The Companies (Amendment) Act 1999 as amended by Section 53 of the Companies (Auditing and Accounting) Act 2003 introduced an exemption from the need to have financial statements audited.
The criteria which a company must satisfy to avail of the exemption are as follows:-
- the company is subject to the Companies (Amendment) Act 1986
- turnover less than €7,300,000
- balance sheet total (i.e. total assets) less than €3,650,000
- average number of employees below 50
- the company is not a member of a group
- the annual return for the previous year must have been filed with the CRO on time and the current year’s annual return, to which the financial statements are annexed, is to be filed on time.
One interesting and important exemption from the ability to claim audit exemption is for companies limited by guarantee rather than limited by shares. This would include a large percentage of community and voluntary companies set up for non-profit purposes. This sector typically includes residential management companies, community childcare/training companies and incorporated sports and social clubs.
In order to avail of the exemption, the directors must be of the opinion that the company satisfies the necessary conditions in respect of the current and previous financial year. Their decision to avail of the exemption should be recorded at a meeting of the board and a statement to the effect that the company is claiming audit exemption must be made by the directors on the Company’s balance sheet.
A company may not avail of the audit exemption if more than 10% of the members (by number of ordinary voting shares) request that the financial statements be audited. Such a request must be served on the company in the financial year preceding the financial year concerned (but not later than one month before the end of that preceding year).
The directors must notify the auditors of their decision to avail of audit exemption. The auditors must then, within 21 days, serve a notice on the company advising whether there are any circumstances which the auditor believes should be brought to the attention of the members or creditors. A copy of this notice must also be filed with the Registrar of Companies irrespective of whether there are any issues.
It should be noted that availing of the audit exemption does not exempt a company from the requirement to file their accounts in the Companies Registration Office. A company must still file accounts as required under the Companies (Amendment) Act 1986.
However, despite the advantages of claiming audit exemption, including reduced fees, there are some significant benefits in retaining the audit:
- Enhanced credibility with the Revenue – we are not aware of any greater likelihood of a Revenue audit simply because a company is claiming audit exemption but retaining the audit may provide more comfort to Revenue Inspectors
- A rigorous and targeted audit can identify key areas of the business that need improvement and the auditor can work with the owners to improve the company's financial management – our audit services are geared towards this very purpose
- An audit gives assurance that the company has complied with its obligations under company law
- An audit may give additional assurance to the customers and suppliers about the financial management of the business – this is especially the case in the current financial environment where suppliers are monitoring credit risks very closely
- Whether or not a company has had its accounts audited may be used by lenders in assessing loan applications for both the company and the directors.
If you wish to investigate the advantages of claiming audit exemption please contact:
Amanda Sheerin
Tel: 046 943 7900
Email: asheerin@ohd.ie
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