by John McCarthy Consulting Ltd. | Apr 14, 2022 | Blog, News
A significant legislative change made five years ago will only impact affected companies this year. The amendment made by the Companies (Accounting) Act 2017 amended section 1274 dealing with unlimited companies (known as a ULCs).
‘Designated ULCs’ lose accounts filing exemption
Among other changes, certain types of ULC (known as ‘designated ULCs’) are required to file their accounts with the CRO (including group accounts where applicable) for the first time. While most changes in the law came into effect from 1 January 2017, this one was delayed until accounting periods commencing 1 January 2022.
The amended Section 1274 Companies Act, 2014 broadly states that for accounting periods commencing on or after 1 January 2022, a ULC that has been a holding company of an undertaking which was at that time limited must file financial statements along with their annual return for accounting periods commencing on or after 1 January 2022.
This applies across the board regardless of the size of the group as section 1274 does not have any exclusion clause that says the section disapplies sections 347/348 making the filing of annual returns/accounts compulsory.
ULCs may qualify for audit exemption
In a related point Section 1230 Companies Act, 2014 allows such designated groups, where they are private ULCs (provided they satisfy the ‘small’ company criteria) to claim audit exemption (assuming all the other criteria are satisfied – annual returns filed on time, no 10% shareholder objections etc., their constitution permits audit exemption etc. ) because the Table disapplying certain sections of the Companies Act, 2014 for ULCs does not disapply the audit exemption and ‘small’ company criteria for ULCs contained in Parts 1-14 of the Companies Act, 2014.
Filing Exemption Remains for non-designated ULCs
So-called ‘non designated’ ULCs under Section 1274, that do not have any limited liability subsidiaries and whose direct and indirect shareholders do not comprise solely of limited liability undertakings will continue to be exempt from the requirement to file their financial statements.
In other words where a company is a ‘pure’ unlimited company (i.e. there is no ultimate protection of limited liability in the group structure), it will still be possible to avail of an exemption from filing financial statements.
However, they will need to file an auditor’s report attached to the Annual Return which confirms that the auditors have audited the financial statements of the company for the relevant financial year in accordance with sections 336 and 391.
Are your AML Policies Controls & Procedures up to date?
We have just released our latest Anti-Money Laundering Policies Controls & Procedures Manual (March 2022) – View the Table of Contents click here.
We have also just released an updated AML webinar (March 2022) available here, which accompanies the AML Manual. It explains the current legal AML reporting position for accountancy firms.
To ensure your letters of engagement and similar templates are up to date visit our site here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items if bought together.
For our latest Audit Quality Control Manual (October 2021) (implementing the latest Irish Audit & Accounting Supervisory Authority standards including ISQC1 on audit quality control) click here. View the Table of Contents here.
by John McCarthy Consulting Ltd. | Apr 14, 2022 | Blog, News
In last week’s blog we looked at some of the key implications that may impact on the work of auditors. In the previous week’s blog we looked at the implications in circumstances where audit clients are not directly impacted. This week we conclude with some final matters for auditors to consider.
Going concern
Management of affected entities, especially those with operations in Ukraine, will need to evaluate the impact on the going concern assessment and revisit this. The auditor will also need to show increased professional scepticism when making going concern judgements to verify that management has taken all the relevant factors into account. Some of these factors are highlighted below.
Supply chain issues
Some companies have stopped trading with Russia and therefore there will be an unavoidable impact on supply chains. We have already seen higher fuel prices which are likely to affect many companies’ cost base, and cause transport disruption. Auditors will need to document their assessment of the impact on clients’ business models, cash flows, and their ability to continue as a going concern. electronic
Currency valuation
Sanctions have triggered a devaluation of the Russian Rouble and there are consequent implications for the Belarussian Rouble. Translation of Roubles to other reporting currencies may lead to material exchange rate losses for affected companies.
Insurance cover
In some circumstances insurance cover for companies may be restricted, especially if insurance policy exclusion clauses state that a loss event is considered to be an ‘Act of War’.
These circumstances may not be restricted to the use of conventional weaponry, but also retaliatory cyber-attacks. Trade credit insurance may also be more difficult to obtain and companies/ their auditors need to take this into account.
Are your AML Policies Controls & Procedures up to date?
We have just released our latest Anti-Money Laundering Policies Controls & Procedures Manual (March 2022) – View the Table of Contents click here.
We have also just released an updated AML webinar (March 2022) available here, which accompanies the AML Manual. It explains the current legal AML reporting position for accountancy firms.
To ensure your letters of engagement and similar templates are up to date visit our site here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items if bought together.
For our latest Audit Quality Control Manual (October 2021) (implementing the latest Irish Audit & Accounting Supervisory Authority standards including ISQC1 on audit quality control) click here. View the Table of Contents here.
by John McCarthy Consulting Ltd. | Apr 14, 2022 | Blog, News
The war in Ukraine is an evolving human tragedy. In last week’s blog we looked at some of the key implications that may impact on the work of auditors, even if one’s clients have no immediate connections with Ukraine/Russia. This week we continue with a quick reminder of some pertinent topics for auditors to consider.
Non-compliance with laws and regulation (NOCLAR)
Auditors fulfilling their responsibilities under ISAs (especially ISA 250 Consideration of Laws and Regulations in an Audit of Financial Statements) with respect to laws and regulations will be auditing and reporting in a constantly changing environment. This may be the case right up to the point of signing the auditor’s report, depending on the period end of the entity and timing of the audit. Auditors will need to be vigilant and maintain regular communication with management in order to monitor NOCLAR up to the signing of the audit report.
It will often be difficult for management to ensure that they have complied with laws and regulations, let alone articulate how they have complied.
Post balance sheet events
For companies with 31 December 2021 year ends, the war in Ukraine would be considered a non-adjusting event, because the conditions did not exist at the end of the reporting period. For 28 February 2022 period ends and later, the impact of the war is an adjusting event.
Management’s disclosures about material non-adjusting events, and related estimates of its financial effect, must be appropriately disclosed in the notes to the financial statements and auditors will need to check these disclosures.
We will conclude our review of these issued in next week’s blog.
Are your AML Policies Controls & Procedures up to date?
We have just released our latest Anti-Money Laundering Policies Controls & Procedures Manual (March 2022) – View the Table of Contents click here.
We have also just released an updated AML webinar (March 2022) available here, which accompanies the AML Manual. It explains the current legal AML reporting position for accountancy firms.
To ensure your letters of engagement and similar templates are up to date visit our site here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items if bought together.
For our latest Audit Quality Control Manual (October 2021) (implementing the latest Irish Audit & Accounting Supervisory Authority standards including ISQC1 on audit quality control) click here. View the Table of Contents here.
by John McCarthy Consulting Ltd. | Apr 10, 2022 | Blog, News
Auditors in Ireland would be forgiven for thinking that, apart from rising fuel costs, the war in Ukraine is far away and has few audit implications. This blog is attempting to highlight the requirement in recent changes to the audit standards for auditors to ‘stand back’, frequently mentioned by the Financial Reporting Council in recent publications.
In this case, while your audit clients may not have direct connections with Ukraine or with sanctions against Russia, there may be relationships through clients’ supply chains, clients’ customer base and clients’ overseas subcontractors that leave the business exposed to a potential negative impact – even as simple as the shortage of raw materials (E.G. VW group) and its wider implications for the European economy.
The war in Ukraine is evolving rapidly, as is the reaction by the Irish government and its international counterparts with sanctions against Russia. In this blog we take a look at some of the key implications that may impact on the work of auditors.
Auditor’s Risk Assessment (ISA 315) – the ISAs (Ireland) still apply. The risk assessment will need to reflect changes within the audited entity’s business and operating environment and whether there are any new risks, significant or otherwise such as business interruption that may impact the entity’s ability to continue as a going concern. This may drive additional disclosures about the impact of the war, changes to forecasts, future plans, or even the entity’s business model or strategy.
Groups – The situation may also impact on group audits and collecting audit evidence (ISA 500).
Sanctions and AML – accountants are urged to look hard at any connections with Russia among their client base and perform updated due diligence, thinking more about the spirit of the law and not just the letter of the law. Accountants are re-screening clients, looking at sanction lists beyond the EU, and considering clients with Russian connections where they do not appear on sanctions lists.
We will take a look at further audit implications of the war in the Ukraine, in next week’s blog.
Are your AML Policies Controls & Procedures up to date?
We have just released our latest Anti-Money Laundering Policies Controls & Procedures Manual (March 2022) – View the Table of Contents click here.
We have also just released an updated AML webinar (March 2022) available here, which accompanies the AML Manual. It explains the current legal AML reporting position for accountancy firms.
To ensure your letters of engagement and similar templates are up to date visit our site here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items if bought together.
For our latest Audit Quality Control Manual (October 2021) (implementing the latest Irish Audit & Accounting Supervisory Authority standards including ISQC1 on audit quality control) click here. View the Table of Contents here.
by John McCarthy Consulting Ltd. | Apr 10, 2022 | Blog, News
Here we look at a potential money laundering scenario that can arise in practice. You have been filing income tax returns for your client for many years. Just last week your client has volunteered a confession that she has been keeping money offshore in a Panamanian bank account, the existence of which has never been declared on her tax returns.
Normally tax evasion is a reportable money laundering offence. Is there something different that may apply here?
Section 46 (1) of the 2010 Act states that disclosure of information which is subject to legal privilege is not required. Known as the ‘privilege circumstances exemption’, ‘relevant professional advisers’ (defined as accountant, auditor or tax adviser who is a member of a designated accountancy body or of the Irish Institute of Taxation) may, in the course of their work, receive information and documents that are subject to legal privilege, e.g. when engaged by a legal professional to carry out work on behalf of a client or when approached directly by a client to deal with previously undeclared taxes. If Section 46 applies in these circumstances, no money laundering report needs to be filed.
Given the complexity of these matters – as well as the need for a considered and consistent approach to all decisions, supported by adequate documentation – it is recommended that they are always discussed with the MLRO and legal/professional advice is obtained in writing.
The reporting exemption is unlikely to apply if the existence of the Panamanian bank account came to light in the course of your work and was not initially volunteered by the client or if the client subsequently refuses to go ahead and file/pay the relevant taxes, having had your professional advice. then Section 46 will fall away and a money laundering suspicious transaction report (STR) will need to be filed by the MLRO.
More guidance on this topic is available in Part 7.4 of the recent CCAB-I Guidance called Technical Release 01-2019 (Updated March 2022).
Accountants should also consult the Code of Ethics (ACCA, CPA Ireland, Chartered Accountants Ireland) of their respective professional bodies for the implications of the lack of integrity of their client and consider the implications of withdrawing from the assignment. Withdrawal from the engagement and the professional relationship is not a substitute for taking other actions that might be needed to achieve the professional accountant’s objectives. Again obtaining professional and legal advice is a good idea.’
Are your AML Policies Controls & Procedures up to date?
We have just released our latest Anti-Money Laundering Policies Controls & Procedures Manual (March 2022) – View the Table of Contents click here.
We have also just released an updated AML webinar (March 2022) available here, which accompanies the AML Manual. It explains the current legal AML reporting position for accountancy firms.
To ensure your letters of engagement and similar templates are up to date visit our site here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items if bought together.
For our latest Audit Quality Control Manual (October 2021) (implementing the latest Irish Audit & Accounting Supervisory Authority standards including ISQC1 on audit quality control) click here. View the Table of Contents here.
