Auditing and Assurance Standards and Guidance

Ethical Standards for Auditors

Ethical Standard(s) for Auditors - applicable in Ireland - applicable for periods beginning before 17 June 2016

ES Provisions available for small entities (Revised 2010)

Introduction

1	The APB issues Ethical Standards which set out the standards that auditors are required to comply with in order to discharge their responsibilities in respect of their integrity, objectivity and independence. The Ethical Standards 1 to 5 address such matters as:

How audit firms set policies and procedures to ensure that, in relation to each audit, the audit firm and all those who are in a position to influence the conduct and outcome of an audit act with integrity, objectivity and independence;

Financial, business, employment and personal relationships;

Long association with the audit engagement;

Fees, remuneration and evaluation policies, litigation, gifts and hospitality;

Non-audit services provided to audited entities.

These Ethical Standards apply to all audit firms and to all audits and must be read in order to understand the alternative provisions and exemptions contained in this Standard.

2

The APB is aware that a limited number of the requirements in Ethical Standards 1 to 5 are difficult for certain audit firms to comply with, particularly when auditing a small entity. Whilst the APB is clear that those standards are appropriate in the interests of establishing the integrity, objectivity and independence of auditors, it accepts that certain dispensations, as set out in this Standard, are appropriate to facilitate the cost effective audit of the financial statements of Small Entities (as defined below).

3

This Standard provides alternative provisions for auditors of Small Entities to apply in respect of the threats arising from economic dependence and where tax or accounting services are provided and allows the option of taking advantage of exemptions from certain of the requirements in APB Ethical Standards 1 to 5 for a Small Entity audit engagement. Where an audit firm takes advantage of the exemptions within this Standard, it is required to:

(a)

take the steps described in this Standard; and

(b)

disclose in the audit report the fact that the firm has applied APB Ethical Standard – Provisions Available for Small Entities.

4

(i)

In this Standard, for the UK a 'Small Entity' is:

(a)

any company, which is not a UK listed company or an affiliate thereof, that qualifies as a small company under Section 382 of the Companies Act 2006;

(b)

where group accounts are produced, any group that qualifies as small under Section 383 of the Companies Act 2006;

(c)

any charity with an income of less than the turnover threshold applicable to small companies as identified in Section 382 of the Companies Act 2006;

(d)

any pension fund with less than 100 members (including active, deferred and pensioner members)1;

(e)

any firm regulated by the FSA, which is not required to appoint an auditor in accordance with chapter 3 of the FSA Supervision Manual which forms a part of the FSA Handbook2;

(f)

any credit union which is a mutually owned financial cooperative established under the Credit Unions Act 1979 and the Industrial and Provident Societies Act 1965 (or equivalent legislation), which meets the criteria set out in (a) above;

(g)

any entity registered under the Industrial and Provident Societies Act 1965, incorporated under the Friendly Societies Act 1992 or registered under the Friendly Societies Act 1974 (or equivalent legislation), which meets the criteria set out in (a) above;

(h)

any registered social landlord with less than 250 units; and

(i)

any other entity, such as a club, which would be a Small Entity if it were a company.

(ii)

In this Standard, for the Republic of Ireland a 'Small Entity' is:

(a)

any company, which is not an Irish listed company or an affiliate thereof, that meets two or more of the following requirements in both the current financial year and the preceding financial year:

not more than €7.3 million turnover;

not more than €3.65 million balance sheet total;

not more than 50 employees.

(b)

any charity with an income of less than €7.3 million;

(c)

any pension fund with less than 1,000 members (including active, deferred and pensioner members)3; and

(d)

any other entity, such as a club or credit union, which would be a Small Entity if it were a company.

Where an entity falls into more than one of the above categories, it is only regarded as a 'Small Entity' if it meets the criteria of all relevant categories.

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