Brexit Bulletin: No-deal Brexit will prevent Irish businesses from choosing NI audit firms

Dec 03, 2018

Chartered Accountants Ireland has joined partner accountancy bodies in the UK to call on Brexit negotiators on both sides to ensure that the final negotiated exit agreement permits Irish businesses to continue to exercise their right to retain statutory audit firms based in Northern Ireland or Great Britain, and for similar rights to be available for NI businesses to retain ROI audit firms.  The Institute is also urging negotiators to ensure that the current mutual recognition of professional accountancy qualifications between the UK and Ireland is maintained, particularly in relation to auditor recognition.  In ROI, UK statutory audit firms are currently recognised under Irish company law.

Barry Dempsey, Chief Executive of Chartered Accountants Ireland said:

“As it currently stands, Irish businesses can choose from NI or UK firms to provide them with audit services. Such services are essential in the provision of financial assurance and reliable data on which to base decision-making.  In the event of a ‘no deal’, UK audit clients listed on EU regulated markets will need to put a contract in place with an EU registered statutory auditor (i.e. a non-UK firm) to get a second audit report on their December 2018 accounts. This would be an unnecessary and unreasonable expense for business. 

“Chartered Accountants Ireland is a regulatory body for the audit profession and registers 189 audit firms ‘located’ in the UK (mostly in Northern Ireland). Our current statistics suggest that 55 of those firms have Irish audit clients.  We believe that maintenance of the status quo will be critical to the public interest, given the role of financial information in securing the stability of markets and the extensive degree of market inter-dependencies.

“Companies of all sizes, and those who draw their livelihoods from them, need to avoid any breakdown in the flow and availability of corporate information which could have broader repercussions on liquidity and investment. Even where an exit deal is negotiated, Brexit may lead to some economic instability. In these circumstances, timely and reliable financial information will be essential. Therefore we believe it is critical to avoid any disruption to the preparation of reliable information and the fulfilment of reporting requirements, which in turn could negatively impact governments in respect of their tax revenues as well as the stability of markets.

“We welcome the discussions that have taken place with the UK Government about the mutual recognition of professional qualifications, which is highly relevant for all professions. The UK Government’s plans to pursue ‘third country’ agreements with the EU in all areas of accountancy and audit as well as the retention of joint UK-EU ownership of audit firms can be a workable starting point for more detailed negotiations. We believe, however, that there is a need to go significantly beyond this and to incorporate accountancy and audit within a deep economic partnership approach. To this end, we consider it vital that a similar type of UK-EU regulatory interaction is agreed as that already outlined by the UK Government for the financial services sector.

“In the same vein, it’s a cause of concern that the recognition of reciprocal rights of statutory auditors and Chartered Accountants to practice on both sides of the Irish Sea is under threat as a result of Brexit.  As a result of their training and experience, Chartered Accountants are intrinsically and systemically involved in international business and commerce, so any loss of mutual recognition of the qualification would have a significant, negative impact on Irish business, including IFSC organisations, larger multinational groups and smaller private companies operating on both sides of the border. 

Accountancy sector generates €12.9bn

The Institute’s call comes as a new report released by the leading accountancy bodies in Great Britain and Ireland show that the accountancy profession in the Republic of Ireland contributed over €12.9 billion to Ireland’s GDP in 2017, equivalent to 4.4 percent of the total Irish economy, and only a little smaller than the economic contribution of the country’s real estate sector (€14.5 billion).

The report, the first to quantify the contribution of the profession to the Irish economy, was produced by UK consultants Oxford Economics on behalf of CCAB (the Consultative Committee of Accountancy Bodies). It shows that one-quarter of the €12.9 billion contribution (€3.2 billion) was generated by the accounting industry itself, with the remainder––around €9.7 billion––made up of the value provided by in-house accountants within other Irish industries.

61,200 jobs

The report also shows that the accountancy profession in Ireland supported 61,200 jobs in 2017.  This is made up of around 37,900 people who were employed as in-house accountants across the Irish economy, along with 23,300 individuals were employed in the accounting, bookkeeping, and audit sector in Ireland.

Accounting activities and supporting services directly contributed to €1.4 billion in tax revenue for Ireland in 2017. The clear majority of this figure, around €1.2 billion, was made up of “labour taxes” (encompassing Income Tax, PRSI, and USC), with the remainder representing taxes on the sales, profits, and purchases of Irish accounting firms.