all types of estimates. Inevitably, as auditors direct more attention to estimates, accountants in business involved in financial reporting will feel the heat of incisive questions from their auditors as they apply the new rules to the myriad of estimates underlying the financial statements.  The Irish auditing standard setter, the Irish Auditing and Accounting Supervisory Authority (IAASA), issued its new standard on auditing accounting estimates (ISA 540) in late 2018 with mandatory effect for audits of financial statements for periods commencing on or after 15 December 2019. That may seem some time away but, of course, early adoption of the more demanding rules is permitted, and some auditors may consider it appropriate to apply the new rules early. The implications of this for accountants in business are likely to vary significantly depending on the auditor’s assessment of the risk that incorrect estimation may cause a material misstatement. Among the areas of particular focus in the updated ISA 540 is the requirement for the auditor to show adequate professional scepticism and to be on alert for management bias.  There is also a strong emphasis on the auditor documenting – in detail – the management estimation process, including the assessment of material misstatement risks. The level of subjectivity underlying these estimates, and the degree of estimation uncertainty, will affect the design and completion of this process. Of course, some auditors may have already been applying the new rules or, indeed, may have assessed that the new rules will not add to their audit effort. Accountants in business will wish to avoid any late surprises as a result of their auditor introducing additional audit procedures or placing increased demands on them. It is worth remembering, too, that the auditor will seek written representations from management on certain matters, including areas of accounting estimation, and will often report to the board or the audit committee on areas of judgement and estimation, both of which can take up more senior audit effort. Further, for many listed companies, the auditor’s report to the shareholders will explain how the auditor has addressed significant estimates. When the updated ISA 540 was being developed, many commentators, including some Irish auditors, had concerns that it might put an unnecessarily large burden on the audits of smaller companies. The final version of ISA 540 has attempted to allay those concerns by suggesting that the risk of material misstatement may be less significant in smaller companies with a consequent lower level of audit effort required. It will be useful for company accountants to be aware of where their auditor’s assessment of this risk lies along the spectrum and the consequences for the degree of audit effort required. Preparing to justify accounting estimates The degree to which the auditor decides it is necessary to devote effort and focus to the estimates can affect how accountants in business should prepare to justify their own estimates. That preparation might include more detailed documentation of the appropriateness of the estimates, the level of estimation uncertainty involved and the rigour of the internal control process surrounding the estimation process. This should help the auditor conclude on their reasonableness, and reduce the degree of effort spent drafting documentation they are required to complete.  For some complex or specialised areas of estimation, company accountants may wish to ensure that their auditors have the necessary skills or expertise to assess the reasonableness of the estimates to reach their conclusions promptly. This may arise in areas such as actuarial assumptions for pension obligations, valuation techniques for derivatives and unquoted financial assets, the likely outcome of legal claims and uncertain tax positions, and technical provisions in insurance companies, to name a few. Conclusion There is no getting away from the vital role that estimation plays in financial reporting. Consequently, there can be no denying the importance of the auditor’s procedures in auditing those estimates, notwithstanding the level of interrogation and challenge this may entail as the auditor seeks to conclude on the reasonableness of the estimates. Clearly, it is desirable that maximum co-operation between management and auditor is achieved by early communication, explanation and clarity on the level and type of audit work planned, and the degree to which management and accountants in business can enhance their documentation of the estimation process. After all, making accounting estimates is the prerogative of management, and management should have every opportunity to justify them to the auditors to ensure that the new, more onerous auditing rules neither add significantly to the cost nor disrupt the harmony of the audit.   Terry O’Rourke FCA is Chair of the Accounting Committee at Chartered Accountants Ireland. 

With increased pressure being placed on Irish plcs to improve their human capital reporting practices, Anthony Wall, Martin McCracken, Professor Ronan McIvor and Raymond Treacy look into why Irish companies’ reporting is coming up short compared to the UK.   For many years there have been attempts to place a value on an organisation’s employees, either for financial statements or for internal purposes. Despite a plethora of suggestions, no method has gained universal approval. More recently, though, the focus has switched from placing a value on an organisation’s workforce to understanding and leveraging human capital (HC) effectively. The term ‘human capital’ has been defined by Gary Becker, an American economist Nobel Prize winner, as the knowledge, information, ideas, skills, and health of individuals. In 2016, we developed a framework to ascertain the HC reporting practices of UK companies (see Table 1).  The KSA area includes items that employees need to participate effectively in the workplace, and, therefore, contains elements that an employee either brings with them when they start working for an organisation or that they can subsequently develop.  ‘HRD’ is concerned with how organisations develop and enhance the KSA of their employees.  ‘Employee welfare’ is the notion that the organisation will act as a good citizen, within its environment, and how well it treats its employees.  ‘Organisational justice and equity’ involves organisations treating employees in a fair and equitable way, and offering equal access to opportunities. This framework has been used to investigate the reporting practices of the 53 companies currently quoted on the Irish Stock Exchange (Euronext) by examining their latest annual reports. Any sentence within the annual reports containing the items listed in the HC framework was counted. Subsequently, the sentence count for each element was aggregated for all of the Euronext companies in order to analyse the current standard of HC reporting.  The overall sentence count for each of the four areas can be seen in Table 2 below.   The first thing to note is the relatively low sentence count for HC items. A study of the FTSE 100 companies in 2018 by the Chartered Institute of Personnel and Development (CIPD), ascertained that the total sentence count for UK plcs was 18,162, compared to the Irish 3,142. This works out at an average of 182 items per UK company to the 59 items for each Irish plc, a difference of 68%.  You can see that Irish plcs attach the most importance to HRD, followed by KSA, employee welfare and organisational justice and equity. Three Irish plcs did not report on any HC items, and 15 reported on ten or less. The highest overall sentence count for an Irish plc was 211.  KSA Of all the framework items listed, ‘leadership’ was the most reported item followed by ‘expertise’, with these two items accounting for 80% of all HC elements reported in this category. The remainder of the KSA items had relatively low levels of reporting, ‘flexibility’ in particular. Other related workforce flexibility concepts such as ‘entrepreneurship’ and ‘innovation’ also had low sentence counts. This is an important area in an era of flexible working arrangements. However, a study by the Economic and Social Research Institute  in 2018 found that Ireland lags behind the EU average when it comes to contingent employment (McGuinness et al, 2018). Therefore, it is perhaps not surprising that reporting levels are low.   HRD Table 4 shows that training was the highest reported HRD item, with ‘talent management’ and ‘succession planning’ in second and third place respectively. The high level of references to training is expected, as unemployment has decreased in Ireland to its lowest level in 10 years (Central Statistics Office, 2018). With more people re-entering the workforce, the demand for training programmes will be high. In terms of talent management, key skills gaps in certain areas of Irish business have emerged in recent years. Employee welfare ‘Health and safety’ made up over a third of the employee welfare items in annual reports. However, a reference to ‘ethics’ was fairly low. It was found that while Irish firms tended to report broadly on issues such as employee codes of conduct and whistleblowing policies, disclosures relating to specific ethical issues, such as corruption, bullying and harassment, were quite rare.  ‘CSR’ and ‘employee engagement’ both had reasonable levels of reporting but everything else in this category dipped into the one digits. However, one might have expected more references to employee wellbeing given the prominence of mental health awareness campaigns. Given the recent emphasis on diversity, the levels of reporting of this is not surprising (see Table 6). However, the relatively few referrals to ‘equality’ are unexpected. This low level of reporting may be down to firms’ tendency to report equality issues under the heading of ‘diversity’, as there is invariably some overlap between the two. Nevertheless, as Ireland now requires companies to report on any gender pay gaps, reporting in this area may improve.  ‘Employee rewards’ were also referred to quite frequently, while ‘human rights’ had fairly low levels of reporting even though EU legislation requires more reporting of such issues.     This study shed some light on the HC items that Irish firms value most, while also identifying areas where HC reporting can be improved. Compared to the UK, the disclosure of HC items by Irish plcs is quite low, and there was generally far less information included in the Irish companies’ annual reports. Irish firms could and should disclose more HC information. The lack of information provided suggests that the EU directive may not be enough on its own, and Ireland could benefit from amending its own 2014 Companies Act to encourage more comprehensive and in-depth HC reporting. Anthony Wall is a Senior Lecturer in accounting at Ulster University. Martin McCracken is a Research Director of business and management at Ulster University.  Professor Ronan McIvor is a Professor of operations management at Ulster University.  Raymond Treacy is a Research Consultant at Ulster University. The authors would like to thank the Chartered Accountants Ireland Educational Trust (CAIET) for funding this research.