Audit quality reviews
The Financial Reporting Council (FRC) in the UK has issued guidance on who may and who may not do an audit engagement quality review. This confirms that for a public interest entity (PIE) client, the quality review must be done by a person qualified to be the auditor but that they need not be a PIE registered responsible individual. The engagement (and group engagement) partner and key audit partner for a UK PIE must be registered with the FRC, but the person performing the quality review just needs to be audit registered (i.e. hold an audit qualification). The legislative underpinning for this position can be found here.
In Ireland, as in the UK, the requirement set out in the International Standard on Quality Management (ISQM) is that the quality reviewer has to have ‘the competence, capabilities and appropriate authority’, and for PIE audits also needs to be a statutory auditor.
Selection for review is not an indication of anything untoward having been identified
PIE statements
Financial statements for PIEs, which are in summary debt and equity quoted companies and some funds, are reviewed by the Irish Audit and Accounting Supervisory Authority (IAASA). IAASA names the companies it inspects, and identifies not only any issues raised but also accounts deemed compliant. Selection for review is not an indication of anything untoward having been identified.
Companies reviewed in IAASA’s recently published report on supervisory activity include AIB Group, CRH, Dalata Hotel Group, Diageo, Flutter Entertainment, Glanbia, Glenveagh Properties, Irish Continental Group, Irish Residential Properties REIT, Kenmare Resources, Kerry Group, Kingspan, Ryanair Holdings and Tullow Oil.
The most common finding was ‘no instances of non-compliance were detected’ followed by some minor observations where undertakings were given for additional or more clear disclosure particularly in the area of climate impact.
Auditor fined
John Kavanagh of Howlett Kavanagh Chartered Accountants in Naas has recently been fined €10,500 by IAASA, and the firm’s audit licence has been suspended for a year, for contraventions and non-compliance with legislation and regulation in an audit of a PIE.
The firm had acted as auditor to a special purpose vehicle which had been set up to raise secured note finance on the Cyprus Stock Exchange. As an entity with securities entered into trading on a regulated stock exchange, the client fell into the definition of a PIE and was therefore subject to monitoring by IAASA and not the firm’s affiliated professional body. IAASA’s findings are here.
The administrative burden of being a PIE auditor is substantial
Only seven audit firms in Ireland are authorised to audit PIEs. A firm deciding to undertake PIE audits needs to register with IAASA (an additional fee applies) and put in place requirements such as a transparency report and additional quality control procedures.
The ethical standards that apply to PIE audits are higher than for non-PIE audits, so the ISQM manual for a PIE audit firm will be at least double the size of a non-PIE audit firm. The administrative burden of being a PIE auditor is so substantial that many small firms have little chance of achieving compliance.
It is not unknown for small firms to unknowingly audit a PIE or an entity that neither the client nor the auditor realises is a PIE, as the rules can be complex. While the definition sounds simple, one section on insurance companies refers to an EU directive that itself refers to another EU directive, and it is unclear how the definition in that directive ties into the current levels of authorisation applied to insurance companies in Ireland. It is also unclear whether the insurance or reinsurance company becomes a PIE based on its level of authorisation or its actual activities. To further complicate things, the definition in the UK is different.
Audit monitoring
ACCA has published a note on common issues identified during a recent audit monitoring review. The review focused on common breaches of the ethical standards and ACCA’s code of ethics and conduct.
Insolvency practitioners
The Consultative Committee of Accountancy Bodies in Ireland (CCAB-I) has published a guidance document for insolvency practitioners on the impact of sanctions introduced as a result of Russia’s invasion of Ukraine. This provides information on the legal obligation not to transfer funds or make funds or economic resources available, directly or indirectly, to any person or entity that has been sanctioned under EU financial sanctions.
AML training
ACCA has produced a 50-minute on-demand CPD resource that provides sufficient training to fulfil a practice’s legal requirement to train its general staff in anti-money laundering (AML).
The free-to-access course has been designed for general accounting, tax and audit staff in an accountancy practice. Additional modules will become available for principals and money laundering reporting officers (MLROs) at a later date.
More information
Anti-money laundering is one of the topics to be discussed at ACCA Ireland’s conference in Dublin on 1 June
