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The professionalism within many boardrooms has improved considerably over recent years due to a desire to decrease risk and better awareness of best practice. Despite this, the role of the board of directors continues to be scrutinised by the public and regulators on a regular basis and, for some, the implementation of strong corporate governance arrangements is a never-ending pursuit. An effective board is more than a sum of its individual members. While each board member has seven general statutory duties (as set out in the Companies Act), the responsibility of the Board to set strategy, and direct and control the activities of the company for the benefit of stakeholders is much more onerous. In general terms, board accountability is about taking responsibility for all of a company’s activities and presenting a fair, balanced and understandable assessment of an organisation’s position and prospects to stakeholders. It is no surprise that the Boards of successful companies tend to have good governance arrangements and demonstrate strong corporate cultures in which Board accountability is a central feature.  Board accountability is well structured in listed companies. They must comply with the guidance for board accountability under the Corporate Governance Code and, while not mandatory for small and medium sized organisations, the Code could be a useful resource for SMEs to help managing risk and change behaviours. The Code is also becoming increasingly important for the public sector and not-for-profit organisations that strive to reduce risk and increase transparency. The first step towards accountability is to fully understand and determine the nature and extent of the risks within the organisation and to establish clear channels for decision making and communication. There are various methods to assess business risks and the process will vary based on the complexity and industry of the company. The second step is transparency. Transparency is key to accountability. Open, clear and honest reporting will help an entity build relationships with stakeholders including customers, employees and investors, and the annual financial statements allow the board to communicate the results for the year while also documenting their performance assessment.  Next, medium and large companies are required to provide a strategic report, in which directors present a fair, balanced and understandable review of positive and negative aspects of the development, performance, position and future prospects of the entity openly and without bias. This report should be consistent with the size and complexity of the business. It should contain key performance indicators (‘KPIs’) to aid an honest understanding of the company’s business for the period, and must also include the principal risks and uncertainties facing the company. Regrettably, this reporting obligation is often regarded by boards as a necessary task rather than a desirable one, with only minimum levels of disclosure provided. The report, however onerous a board might find it, should be comprehensive and clear but making sure to protect company information that may be commercially sensitive. Accountability needs to be embedded in an entity’s culture and subjected to review as an organisation grows, and the risk profile of the company and key personnel change.  A strong ethos of accountability, and applying principles for best practice, will undoubtedly serve to protect a director’s and a company’s reputation. With boards facing increased scrutiny from stakeholders, the time taken to improve board accountability processes will be a worthwhile investment. Emma Andrews is an Associate Director in Audit and Assurance in Grant Thornton.

The bedrock of commerce is the contract. Every single day, contracts are negotiated, signed and implemented by businesses across the world. Agreements between buyers and sellers of goods and services. Agreements to invest in, merge, and buy and sell businesses. Agreements to lend and borrow money and to insure against risks. One of the important parts of a contract is the bit which governs what happens if things don’t go according to plan and a dispute arises between the parties. If two Irish businesses are making an agreement, the dispute resolution clause will usually say that the contract will be governed by Irish law (“the choice of law clause”) and that any dispute will subject to the exclusive jurisdiction of the Irish courts (“the jurisdiction clause”). Agreeing that bit of the contract is usually straightforward when two Irish businesses are making an agreement. Where two international businesses are involved, however, the parties might choose a neutral law for interpretation of the contract and a neutral venue for litigation. Over the centuries, English law and the English courts have been popular and acceptable neutral provisions when international businesses are making agreements. The popularity of English law and the English courts has sustained a significant number of legal jobs in the City of London. One euro in five of all European legal fees is earned by law firms based in London. Since 2010, four court cases in five at the London Commercial Courts have involved at least one foreign party. Half of all commercial lawyers in Singapore, for example, identify English law as their preferred law when making contracts.  So where does Brexit come in, and how can Ireland benefit? On Brexit day, European law will cease to exist as part of the English legal system. Parties litigating in London will not be able to refer a case to the European Courts in Luxembourg. After Brexit, a judgment of an English Court will be more difficult to enforce in, say, France, compared to a judgment of an Irish Court. In summary, some of the benefits of applying English law since 1973 have arisen because the UK has been part of the EU – the most important business market in the world.  After Brexit, Ireland will be the only English speaking EU country which applies the English common law system. Ireland’s legal, accounting and courts system can offer international businesses the same benefits they are used to with the English legal system and with continued access, also, to EU protections and benefits. So what does this have to do with accountants? Well, first, the business side of commerce is usually handled by accountants (in my experience), i.e. agreeing most of the terms of the business relationship before the lawyers from both sides get their hands on the draft agreement to finalise it. If the business’ usual practice is to have contracts governed by English law, the fact of Brexit means that some new thinking will be needed.  Second, it is the case that a business dispute, i.e. a commercial lawsuit, is a significant event in the lives of an accountant in industry and the business’ external accountants in practise. Having Ireland as the place where international lawsuits are conducted would be very good business indeed for Irish forensic accountants, expert accounting witnesses, business valuers, and the sectoral accounting experts in banking, insurance and treasury. Irish accountants involved in mediation and arbitration should also benefit as will, for example, IT companies involved in storing, analysing and presenting documentary evidence used during a court trial.  It is also the case that one of the benefits to a business relocating from London to Dublin (as opposed to, say, Paris, Luxembourg or Frankfurt) will be that the legal system in Ireland is roughly the same as the English one. In-house lawyers and accountants transferring over from the UK to Ireland won’t notice much difference between English and Irish law.  Big litigation is big business and Ireland is well positioned to benefit from this potential Brexit windfall. Eoin O’Shea FCA is a practising barrister, specialising in commercial and tax law.

Composite leading indicators (CLIs), designed to anticipate turning points in economic activity relative to trend six to nine months ahead, point to stable growth momentum going forward in the OECD area as a whole. Stable growth momentum is expected in the United States, Japan, the United Kingdom, and the euro area as a whole, including France and Italy. Growth is anticipated to gain momentum in Germany and Canada. Amongst major emerging economies, CLIs continue to indicate growth gaining momentum in Brazil and Russia, while the CLIs for China and India signal stable growth momentum. While the Euro area indicators show growth, in March, Ireland saw a .08% dip compared to the previous month but up .81% from March 2016. You can find more information at www.oecd.org.

The IESBA has released the Exposure Draft, Proposed Application Material Relating to Professional Skepticism and Professional Judgment for public comment. The guidance clarifies how compliance with the fundamental principles in the IESBA Code of Ethics for Professional Accountants (the Code) supports professional scepticism by auditors and assurance practitioners for audit, review and other assurance engagements, and emphasises the importance of professional accountants having a sufficient understanding of the facts and circumstances known to them when exercising professional judgment in applying the conceptual framework underpinning the Code. Dr. Stavros Thomadakis, IESBA Chairman said, “Compliance with the fundamental principles and professional scepticism are essential obligations of professional accountants for audit and other assurance engagements. We are articulating for the first time the linkage between the two, making clear the important role that the fundamental principles play in enabling auditors and assurance practitioners to meet the public’s expectations about exercising professional scepticism.” The proposed guidance addressing the fundamental principles and professional scepticism responds to a recommendation from the Professional Skepticism Working Group established by the IESBA, the International Auditing and Assurance Standards Board (IAASB), and the International Accounting Education Standards Board (IAESB). The IESBA invites all stakeholders to comment on the Exposure Draft by visiting the Ethics Board’s website at www.ethicsboard.org. Comments are requested by 25 July 2017.

Disruptive Innovation in Financial Services, a report from Deloitte and World Economic Forum, finds distributed ledger technology (DLT), or blockchain, has the potential to reshape financial services. However, the report suggests it requires careful collaboration from other emerging technologies, regulators, incumbents, and additional stakeholders to be successful. The report makes significant claims, such as financial transactions becoming faster and cheaper, and information silos disappearing with the use of DLT. The report states, “risk [for financial services] declines, as credit history and asset provenance become immutable parts of the record.” However, there will be a lot of work to make this happen. The report states that firms must stand up cost-benefit analyses, execution roadmaps and governance models, and industry and government must work out regulatory, legal and jurisdiction-specific tax guidance. According to the report, potential uses for DLT include the ability to scale distributed ledgers and also claims that regulators would be able to access a shared repository and help themselves to the data they need. You can read the full report here.

It has only been two years since the Companies Act 2014 came into force and brought with it significant changes to the corporate landscape in Ireland. However, further significant change is expected to be in place by the end of the month. The Companies (Accounting) Bill 2016 has been passed by the Oireacthas and will transpose the EU Accounting Directive 2013 into Irish legislation. New accounting regimes and company size thresholds As set out in the table below, the Bill will introduce a new set of company size criteria for Irish companies. The Bill will allow micro- and small companies access to Financial Reporting Standard 105 (FRS 105) and Section 1A of Financial Reporting Standard 102 (FRS 102) for the first time. These two frameworks will provide opportunities for simplification and reduction of reported financial information. Significantly, micro-entities will be able to avoid disclosing details of directors’ remuneration and a Directors Report.   Micro Small Medium Large Turnover Less than €700,000 Less than €12m (€8.8m) Less than €40m (€20m) Greater than €40m (€20m) Balance sheet total (total assets) Less than €350,000 Less than €6m (€4.4m) Less than €20m (€10m) Greater than €20m (€10m) Number of employees Less than 10 Less than 50 Less than 250 Greater than 250 *Companies must satisfy two out of three criteria **Existing thresholds in brackets Increased disclosure with the Companies Registration Office (CRO) Medium-sized companies will no longer be able to abridge their financial statements filed with the CRO, resulting in increased disclosure of profit margins and turnover figures. They will also be required to prepare group accounts as the exemption from preparing consolidated financial statements on the basis of size for Irish parent companies has been restricted to micro-entities and small companies. Micro-entities and small-companies will continue to be able to file abbreviated financial information. Exemption from audit are not available to medium-sized companies. Disclosure by unlimited companies Currently under Irish company law, unlimited companies are only required to publicly file accounts if they fall within the definition of a “designated unlimited company” (designated ULC). Up to now, many Irish groups have structured their operations to fall outside the definition of designated ULC while still enjoying the benefits of limited liability, typically through the use of non-EEA incorporated limited companies elsewhere in their corporate structure. Once enacted, the Bill will significantly broaden the designated ULC definition with the objective of denying the exemption to groups that effectively still enjoy the benefit of limited liability protection through their group/corporate structure. The provisions are highly technical and the impact of these changes for existing groups with non-filing structures need to be carefully considered. The implementation date for this change is uncertain but it is expected to apply to accounting periods commencing on or after 1 January 2017. Although the Bill brings an unlimited liability holding company with limited liability subsidiaries within the designated ULC definition, such a holding company can continue to avail of the exemption until 2022 (provided it does not otherwise fall within the ULC definition). Cathal Melia is the Audit & Business Advisory Partner in RBK.