By Eamon Murphy Another Brexit deadline has come and gone. The recent EU summit should have been about assembling enough of the Brexit jigsaw pieces to present a recognisable picture of the future of Europe. The stage was perfectly set for another one of those hard nights of negotiation after which all sides would emerge bleary-eyed into the morning – claiming victory and vindication. Everybody knew it wasn’t going to be the finished article but it should have been enough to allow for entry into the transition phase – provided nobody looked too closely for the missing pieces. However, we currently remain some way away from an agreement. Theresa May is in a near-impossible situation, hemmed in everywhere she turns – to her right, by her party’s hard brexiteers; to her left, by the elusive Labour party and the DUP. In Europe, she is confronted by a determined set of EU leaders who have heeded Benjamin Franklin’s advice: better hang together rather than be hanged separately.  So, more than two years after the Brexit vote and only a few months from the scheduled departure, Brexit remains an enigma. At its best, it could mean a benign, business-friendly free trade area with reciprocal regulations. At its worst, it could descend into a nasty, vindictive shambles of hard borders and customs posts. The centenary of the end of the First World War will happen in a few days. We would do well to remember that the EU – for all its bulky bureaucracy – has provided its citizenry with a safer, more prosperous existence than the slaughter in nearby Flanders fields one hundred years earlier.   Unfortunately, the true meaning of Brexit has yet to be revealed. Depending on your perspective in the UK or EU, Brexit can mean a few conflicting things:   The democratic will of the people or a second referendum.  A steadfast union of Great Britain and Northern Ireland or quasi-new Irish free state. Something to be celebrated or something to be punished. Losing a comfort blanket or escaping a straitjacket Theresa May wasn’t too far out with her early assertion that Brexit means Brexit. Its meaning is elusive and polarising. ‘Brexit’ has, perhaps, become a contronym – a word that has acquired different and opposite definitions.  At this late stage in the Brexit negotiations, words are our best chance of progress. We must hope that both sides can prepare a comforting stew of words from which everybody can find something palatable. This would allow entry into the next phase of transition and give both sides the time and space to negotiate a long-term, mutually-beneficial solution. There remains the intriguing possibility of a second referendum but it is by no means certain that such a referendum would yield a different outcome.  I still don’t know what Brexit means. Nor do many other people, but many Irish companies have already made plans for Brexit. We do know that the Brexit winners will be those companies who can secure alternative non-UK markets and suppliers, embrace innovation at all levels in business, see opportunity in the chaos and who develop excellent strategic finance and foreign exchange capabilities (which is good news for members). For those not yet started – it’s not too late. Avail of some free help and advice from the agencies and get going (even if we’re all doing so blindly).  Eamon Murphy FCA is a member in business.

On Tuesday afternoon last (23 Oct 2018), a panel drawn from all stakeholders in the audit market, including auditors from the larger and mid-tier audit firms and business leaders told a capacity audience in Chartered Accountants House that the statutory audit is here to stay and continues to deliver a valued service to investors and shareholders. However, in a climate of increasing regulation of all professions, audit practitioners may have to come up with fresh approaches to remain relevant. The benefits and challenges from the imposition of a tighter regulatory audit regime was also debated. Session 1:  Value of Audit Lead Speaker: Michael Cawley, NED and Chair of Audit Committee in Betfair Paddy Power, Kingspan. Panellists: Michael Cawley Andrew Keating, CFO Bank of Ireland Brendan Jennings, MP Deloitte Barry Dixon, Head of Research, DAVY Sinead Donovan, Partner GT  Session 2:  Future of Audit Lead Speaker: Pat O’Neill, Partner EY Panellists: Pat O’Neill Kevin Prendergast, CEO IAASA Ken Bowles, CFO Smurfit Kappa Group Ciaran Hancock, Business Editor, Irish Times Pat Cox, NED and Chair of Public Interest Committee at KPMG Emma Scott, Partner PwC Over 180 delegates at Chartered Accountants Ireland’s conference on ‘The Value and Future of Audit’ were comprised of business leaders, chairs of audit committees, analysts, and preparers of financial information and practitioners who engaged in a lively debate. They heard that that the statutory audit is at a crossroads, with increased scrutiny on the value, quality and purpose of audit.   The debate ranged over a wide range of audit related issues including: The need for greater competition and choice in the audit market and the impact (or not) of the recently introduced EU audit reforms; the societal needs from the statutory audit and whether the audit as currently designed was capable of meeting them; the impact of regulation on the mind-set of auditors and the attractiveness of audit as a professional career. While competition between the larger audit firms is significant, there was an acknowledgement that there are currently too few players in the PIE audit market sector. Possible remedies to this that are currently being debated in the UK include: audit only firms; market share caps; joint or shared audits; total prohibition of provision of non-audit services to audit clients. However we need to be certain that any local remedies are responsive to the particular market in Ireland and also sensitive to the risks of unforeseen consequences. It is not at all evident that these proposed remedies were necessary or relevant in Ireland. Speakers argued that the so-called expectation gap was only partially real. In their experience consumers of audit services, practitioners, regulators, audit committees, boards and analysts all understand the limitations of a statutory audit. However some challenges are less understood in other quarters.  In addressing this gap in perception, the choice is either change perceptions through engagement and communication, or move to meet those expectations and change the audit model. If statutory audit is not meeting the needs and expectations of society then clearly it needs to change.  However, debates and discussions about the nature of such change need to begin from informed positions about what audit currently delivers and the challenge it provides before exploring how it might evolve into the future.  Panellists suggested that some commentators want assurance on businesses that an audit as currently designed can’t provide, and it is up to the profession to communicate the function and limitations of the statutory audit as a foundation for an informed debate.  Speakers argued that, if one of the desired outcomes of the new EU rules governing audit is to avoid binary, pass/fail audit opinions in favour of richer, more nuanced reporting, then the imposition of tighter regulation will have the contrary effect.  In a highly regulated environment the fear would be that the real problems are ignored and instead practitioners just concentrate on being seen to comply with auditing standards instead of adding insight and value. Over-regulation could in fact lead to audits having an increasingly technical focus instead of offering judgement and opinions on points of improvement. This in turn could impact the attractiveness of the profession to high-quality people and its very sustainability. Delegates heard that the audit needs to innovate in order to add value and offer deeper judgement and insight on structures of the business and business model.  One example of innovation put forward concerned how financial results are portrayed in annual reports, and these could be communicated in a more transparent and accessible manner.  Final remarks at the conference went to Irish Times Business Editor Ciaran Hancock, who gave a valuable external perspective.  Drawing attention to recent controversial business collapses where the performance of audits was brought into question, he suggested that the profession has to acknowledge when things go wrong. It is the duty of the media to investigate, and the reality is that interest in audit will only be generated when issues arise. Auditors should also have a clearer sense of their accountability to society, and need to significantly improve how they currently communicate. Mr Hancock said that there are issues with how the outcomes of audits are presented, and simpler, plainer English should be adopted. Deputy President Conall O’Halloran who chaired the conference said: “The idea of this event was to hear from a range of stakeholders who have an interest in statutory audit. “Ultimately, statutory audit is a global service and any remedies to address current problems, real or perceived, must be global. However, for Chartered Accountants Ireland to be able to provide informed comment on the future direction of the statutory audit, events like this are important. “The Institute will now consider the range of views heard in formulating its own contributions to the current debates on the future of audit”. Photos of the Audit event are available here.

Budget 2019 definitely dished out a little something to many and maybe that is what will make it forgettable.  A hike in the tourism VAT rate, a 50 cent rise in the price of a packet of cigarettes and a doubling of betting duty allowed the Minster to significantly increase spending and paved the way for €291 million in personal tax cuts.  As expected, measures to tackle the housing crisis dominated the headlines. The small amount of money left to go around saw the squeezed middle benefit from minor cuts to USC and a tweak to the standard rate tax bands.  Read Chartered Accountants Ireland's special analysis of Budget 2019