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In November 2020, the Irish Auditing and Accounting Supervisory Authority (IAASA) issued a revised ethical standard for auditors,  Ethical Standard for Auditors (Ireland) 2020  (https://www.iaasa.ie/Publications/Auditing-standards). The revisions build on existing changes made to the standards in 2017 which implemented the requirements of the EU Audit Regulation and Directive.    The revised Ethical Standard includes a new requirement for audit firms to make reports of breaches of the Ethical Standard to the relevant competent authority and now explicitly prescribes reporting of breaches to those charged with governance. The purpose of the Technical Release (TR 02/2021) Reporting Breaches of Ethical Standard for Auditors (Ireland) 2020 is to alert members to these new requirements and to provide an example of the report that may be submitted to the Recognised Accountancy Body and IAASA. Please note the revised standard is effective from 15 July 2021.

Originally posted on Business Post 20 June 2021. Given Ireland’s pandemic-related national debt, significant income tax cuts in the near future seem unlikely, but moving abroad to work remotely will not always result in savings either. As if it wasn't enough to have ongoing upheaval over corporation tax, events are now conspiring to push the income tax burden into the spotlight. Tánaiste Leo Varadkar has been warning that Ireland's personal tax rates are a major disincentive for attracting mobile workers. Highly paid workers, he believes, could avail of new remote working possibilities to move overseas. Any government minister should be wary of losing high-paid executives from this economy. Broadly speaking, Ireland operates the 80/20 rule when it comes to tax receipts from individuals – roughly 80 per cent of income tax is paid by the top 20 per cent of earners. In common with some other countries, Ireland has tax measures for foreign executives coming in on assignment. A special assignee relief programme, or SARP, allows people coming into this country to have part of their income ignored for tax purposes, provided certain terms and conditions are met. Numbers in the public domain suggest that just under 600 jobs were eligible for SARP in 2018. Given that there were some 2.7 million employees in the country before the pandemic hit in early 2020, SARP doesn’t appear to be making a huge difference either to overall employment, or to the overall tax take. Whatever about coming in, what about people who might leave the country because of the increased acceptability of remote working? Every other day, companies are announcing policies to permit their workers to work remotely from their homes for a proportion of the working week or working month. It's not clear, however, that this will translate to a mass exodus of largely white-collar, higher-paid workers from the jurisdiction. Except for company directors, who are always caught by the Irish tax system irrespective of where they live, taxing rights are usually determined by the employee’s place of residence rather than their place of employment. A worker in Mullingar who emigrates to Marseille, while still working remotely for their Westmeath employer, will be subject to French income tax and not Irish income tax on the earnings. The position of social welfare contributions (PRSI) and the corresponding entitlements is not as clear cut as that of income tax and may differ from country to country. The position also gets tricky if the work involves travel to meet clients, customers or suppliers. Tax-free reimbursement of travel expenses in Ireland is only permissible where the travel is from the normal place of work, which can become problematic for remote workers, even within the jurisdiction. Moving abroad will not always achieve tax savings. An OECD study of the income tax and social security paid by single workers on the average wage in 2020 shows that the tax take in Ireland is more or less in the middle ground by international standards. A person moving from Ireland to Germany or Belgium or Austria will have a lot less after-tax income to spend than if they had stayed put. The difference is mainly due to social security contributions. That person might fare better by moving to Australia or Britain or Canada, but only marginally so. Higher-paid workers may do better than their counterparts on average pay, but few territories offer workers a tax crock of gold. Any telecommuting move, of course, depends on a willing employer. A recently published study from the University of Chicago, analysing personnel and analytics data on professionals in the IT industry, found evidence that while the total hours worked by people working from home did increase, the average output did not significantly change. Not only that, time spent on coordination activities and meetings increased. In short, there seems to have been more management, but less productivity. It is unlikely that company employment and benefits policies will require significant adjustments if a person is to work three days from the house and two days from the office. However, if the person wants to move to another jurisdiction entirely, the chore of administering that employee’s insurance, terms and conditions becomes far more onerous and perhaps without much commercial benefit to show for it. There undoubtedly will be even more studies on the benefits or otherwise of telecommuting, but the University of Chicago findings will resonate with many people who have been involved in telecommuting since the start of the pandemic lockdowns. Part-time telecommuting opportunities may become a part of an employee benefit package, but it doesn't necessarily follow that those opportunities will routinely extend to permitting employees to work offshore. The pandemic has resulted in higher national debt and a bigger state apparatus to pay for. The pressure on taxes generally, and on social security contributions particularly, will increase if government finances are to recover. If corporation tax receipts are indeed under threat – though I suspect that the €2 billion plus estimates may be overstated – it will be difficult on purely budgetary grounds to make a strong case for income tax cuts as well. The threat of income tax loss from offshore working may also, I suspect, be overstated. While the grass may be greener, the tax benefits of offshore working are not black and white. Originally posted on Business Post 13 June 2021.   Dr Brian Keegan is Director of Public Policy at Chartered Accountants Ireland

In November 2020, the Irish Auditing and Accounting Supervisory Authority (IAASA) issued a revised ethical standard for auditors (https://www.iaasa.ie/Publications/Auditing-standards ).  The revisions build on existing changes made to the standards in 2017 which implemented the requirements of the EU Audit Regulation and Directive.  The Institute have issued the attached Technical Alert (TA 02/2021) Guidance on the revised Ethical Standard for Auditors (Ireland) 2020 to highlight to members the key new requirements of the Ethical Standard applicable in Ireland and to add some clarification. In particular we draw attention to the effective date of the revised standard. The Ethical Standard for Auditors (Ireland) 2020 is effective from 15 July 2021. There are limited transition provisions.  These are set out on page 30 of the Ethical Standard and in Section 5 of the Technical Alert. Firms may complete engagements relating to periods commencing before 15 July 2021, in accordance with existing ethical standards, putting in place any necessary changes in the subsequent engagement period. Engagements to provide previously non-prohibited non-audit services entered into before 15 July 2021, and for which the firm has already commenced work may continue until completed in accordance with the original engagement terms, subject to the application of appropriate safeguards.   

  Originally posted on Business Post 13 June 2021. Corporation tax might be dominating the headlines now, but environmental matters are of more long-term importance to international finance. Ideas for what constitutes sustainable behaviour change over time too. Over a decade ago, motor tax on diesel cars was reduced here to reflect lower greenhouse gas emissions From the headlines you could be forgiven for thinking that the G7 finance ministers discussed nothing but multinational corporation tax last week. Accounting standards rarely deserve such coverage, but the G7 statements about how businesses should account for their environmental behaviour will have repercussions long after the tumult over tax has subsided. The fundamental issue considered by the G7 finance ministers is that there is no universally accepted standard to measure claims by a business that it is conducting itself in a sustainable way. Misleading impressions are getting created. When it comes to food, for example, there is much talk about the environmental impact of shipping produce from far afield. Yet, as the chief executive of Bord Bia pointed out last week, transport accounts for only about 3 per cent of the carbon footprint of Irish produce. This figure is undoubtedly valid, but without agreed standards, her counterpart in another country may be doing the same calculation a different way and getting a different result. Ideas for what constitutes sustainable behaviour change over time too. Over a decade ago, motor tax on diesel cars was reduced here to reflect lower greenhouse gas emissions. Now there is a pushback from some quarters on the role of diesel cars on the grounds of high particulate emission. If all this confusion makes sustainable consumption choices difficult for the consumer, the problems are even greater for fund managers looking to make planet-friendly returns on behalf of the individuals, unit trusts and pension funds for whom they act. These investment choices are really what prompts the G7 concerns over the lack of generally recognised accounting standards. The idea of obliging companies to report on their sustainability agenda activity is not new. Since 2014, an EU directive on non-financial reporting has required large businesses to report not only on their financial results, but also on things like their approach to human rights, steps to take against corruption and their promotion of diversity in the workforce. It is estimated that perhaps 20,000 companies across Europe have been including this material in their published reports and accounts, some of whom volunteer to do so. The system is not without its drawbacks. It is only a legal requirement for the very largest businesses and it allows companies to choose whatever reporting standards they feel appropriate. This makes it difficult to form objective comparisons between companies. Nevertheless, the directive has promoted the key idea that sustainability reporting needs to be seen in two ways. First it has to show how sustainable conduct contributed to the value of the business – the euros on the balance sheet. Then it has to show what impact the company’s performance has on the broader environment. This idea is known as “double materiality” in the jargon. Persisting with the notion of double materiality will be crucial to any fair measurement of a business in terms of its environmental impact. There are already at least five voluntary consortiums involved in devising reporting standards and the EU now wants to establish yet another standard for itself. The G7, however, seem to be saying that the work should be given to the International Financial Reporting Standards (IFRS) Foundation, the organisation which sets the existing accounting standards to calculate profits, losses and balance sheet values. That approach seems logical, but it is also problematic. The IFRS Foundation will have to develop expertise in sustainability matters. It took well over a decade to devise the current financial reporting regime, but that kind of timeframe surely cannot be repeated if proper sustainability reporting is to be part of a meaningful response to the climate change crisis. These initiatives will affect more than just large multinationals. To be credible, larger entities will have to be able to show that their supply chain also operates with good sustainability credentials. That in turn means that smaller enterprises will have to develop similar credentials to secure their position in supply chains, even if they are exempt from formal reporting themselves. All this will come at a cost. Currently, the relatively modest requirements of the EU non-financial reporting directive drive average costs per company of some €150,000 a year. While such costs would be only a tiny fraction of the total operating costs of a large manufacturer or insurer, they are certain to become proportionately higher as the reporting requirement increases. In addition, there will be training costs for staff, and new systems to be implemented. It's one thing to meter the number of items processed on a production line, but quite another to meter, for instance, the energy consumption per item. The piece missing from the G7 approach is that it is all very well for them to mandate more regulatory change cross their own industries in their own territories, but climate change is a global problem. Regulatory compliance is not always a top priority in every country across the world. The current tax proposals have teeth because the US is threatening to discriminate against countries that don’t apply the proposed 15 per cent minimum rate. There will have to be similar sanctions for countries where their major industries do not have to account for what they are doing to the planet.   Dr Brian Keegan is Director of Public Policy at Chartered Accountants Ireland

Edel O’Reilly is Head of Investor Relations in Goodbody and is a member of the Chartered Accountants Ireland Sustainability Expert Working Group. Every day, my Goodbody colleagues and I are seeing the opportunities the fast-evolving ESG agenda is presenting for investors to deploy capital behind sustainability initiatives and how many companies are more than stepping up to this challenge.  Navigating the issues and trends related to sustainability poses a steep and ever-evolving learning curve for us all so Goodbody is really pleased to support the Chartered Accountants Ireland inaugural Sustainability Conference this month which will address the key ESG issues facing accountants and financial professionals.  As Head of Investor Relations in Goodbody, I act as a conduit between our corporate plc client management teams and the global investor community and I have witnessed first hand how ESG has transitioned from being ‘important’ to being a core priority for investors and leaders alike. In the last 2 years, this issue has now moved centre stage for all company strategies, with consequences for existing business models and future plans.  Similarly for investors, there has been a sea change in recent times with investing in sustainability transitioning from a ‘nice to have’ to being viewed as a crucial driver of value creation. This has been reflected in asset management where there has been significant progress on integrating ESG strategies into the asset management process, with an acceleration in engagement levels between companies and their stakeholders.  According to a recent EPFR report, during 2020, Socially Responsible Investment (SRI) and ESG investment recorded inflows of $168.7 billion compared to $63.3 billion in 2019, and the global fixed income market is now worth over $1 trillion from a near standing start in 2016.  Sustainability has been rising up companies’ risk registers for years, with the Paris Agreement signed by governments in 2015 putting climate change at the centre of the global discussion. COP26 and the Race to Net Zero campaign have shone an even brighter light on climate change issues globally. Since the onset of Covid-19, we have seen more scrutiny than ever before on ESG issues. ESG investors are rewarding companies that can prove they are legitimately committing resources to sustainable goals but those without credible plans risk being penalised. Moreover, the investment market is giving companies time to undertake the necessary changes and investments as long as detailed plans are in place. For a time, there was undoubtedly an emphasis on the ‘E’ or what environmental practices companies engage with but the investment community is increasingly focusing on the ‘S’ and ‘G’ when meeting management teams.  I hope to share some more of those investor perspectives at the conference but simply put, we believe that companies that have strong ESG sustainability goals embedded in their strategies will benefit from greater access to debt and equity capital at competitive costs.  The financial system is emerging as a key gateway for ESG policy purposes and increasingly, any corporate seeking a loan or an equity investment will be screened through an ESG lens which will determine access to and the cost of such capital. That financial system role, via banks, asset managers, private equity investors etc will be pivotal in driving forward ESG decisions.  Registration for the conference is open here.  You can find information, guidance and supports to help members understand sustainability and meet the challenges it presents in Chartered Accountants Ireland's Sustainability Centre.  

The experience of working remotely, of having our contact with colleagues and customers mediated through technology, has highlighted the need to think about the positive role humour can play in closing the gap between people, in creating a feeling of togetherness and inclusion, where people can bring their whole selves to work. In their book Humour, Seriously: Why Humour is a Superpower at Work and in Life, Jennifer Aaker and Naomi Bagdonas argue that organisations and teams perform better if they allow room for laughter.  Teams that can laugh together demonstrate better communication and problem-solving skills. And laughter, if used appropriately, is a valuable tool for leaders.  Aaker and Bagdonas report their research finding that employees who regard their bosses as having any sense of humour rate them as 23% more motivating.  This kind of edge can make a big difference, given the influence this relationship can have on people’s happiness.  According to Tera Allas and Bill Schaninger, writing in the McKinsey Quarterly, relationships with immediate management is the top factor in employees’ job satisfaction, which in turn is the second most important determinant of employees’ overall satisfaction with their lives.  Having a boss with a positive, inclusive sense of humour can be a life-changer. As any good salesperson will tell you, humour can be a highly effective way of defusing tension in a high-stakes situation, when pitching for business or presenting to a client.  If it lands well and works, humour can break down barriers, connecting people and building relationships. But, of course, there are risks: the joke may fall flat, the story fail.  Humour by its very nature is a gamble. It involves risk, a leap of faith (particularly when attempted on a Zoom call!). Cultures of countries and organisations differ, and some people may be uncomfortable with the use of humour in serious situations, including work.  Humour may even be seen as subversive, out of place, gauche, unprofessional. Clearly, to be effective, the use of humour should not be offensive or hurtful in any way and it should accommodate diversity.  While a sense of humour can be quite a personal taste, at work its flavour should always be appropriate, conscious of difference, tapping into things that are universally funny, starting with shared experience. For leaders of teams and organisations, though there are definite benefits to the use of humour, there are also heightened risks.  All managers will want to avoid being seen as another David Brent, the frustrated all-round entertainer of The Office.  Aaker and Bagdonas point to the importance of leaders being aware of their own style of humour, which can range from the edgy to the self-deprecating.  One leader can tease without offending, another can reveal vulnerability without losing respect. It’s a fine balance, but humour at work is worth the risk, and the risk can be mitigated. Self-awareness is the key: balancing the natural spontaneity of laughter with a sense of its appropriateness and effect on others, observing rules such as ‘never punch down’ or ‘carry a bag of good stories’.  Be aware of your style, be sensitive, inclusive and recognise difference. Humour is one thing that AI and the robots will never replace.  For the individual, laughter is a tonic, a stress buster.  For teams of people, shared laugher is a powerfully inclusive experience.  It engenders trust, collaboration and creativity.  And the world knows we could all do with a laugh. Michael Diviney is Executive Head of Thought Leadership, Chartered Accountants Ireland