As the end of the Brexit transition period approaches on 31 December 2020, clarity is finally emerging in relation to the implications for audit registration in Ireland and the UK after the transition period. The important news for auditors and audit firms registered by the Institute is that the status quo will continue for the majority of firms in both Ireland and the UK after 1 January 2021. Irish audit registration – after the Brexit transition period Since 2018 Brexit has cast uncertainty over the position of ‘UK-based’ (however interpreted) auditors registered by the Institute vis-à-vis eligibility to audit Irish entities post Brexit.  The Institute has kept members informed of any developments in this regard and has outlined our position that there is no basis for the Institute to remove its ‘UK-based’ auditors from the Irish audit register as a consequence of Brexit unless there is a change in Irish company law or a formal direction from IAASA to the Institute.    Recent engagement with IAASA has confirmed that there will not be any legislative change or regulatory direction in this regard. Therefore the status quo will continue in Ireland from 1 January 2021 for the Institute’s UK-based auditors and audit firms, as long as those individuals and firms continue to meet the eligibility criteria (unchanged) set out in the Institute’s Audit Regulations and the Companies Act 2014.  The Professional Standards department will be writing to audit compliance principals of statutory audit firms in more detail in the coming weeks. It is welcome news for the auditors and audit firms registered by the Institute in Ireland and based outside of the jurisdiction, that there will be no change to their status on the Irish audit register from January 2021. In the longer term, however, Brexit may impact on the number of UK-based firms on the Irish audit register as the audit regulatory requirements in Ireland and the UK continue to diverge over time.   Audit firms who are registered in Ireland but do not have any Irish audit clients may find that the burden of complying with distinctly Irish regulatory requirements is no longer worthwhile and may choose to cease their Irish audit registration. Related Matters regarding Irish audit registration While not of direct relevance to Institute members and audit firms, it is worth mentioning that Irish company law provides a mechanism for approval of third country auditors in Ireland.  From 1 January 2021 auditors based in the UK who are not a member of the Institute or another Recognised Accountancy Body would have to avail of this mechanism if they want to be eligible to audit Irish entities. The Companies Act 2014 in Ireland provides for the approval of third country auditors as Irish statutory auditors where certain criteria are met.  These criteria include the existence of reciprocal arrangements regarding auditor approval between Ireland and the third country concerned as well as the completion of an aptitude test by the third country auditor.  The Companies Act 2014 also allows for exemption from that aptitude test to be granted in certain circumstances.  We understand that IAASA and the Financial Reporting Council (‘FRC’) in the UK are working on developing reciprocal arrangements which would support the operation of a regime in Ireland for approving third country auditors from the UK.   The Institute currently administers an aptitude test for third country auditors and is engaging with IAASA in relation to guidelines for granting exemptions from the aptitude test. UK audit registration – after the Brexit transition period After 31 December 2020, audit registration in the UK will continue without interruption for individual statutory auditors (responsible individuals) registered by Chartered Accountants Ireland given the status of the Institute as a Recognised Supervisory Body (‘RSB’) in the UK, regardless of whether the responsible individual is based in the UK or Ireland.  There will be no change to the UK audit registration of the majority of audit firms registered in the UK by Chartered Accountants Ireland regardless of whether the audit firm is based in Ireland or in the UK.  Audit firms currently registered in the UK by the Institute can retain UK audit registration after 31 December 2020 if the UK firm ownership rules are met.  The ownership rules for a UK registered audit firm after 31 December 2020 will require that the majority of the voting rights on the ownership body and management body of the firm are held by: Individuals holding an audit qualification from a UK RSB (including Chartered Accountants Ireland) Audit firms approved by a UK RSB (including Chartered Accountants Ireland) Individuals who hold EEA qualifications, who have passed or applied to sit a relevant aptitude test by 31 December 2020. The change in the ownership rules impacts firms who count EEA qualified auditors (who are not qualified by a UK RSB) and EEA audit firms in their majority of qualified owners and managers.  From 1 January 2021 the qualified majority of owners and managers can only include EEA auditors (who are not qualified by a UK RSB) if the EEA auditors have applied for, or passed, a relevant aptitude test before 31 December 2020. This change may affect a small number of firms.  

The UK Financial Intelligence Unit (FIU) has produced 3 Podcasts on SARS and these are available free online.  We strongly encourage you to take time to listen to these useful and informative podcasts. Podcast 1: SARs Frequently asked Questions Podcast 2: How SARs reporters can help combat Modern Slavery and Human Trafficking Podcast 3: What makes a good quality SAR?

Insolvency Monitoring - Common findings from RoI Visits The Professional Standards Department is hosting two Insolvency related CPD online webinars.   The first online webinar, ‘Insolvency Monitoring - Common findings from RoI Visits’, scheduled for 16 November at 12:00 – 13:00, will focus on the common findings and issues identified during insolvency monitoring visits, which regularly feature in visit reports issued after each visit.  You can register, free of charge, by clicking here. The second online webinar, ‘Insolvency Monitoring - Findings with remuneration approval procedures’, scheduled for 14 December at 12:00 – 13:00, will focus on how to ensure remuneration approval is obtained correctly in accordance with the current legislation and Statement of Insolvency Practice S9B. You can register, free of charge, by clicking here. These webinars are hosted by Professional Standards and are both free of charge.  They are designed for all Insolvency Practising Certificate (IPC) Holders and aim to help prepare for future visits and to give practical advice on the most common areas of weakness found during insolvency visits. We would encourage all IPC holders to attend both webinars as practical updates to processes and procedures will be covered to ensure full compliance with legislation, regulations and SIPs moving forward. Members can claim 1 hour structured CPD per webinar

Your Individual Annual Return 2020 is available for completion online.  Please be reminded that this is due to be submitted by 30 October 2020.Click here for your Individual Annual Return.We appreciate that this is a difficult period for members due to the Coronavirus and that members will be prioritising matters differently than they would in normal times. If unable to meet this timescale please contact Individual Annual Return.

The UK Government has announced its intention to use the power in the Corporate Insolvency and Governance Act 2020 to require independent scrutiny of pre-pack sales in administration to connected parties. The Pre-Pack Sales in Administration Report sets out the findings and recommendations of a review of pre-packs carried out by Government primarily focussing on whether or not to regulate or ban sales in administrations to connected persons. Published with this report are the draft regulations , which Government intends to lay before Parliament. A summary of the proposed regulatory framework is set out below: The regulations will apply where there is a disposal in administration of all or a substantial part of a company’s assets. An administrator will be unable to dispose of property of a company to a person connected with the company within the first eight weeks of the administration without either the approval of creditors or an independent written opinion. The connected party purchaser will be required to obtain the written opinion. The provider of the opinion must be independent of the connected party purchaser, the company and the administrator and must meet certain eligibility requirements. The administrator must have no reason to believe that the opinion provider is not independent of the connected party or does not meet the eligibility requirements. The opinion provider will provide a written report to state that either the case is made for the disposal or that the case is not made. A connected party purchaser may obtain more than one report. An administrator must consider a report from an opinion provider. Where a report states that the case is not made for the disposal, an administrator can still proceed with the disposal but will be required to provide a statement setting out the reasons for doing so. An administrator will be required to send a copy of the report(s) to creditors of the company and to Companies House.

UK Financial Intelligence Unit invites you to a Webinar on the use of Glossary Codes when submitting a SAR, on Wednesday 14 October 2020 at 2pm. We strongly recommend that you join this webinar.   On Wednesday 14th October at 2pm the UKFIU will be hosting a SAR Glossary Codes Webinar – the benefits to the SAR Regime. Topics to be covered: Key benefits of using glossary codes Overview of the main glossary codes used How SARs are fast tracked - Denise Napper, Head of SARs Enquiry Action Team Reporter view of good use of glossary codes Q&A Session While the event is aimed at UK SAR reporters/supervisors, it is open to anyone with an interest in the topic. Please email UK Financial Intelligence Unit to request an invite before close of play 13/10/2020.

Chartered Accountants Ireland is pleased to announce the publication of the draft AML Guidance for the accountancy sector.This is draft guidance pending approval from HM Treasury. This guidance is based on the law and regulations as of 10 January 2020 – this incorporates amendments required as a result of the UK’s transposition of the 5th Money Laundering Directive. A brief overview of the main changes is available here.

Our Individual Annual Return 2020 is available for completion online.  Please ensure it is submitted by 30 October 2020.Click here for your Individual Annual Return.

The Government has just issued a Consultation on the new Economic Crime Levy announced in the March 2020 Budget. The levy will fund new government action to tackle money laundering, and help deliver the reforms committed to in the 2019 Economic Crime Plan.  The consultation seeks views on what the levy will pay for, how it should be calculated and distributed across the anti-money laundering (AML) regulated sector, and how the levy should be collected. The closing date for responses is 13th October 2020.

On 31 January 2020 the UK left the EU in accordance with the terms of the withdrawal agreement and entered a period of transition until 31 December 2020.  This provided a short period of certainty for audit registrations in Ireland and the UK which continue uninterrupted by Brexit until at least the end of the transition period.  All possibility of an extension of the transition period ended on 30 June 2020 when that date passed without the UK government seeking any such extension from the EU.  As yet another key Brexit date approaches on 31 December 2020, auditors in Ireland and the UK need to be aware of the possible scenarios which might arise in relation to audit registration after the transition period. UK audit registration – after the Brexit transition period After 31 December 2020, audit registration in the UK will continue without interruption for individual statutory auditors (responsible individuals) registered by Chartered Accountants Ireland given the status of the Institute as a Recognised Supervisory Body (‘RSB’) in the UK, regardless of whether the responsible individual is based in the UK or Ireland.  There will be no change to the UK audit registration of the majority of audit firms registered in the UK by Chartered Accountants Ireland regardless of whether the audit firm is based in Ireland of the UK.  Audit firms currently registered in the UK by Chartered Accountants Ireland can retain UK audit registration after 31 December 2020 if the UK firm ownership rules are met.  The ownership rules for a UK registered audit firm after 31 December 2020 will require that the majority of the voting rights on the ownership body and management body of the firm are held by: Individuals holding an audit qualification from a UK RSB (including Chartered Accountants Ireland) Audit firms approved by a UK RSB (including Chartered Accountants Ireland) Individuals who hold EEA qualifications, who have passed or applied to sit a relevant aptitude test by 31 December 2020 The change in the ownership rules impacts firms who count EEA qualified auditors (who are not qualified by a UK RSB) and EEA audit firms in their majority of qualified owners and managers.  From 1 January 2021 the qualified majority of owners and managers can only include EEA auditors (who are not qualified by a UK RSB) if the EEA auditors have applied for, or passed, a relevant aptitude test before 31 December 2020. Irish audit registration – after the Brexit transition period In advance of the original Brexit deadline of March 2019, the Institute shared [1] with its audit registered firms advice received from the Irish government and the Irish Auditing and Accounting Supervisory Authority (‘IAASA’) that auditors who are considered to be ‘UK based’ (we are still seeking clarification as to what this term means) would not be eligible to retain Irish audit registration in the event of a ‘hard’ Brexit.  Unless a Brexit agreement, addressing audit registration in Ireland, is reached by 31 December 2020 auditors will effectively be facing a ‘hard’ Brexit scenario with regards to Irish audit registration on that date. On the basis of legal advice taken by the Institute, the Institute considers that it is not legally empowered to remove auditors from the Irish audit register at the end of the transition period. Therefore, as things stand at the time of writing, the Institute does not intend to remove auditors from the Irish audit register on 31 December 2020 or thereafter.   Audit firms should be aware, however, that if there is a relevant change in Irish company law or a legally binding regulatory instruction to the Institute in that regard, the Institute may have no choice but to withdraw the Irish audit registration of auditors, and therefore audit firms, who are considered to be ‘UK based’.  Re-registration The Institute has been working with relevant stakeholders to explore ways to facilitate re-registration in Ireland of ‘UK based’ auditors in the event that circumstances change such that these auditors are removed from the Irish audit register as a consequence of Brexit and corresponding changes in Irish company law.  In those circumstances ‘UK based’ auditors would be considered to be third country auditors from an Irish perspective. The Companies Act 2014 in Ireland provides for the approval of third country auditors as Irish statutory auditors where certain criteria are met.  These criteria include the existence of reciprocal arrangements regarding auditor approval between Ireland and the third country concerned as well as the completion of an aptitude test by the third country auditor.  The Companies Act 2014 also allows for exemption from that aptitude test to be granted in certain circumstances.  We understand that IAASA and the Financial Reporting Council (‘FRC’) in the UK are working on developing reciprocal arrangements which would support the operation of a regime in Ireland for approving third country auditors from the UK.   The Institute currently administers an aptitude test for third country auditors and is engaging with IAASA in relation to guidelines for granting exemptions from the aptitude test. Statutory audit firms – Irish audit registration In Ireland, a firm’s audit registration is dependent on the firm’s compliance with the eligibility criteria set out in section 1473 of the Companies Act 2014 and reflected in the Institute’s Audit Regulations at chapter 2.   Audit firms with Irish audit registration will need to be cognisant of possible implications for their compliance with those eligibility criteria should it transpire that events related to Brexit as described above impact on the eligibility for responsible individual (‘RI’) status in Ireland for those signing audit reports for Irish registered companies and for audit approval of individuals in the ownership and management structure of the firm. What does this mean for a ‘UK-based’ audit firms registered by the Institute? If you are a an audit firm included on the Irish audit register by the Institute and are based in the UK, the following is relevant: The Institute does not currently expect to withdraw your Irish audit registration on 31 December 2020 as a consequence of Brexit. The Institute may nonetheless be forced, by a change in Irish company law or a regulatory instruction, to withdraw your Irish audit registration some time after 31 December 2020. If your Irish audit registration is withdrawn as a consequence of the circumstances above, you will be able to apply for re-registration in Ireland.Re-registration of an audit firm would require the approval as third country auditors of the firm’s responsible individuals signing Irish audit reports as well as ensuring that the ownership structure of the firm is composed of the appropriate number of individuals eligible for approval in Ireland. All third country auditor applicants must either sit and pass an aptitude test or be granted an exemption from that aptitude test.The aptitude test consists of two exams being corporate and business law and tax law as they pertain to statutory audit in Ireland. It is likely that exemption from the aptitude test could only be granted to third country auditors who can demonstrate that they have sufficient recent experience of performing Irish audit work and have undertaken appropriate Irish relevant audit CPD. It is important to note that it is not clear to the Institute what factors determine whether an auditor is ‘UK based’ (for example residential address of the firm’s partners or responsible individuals? business address of the firm?).We have raised a number of queries with IAASA in this regard. What next? Unfortunately the uncertainties created by Brexit in recent years remain unresolved.  The Institute continues to engage with government departments in Ireland and the UK, with IAASA and the FRC and with other recognised accountancy bodies to prepare for the possible outcomes of Brexit with regard to audit registration.   The Professional Standards Department will keep audit compliance principals informed of any developments arising. Auditors and audit firms who may be ‘UK based’ and who currently undertake Irish audit engagements should continue to be mindful of the possible implications of Brexit for their audit registration in Ireland and plan for scenarios that may arise for auditors and their Irish clients in 2021. Further information – Accountancy Ireland Podcast Listen here. 1] Letters to audit compliance principals in November 2018 and again in February 2019.  Regulatory Bulletin February 2019 

Please be advised that Regulatory Fees for the year 2020 will be issued during the month of January 2020.  Notification will be sent from Professional Standards when these are available for payment.

The Professional Standards Department (PSD) Quality Assurance Team has recently compiled a list of common matters arising on audit and investment business inspection visits, which are set out below. Please note that, where PSD returns to firms that have had a relatively recent visit, it conducts follow-up procedures to ensure that the firm has taken action to address matters raised at the previous visit. Audit Inspections Financial  Reporting Firms need to perform audit procedures to evaluate whether the overall presentation of the financial statements, including the related disclosures, is in accordance with the applicable financial reporting framework which, in recent years, has been substantially changed by the introduction of FRS 100-105 and amendments to company law. PSD found that, for the most part, firms had adequately addressed the requirements of FRS 102 and, in RoI, the Companies Act 2014 (‘CA 2014’) through the use of checklists. However, non-application of FRS 102 by audit clients was sometimes not identified. Firms should ensure that their audit procedures to assess the appropriateness and completeness of disclosures are up to date for the relevant financial reporting regimes. Certain common omissions were identified: Statement of Changes in Equity or Statement of Cash Flows, where relevant; Significant judgements and key sources of estimation uncertainty in relation to amounts recognised in the financial statements (FRS 102 s8.6-8.7); Where relevant, material uncertainties related to events or conditions that cast significant doubt upon the entity’s ability to continue as a going concern (FRS 102 s3.8-3.9); The measurement basis (or bases) used for financial instruments and the other accounting policies used for financial instruments that are relevant to an understanding of the financial statements (FRS 102 s11.40); Disclosures relating to creditors required by CA 2014 Schedule 3, such as terms of payment/repayment and the rate of any interest payable on debts. (N.B.The specific FRS 102-related matters noted above relate to financial statements prepared in accordance with the full requirements of FRS 102 and may not be relevant to financial statements where the small/micro companies regime is applied.) International Education Standard (IES) 8 (Revised) IES 8 Professional Competence for Engagement Partners Responsible for Audits of Financial Statements (Revised) was issued by the International Accounting Education Standards Board (IAESB) in December 2014 and is effective from 1 July 2016. Its objective is to establish the professional competence that professional accountants develop and maintain when performing the role of an Engagement Partner. During an audit monitoring visit, the inspector will make enquiries to assess whether a firm is familiar with IES 8 (Revised), including consideration of the learning outcomes which are listed in Table A to the Standard. Firms can obtain a copy of IES 8 (Revised) at: http://www.ifac.org/system/files/publications/files/IAESB-IES-8.pdf Investment Business inspections Investment Business (IB) inspections carried out by PSD over the last few years had focused on firms holding IB1/IB2 authorisation. However, PSD is now conducting an increased number of IB inspections to firms holding all levels of IB authorisation, including a sample of firms holding IA1/IA2 authorisation. Firms should be mindful of, and ensure they address, the following  matters Investment business procedures (IBR 2.56) All authorised firms are required to establish and maintain adequate written investment business procedures. These should include managing conflicts of interest, maintaining ‘Chinese Walls’ and the consequences of breaching them, along with the handling of errors and complaints. A firm must adequately train its principals carrying on investment business and its employees using these procedures. Training (IBR 2.60) Authorised firms must make arrangements to ensure that principals and employees involved in investment business maintain an appropriate level of competence and comply with Institute CPD requirements. Firms authorised in Category IA2 and above must make arrangements to ensure compliance with the Central Bank Minimum Competency Code, which has recently been updated. A copy of the Code can be obtained on the Central Bank of Ireland’s website. Investment Business Compliance Review (IBR 2.58) An authorised firm must carry out an Investment Business Compliance Review (IBCR) at least annually. PSD found that, for some firms, an annual IBCR had not been carried out, or did not include a whole firm review, a review of accounting records and a sample of client files. Some IBCRs did not identify different types of IB advice provided by the firm or non-compliance with the IBRs. Corrective action was not always taken in a timely manner. Engagement letters (IBR 3.19-3.20) PSD found that some firms did not have an engagement letter in place, or the letter had not been agreed with the client prior to investment business advice being provided, as required by IBR 3.19 or did not include the minimum details required by IBR 3.20. Commission consent and disclosure (IBR 3.30-3.32) If a firm receives commission it must account to the client for that commission, and both the terms (%) of the commission and the amount (€/£) must be disclosed. In cases where the firm retains the commission, it must have the client’s written consent to do so. Consent to retain commission can be obtained in the client engagement letter. The Quality Assurance Committee views non-compliance with commission consent and disclosure requirements very seriously. Section 30 receipts (IBR 4.44-4.46) Firms must issue receipts when they receive client premiums or investment business clients’ money. Details of what must be included on the receipt are specified in IBR 4.45. Other matters Firms should ensure that they are aware of their category of IB authorisation and the limits of that category. Category IA2 is required to hold client premiums; Category IB2 is required to hold investment business clients’ money; and If handling or holding client premiums or investment business clients’ money, the firm must appoint an independent accountant and submit an independent accountant’s report to the Institute. Carrying on investment business, when not authorised to do so, is an offence under the Act. Firms may wish to review their category of investment business authorisation and assess whether it is suitable for their needs. Firms should refer to Schedule 1 to Chapter 1 of the IBRs for activities which may be undertaken under the various categories. For further details on the above matters, please look out for PSD’s forthcoming Regulatory Bulletin. For advice or support on the above matters, firms may contact, in strict confidence, the Practice Consulting Team, which is independent of the Professional Standards Department.