Audit Exemption

The Companies Act 2014 extends the scope of audit exemption to certain types of companies which, heretofore under the Companies Acts 1963 to 2013, were unable to avail of the exemption, subject to such companies meeting the qualifying conditions.

 

Technical Release

Chartered Accountants Ireland has produced a Technical Release to assist members.  Download Technical Release 06/2015 to access a number questions and answers which address issues/queries which may arise in the implementation of the new audit exemption regime under the Companies Act 2014.

 

Commencement

Under the commencement order companies can generally avail of audit exemption immediately on or after 1 June 2015 regardless of the financial periods to which financial statements relate, where those financial statements have been approved on or after 1 June 2015. 

 

Categories of eligible companies 

The new categories of eligible companies are group companies (parents and subsidiaries), dormant companies and companies limited by guarantee.  (Subject to certain conditions).
The categories of companies that can take advantage of audit exemption are:

  • Company Limited by Shares (LTD)
  • Designated Activity Company (DAC)
  • Company Limited By Guarantee
  • Parents and subsidiaries in small groups
  • Non-designated Private Unlimited Company (ULC)

Registered Charities may still be required to have an audit.    

There are also certain categories of companies which cannot avail of audit exemption, set out in Section 362. 

 

Single company criteria

In order to avail of audit exemption under section 358 a company must qualify as small in respect of the financial year in question by meeting two or more of the following requirements:

  • The amount of turnover of the company does not exceed €8.8 million;
  • The balance sheet total of the company does not exceed €4.4 million;
  • The average number of employees of the company does not exceed 50
  • (section 350(5)).

 

Group criteria

Section 359 sets out the rules for audit exemption in groups,

The company must qualify as small as above and the group must also qualify as small by meeting two or more of the following requirements.

  • The amount of turnover of the holding company and other members of the group taken as a whole does not exceed €8.8 million;
  • The balance sheet total of the holding company and other members of the group taken as a whole does not exceed €4.4 million;
  • The average number of employees of the holding company and other members of the group taken as a whole does not exceed 50
  •  

    Groups and companies only lose their ‘small’ status under Companies Act 2014 (and therefore the entitlement to audit exemption under Companies Act 2014) if they do not satisfy the qualifying criteria in respect of two consecutive years. In addition there are a number of other conditions which must be satisfied such as timely filing of annual returns, see TR06/2015 for further details.

     

    Dormant Companies

    Dormant companies will be able to avail of audit exemption once their annual returns are filed on time.  A dormant company (section 365) is one that has no significant accounting transactions and holds only permitted assets and liabilities (investments in shares of and amounts due to or from other group undertakings).

     

    Annual returns

    The existing rules regarding loss of audit exemption (for two years) if a return is filed late still remain in force.  (section 363, 364) This has been extended to include the first annual return so if the company files the first annual return late it cannot avail of audit exemption for the first financial year.

    Section 343 introduces a new provision whereby a company can apply to their local District Court for an order extending the time for filing the annual return of the company. Only one order can be made in respect of a particular financial period. Where the order is filed on time and the company subsequently files the annual return within the extra time specified by the District Court, the documents will be deemed by the CRO to have been received on time.

     

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