On the 7th of August 2012 Statutory Instrument 308 of 2012 increased the audit exemption criteria. Under the new legislation a company can now avail of the audit exemption provided the turnover of the Company does not exceed €8,800,000 and the balance sheet total does not exceed €4,400,000.
This represents an increase in the turnover criteria by €1,500,000 from €7,300,000 to €8,800,000 and an increase in the balance sheet total criteria of €750,000 from €3,650,000 to €4,400,000. S.I. 308 updates S.32 of the Companies Act 1999 which sets the criteria for availing of the audit exemption.
Now under Section 32 of Companies (Amendment) (No. 2) Act, 1999 (“the Act”) a private limited company may avail of an exemption from a requirement to have financial statements audited if it meets the following criteria.
- Is a company to which the Companies (Amendment) Act 1986 applies;
- The turnover of the Company does not exceed €8,800,000
- The balance sheet total does not exceed €4,400,000
- Average employees does not exceed 50
- The company is not one of the following: – A company limited by guarantee, a public limited company, Bank or Insurance Company, a group company (i.e. parent, holding or subsidiary company), an investment, stock broking, building society, credit institution, management or trustee company.
- The company must be up to date with its filing requirements at the Companies Registration Office.
- The company should satisfy all the conditions in respect of the financial year in which the company is to avail of the exemption and the previous financial year.
The increases in the audit exemption are unquestionably a welcome relief to SME businesses and their accountants alike. There has been huge fanfare in relation to the increase of the limits and what they will do to help small businesses reduce “red tape”, which has become another over used Government buzzword.
The changes to the audit exemption limits and their projected savings were announced on the 11th of August 2011 (as per the linked press release http://www.djei.ie/press/2011/20110811.htm) When you look at the extent and scale of the Statutory Instrument, one would would have to wonder if Minister Richard Burton was really focussed on reducing red tape why it took him a full 12 months to sign the statutory instrument into legislation despite his commitment to do so in 2011.
Furthermore if the Government are actually committeed to reducing red tape in relation to the audit exemption they need to look at the inequities in Irish Legislation in comparison to our European neighbours. The uniquely Irish late filing requirement which links the timely submission of annual returns to the CRO to the eligibility to avail of the audit exemption has no logical connection with the ethos or concept of small companies exempting themselves from the requirement to carry out a statutory audit. The other elephant in the room which the current and previous governments have choosen to ignore is the linking of audit exemption to group status. We have thousands of small groups in this country that are subject to audit that do not really need an audit. Hopefully the legislators will see sense and cut some real red tape in the near future by changing this too. One small sweep of the ministers pen could make a substantial difference to large numbers of SME businesses and their overworked accountants.
We have created a FREE Audit Exemption Helpsheet including – 15 Issues to be Considered by Accountants that reflects the new changes, and 15 Potential Issues in relation to the Audit Exemption. The Helpsheet is contained within the Free Section of the Accountants Resource Centre. Download the Audit Exemption Helpsheet.
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Should you have any questions in relation to this article or should you have any Company Law or Company Secretarial queries please contact John Murphy on 053 910 0000, [email protected]
Download SI No. 308 of 2012 – Audit Exemption Size Criteria
Download Free Audit Exemption Helpsheet from the Accountants Resource Centre