Credit unions: new regulations
The Registrar of Credit Unions has issued new regulations governing many aspects of the provision of services by credit unions for their members. These supersede the regulations issued in 2016.
In general, the new regulations cover more activities and are more prescriptive. Some historical material has been removed, such as the procedures required for ‘loan applications by fax’.
Some of the required procedures have been greatly expanded, particularly for prize draws and insurance intermediation services. The new regulations require that ‘the credit union’s external auditor reviews, on an annual basis, all transactions in the prize draw’ (emphasis added).
ACCA wrote to the Central Bank of Ireland seeking clarification on the requirements in respect of the prize draw. The response confirmed there is an “….expectation that the auditor would assess, on a sample basis and in line with materiality as determined by the auditor, transactions related to the prize draw. We would expect that the scope of the work of the external auditor in this regard may be informed by the work undertaken and assurances (or otherwise) provided by the internal auditor during the financial year.” More guidance on this will be published later in the year.
ISQM 1
International Standard on Quality Management Ireland 1 (ISQM 1) requires audit firms to apply a risk-based approach in designing, implementing and operating a system of quality management, which must be documented in an ISQM 1 manual to be reviewed annually and updated as necessary.
Professional bodies will be placing more emphasis on ISQM during monitoring visits
The Irish Auditing & Accounting Supervisory Authority (IAASA) has published a study of the manuals prepared by audit firms under its supervision.
While a number of commercial companies provide information on how to prepare an ISQM manual, the IAASA’s study also sets out the key documentary requirements for compliance:
- an ongoing risk assessment process that considers the firm’s unique circumstances, including technologies used, networks and external service providers
- effective governance and leadership within the firm
- adherence to ethical standards and requirements
- evaluation of client relationships and specific engagements
- focus on thorough audit procedures and quality performance
- resources for recruiting, developing audit teams and providing appropriate tools
- effective communication within the firm
- monitoring and remediation, embracing scalability, flexibility and continuous improvement.
The study identified the following weaknesses in some ISQM manuals:
- ISQM 1 quality objectives were not directly mapped to the firm’s system of quality management
- responses to the quality risks identified were not tailored to the circumstances of the firm, including the description of key documents and personnel requirements
- instances where there were errors in the completion of acceptance and/or continuance assessments, including failure to record non-audit services being provided to a client for an audit continuance assessment
- failure to sufficiently perform an independence check for a new audit engagement
- insufficient evidence that the firm has performed adequate monitoring activities to provide a basis for identifying deficiencies that are relevant to the firm’s system of quality management.
ACCA and the other professional bodies will in the future be placing more emphasis on ISQM during monitoring visits. An off the shelf, copy and paste, manual that has not been tailored to a firm’s specific circumstances will not meet the required standard, and nor will a manual that was not updated annually. More guidance will be issued on ISQM compliance later in the year.
FRS 102
The Financial Reporting Council has issued additional guidance to reflect the amendments to FRS 102. Three new factsheets have been published, which relate to the significant changes to FRS 102, including new versions of Section 20 Leases and Section 23 Revenue from Contracts with Customers.
A number of other factsheets have also been updated to reflect the changes to FRS 102 and these include:
- Factsheet 3 – Statement of cash flows
- Factsheet 4 – Financial instruments
- Factsheet 5 – Property: Fair value measurement and company law
- Factsheet 6 – Business combinations
- Factsheet 7 – Transition to FRS 102
- Factsheet 8 – Climate-related matters
- Factsheet 9 – Initial application of the Periodic Review 2024 amendments
- Factsheet 10 – Revenue from Contracts with Customers
- Factsheet 11 – Lease accounting for lessees
Factsheets 1 and 2 have been withdrawn.
EU sustainability taxonomy
The European Commission has published a set of frequently asked questions on the EU sustainability taxonomy.
Audit qualification changes
Members training towards obtaining the audit qualification should make themselves aware of the changes to the ACCA Rulebook. See Statutory auditor changes for the full details.
An audit qualification on its own will not qualify a member for ‘grandfathering’ as an SASP
An audit qualification on its own will not qualify a member for ‘grandfathering’ as a sustainability assurance service provider (SASP). (See this AB article for details of the role.) Grandfathering simplifies the route to being an SASP, but is only available to a member who is a responsible individual (RI) by the end of 2025. Members becoming an RI from 2026 will need to undertake additional learning and training to become an SASP.
The changes align ACCA’s rules with those of the other professional bodies.
Deduction of expenses
Revenue has updated the guidance on the deductibility of expenses to include additional information on how to claim a deduction for actual vouched expenses incurred wholly, exclusively and necessarily in the performance of a person’s duties of employment. It also covers when CPD can be deductible or not, examples of what typical expenses are deductible and additional guidance on flat-rate expenses.
Of particular interest to members is the guidance on membership fees paid to a professional body and a number of examples are set out. Even where an employer refuses to cover a membership subscription there are circumstances where the fee can still be claimed as a tax deduction, including where they are commercially necessary or there is a statutory requirement for membership of a professional body.
