Regulatory developments

Audit quality

The Irish Auditing & Accounting Supervisory Authority (IAASA) has published its 2024 quality assurance review reports in respect of seven firms that perform statutory audits of public-interest entities (PIEs) in Ireland. These  summarise the IAASA’s annual inspection of each firm’s internal system of quality management and list any findings and recommendations.

The review shows that almost one in five audit files reviewed required improvement. The matters identified include review of financial statement disclosure, communications with those charged with governance and risks of management override of controls, as well as the internal engagement quality reviews, which are a mandatory requirement for PIE audits.

A recurring point concerned the sequence of the timing of certain procedures with, for example, the audit engagement letter signed before the engagement acceptance procedure was completed, which is something that automated audit working papers have made easy to confirm.

There were also a number of findings relating to systems of quality management, where a consistent area of failing was the recording of financial interests to guard against conflicts, as well as failure to perform annual reviews of the various quality processes or to address specific matters required by the International Standard on Quality Management.

Kenmare Resources

The IAASA has published its assessment of the accounting treatment applied by Kenmare Resources in its 31 December 2023 annual financial statements. This decision focused on the application of IAS 36, Impairment of Assets and the company’s value-in-use projections, and how it considered the impact of climate change in relation to the life of a mine in Mozambique.

One interesting aspect of the assessment was that Kenmare had made a net-zero commitment and the financial impact of the transition plan was still being assessed when the 2023 financial statements were published.

Going concern

The Financial Reporting Council in the UK has issued a non-mandatory guide for directors of all companies to assist them with the legal and regulatory requirements to:

• assess and make disclosures related to the going concern basis of accounting and any material uncertainties in their financial statements
• disclose principal risks and uncertainties, which may include risks that might impact solvency and liquidity, within their strategic report.

The guide is just as applicable in Ireland as the UK.

Financial reporting

EFRAG has published a summary report, Financial Reporting: What’s Ahead for 2025?, looking at IFRS 18, Presentation and Disclosure in Financial Statements, the statement of cashflows project and the intangibles project.

Omnibus directive

Accountancy Europe has published a short and simple explanation of the proposed changes to the Corporate Sustainability Reporting Directive (CSRD):

• Omnibus explained: key changes to CSDDD
• Omnibus explained: key changes to sustainability reporting standards
• Omnibus explained: key changes to CSRD

The proposals are in two parts. The first is a postponement by two years of the existing requirements, the so-called ‘stop-the-clock’ proposal; this is to give time for part two of the proposal, which is set out at the links above.

Both the European Parliament and the European Council have now approved the stop the clock proposal. However, there is no certainty over the acceptance by every EU country of the need to amend the original CSRD, which was passed by the EU in December 2022 and transcribed into Irish law in July 2024.

SASP licence

The Omnibus Directive (OD) includes a two-year postponement of the deadline for upskilling in European Sustainability Reporting Standards and obtaining a Sustainability Assurance Service Provider (SASP) licence, which is highly likely to be passed.

Auditors who hold an audit licence up to 31 December 2025 are entitled to a ‘grandfathering’ route for getting their SASP licence, which they can exercise at any time. Members who obtain their audit licence for the first time after 2025 will have a more protracted route, including eight months of sustainability assurance supervised training. Read this AB article for more details.

In addition, if the OD is passed as originally drafted, in two years’ time only large companies with more than 1,000 employees will need to do a sustainability report and engage an SASP to provide assurance over that report.  All 27 EU countries must agree to the reduction for it to be effective, and negotiations are likely to take at least 18 months.