Technical update

Audit monitoring

The Irish Auditing and Accounting Supervisory Authority (IAASA) has published some key messages for auditors in the area of communication with Those Charged with Governance (TCWG). In summary, an auditor needs to formally communicate the following matters to TCWG:

• deficiencies in internal control
• fraud risk identified as a significant risk
• key audit matters
• work performed and evidenced on the audit file
• all non-audit services.

The key pieces of correspondence that will communicate these matters are usually referred to as:

• The audit planning meeting and letter (including planned scope and timing of the audit, and the identified significant risks and non-audit services).
• The management letter (including control weaknesses).
• The audit completion letter (including difficulties encountered, significant matters, adjusted and unadjusted errors, written representations requested, issues with related parties audit, independence and ethical matters).

Double materiality

The concept of double materiality as required by the new European Sustainability Reporting Standards (ESRS) is raising some queries. A simple example might illustrate the difference between single and double materiality.

If ACCA ceased to offer our exams in, for example, a micro country/principality for whatever reason, we would probably not need to mention this in financial statements drawn up in accordance with International Sustainability Standards because the matter would not be material to ACCA.

However, if our financial statement was drawn up in accordance ESRS with a requirement for double materiality, the lack of an exam would be material to the small number of ACCA students in that country, and they make up the ‘double’ part of double materiality. Because the matter is material to those students, it must be disclosed by ACCA if we followed ESRS.

It is easy to see why members struggle with the concept.  As preparers they need to identify who the third parties are and step into their shoes to determine if a sustainability matter is material to them. The European Financial Reporting Advisory Group has issued some draft guidance.

ISQM guidance

ACCA Practice Compliance has issued an update on the matters it is encountering when monitoring compliance with International Standard on Quality Management 1 (ISQM), which is approaching its first anniversary. ISQM 1 applies to firms that perform assurance engagements, such as audits and review engagements, and requires them to document and implement firm-wide policies and procedures to ensure compliance with International Standards on Auditing.

The update confirms that the majority of firms monitored since the implementation of ISQM have documented their policies and procedures in a manual, but notes that in many cases where firms have used a proprietary manual, these had not been sufficiently tailored to the firm.

Self-employment

A recent Supreme Court decision has provided very helpful guidance for clarifying the difference between self-employment and being an employee.

The case concerned whether Domino’s Pizza delivery drivers were independent contractors under a ‘contract for service’ and taxable under Schedule D of the Taxes Consolidation Act 1997, or employees under a ‘contract of service’, and taxable under Schedule E.

Page 165 of the decision provides the following five tests:

1. Does the contract involve the exchange of wage or other remuneration for work?
2. If so, is the agreement one pursuant to which the worker is agreeing to provide their own services, and not those of a third party, to the employer?
3. If so, does the employer exercise sufficient control over the person to render the agreement one that is capable of being an employment agreement?
4. If these three requirements are met the decision maker must then determine whether the terms of the contract between employer and worker, interpreted in the light of the admissible factual matrix and having regard to the working arrangements between the parties as disclosed by the evidence, are consistent with a contract of employment, or with some other form of contract having regard, in particular, to whether the arrangements point to the person working for themselves or for an employer.
5. Finally, it should be determined whether there is anything in the particular legislative regime under consideration that requires the court to adjust or supplement any of the foregoing.

In this case, Justice Murray found that the Tax Appeal Commissioner was entitled to conclude that the drivers were employees for the purposes of income tax.

Money laundering

Ireland has six different reporting obligations relating to money laundering with different thresholds, obligations and authorities to report to, which can be confusing. To help, the Garda has provided contact points for accountants to call to discuss issues they may be having in identifying their reporting obligations:

• Garda National Economic Crime Bureau (GNECB) 01 6663776 or GNECB_Assessment@garda.ie.This includes Section 19 Reports and Section 59 reports, which is the reporting of actual knowledge of a crime as opposed to reporting of a suspicion of money laundering, which is reported to the Financial Intelligence Unit (FIU).
• FIU Ireland 01 6663714 or 01 6663889 or FIU-Ireland@garda.ie, who deal with queries related to anti-money laundering or Go-AML reporting.
• Bribery and Corruption Confidential Reporting Line: 1800 40 60 80.