Services

Audit Exemption

 

Background

Under the terms of section 32 of the Companies (Amendment)(No.2) Act 1999 (as amended by the Companies (Auditing and Accounting) Act 2003, the Investment Funds Companies and Miscellaneous Provisions Act 2006 and the Companies (Amendment)(No.2) Act 1999 (Section 32) Order 2012), companies that meet specific criteria were allowed to avail of an exemption from the requirement to have the accounts, which are appended to their annual return, audited.

A company type - private limited by guarantee without share capital - is not entitled to audit exemption and cannot change type in order to be eligible.

When can you claim your Audit Exemption?

A claim for audit exemption does not arise when a new company is filing its first annual return (required to be made up to the six-month anniversary of the date of incorporation) as no accounts are required to be attached to the first annual return. Audit exemption may be claimed however at the time of the company's first annual return with accounts or when subsequent annual returns are being filed.

Conditions to be satisfied

The conditions to be satisfied (revised) before a company will be able to claim the exemption from the requirement to have its accounts audited are set out in section 32(3) of the 1999 Act (as amended by the Companies (Auditing and Accounting) Act 2003, the Investment Funds Companies and Miscellaneous Provisions Act 2006 and the Companies (Amendment)(No.2) Act 1999 (Section 32) Order 2012) and are as follows:

In respect of the financial year concerned:

  • The company must be a company to which the Companies (Amendment) Act 1986 applies i.e. a Private Limited Company;
  • The amount of turnover of the company must not exceed  €8.8 million;
  • The balance sheet total of the company is less than €4.4 million at the end of its financial year;
  • The average number of employees must not exceed 50;
  • The company must not be a parent company or a subsidiary company;
  • The company must not come within one of 19 classes of companies listed in the Second Schedule to the 1999 Act; Please see Attorney Generals website for Second Schedule;
  • The company's annual return, to which the accounts for the financial year in question are attached, must be furnished to the CRO in compliance with section 127 Companies Act 1963. This means that the return must be delivered to the CRO not later than 28 days after the company's Annual Return Date, or where the return has been made up to an earlier date, within 28 days of that earlier date. i.e.it must not be late in the current year;
  • Furthermore, where an annual return to which accounts for the immediately preceding financial year was delivered to the CRO, that return must also have been filed on time. i.e. it must not be late in the previous year;
  • the year in question must be the current year - section 32 provides that the directors must be of the opinion that the company "will satisfy" the conditions - use of the future tense precludes the decision being taken in respect of a year that has already ended.
  • A company which satisfies the revised exemption threshold levels in a current financial year, the year in respect of which the audit exemption is being claimed, must also have satisfied those revised threshold levels in the preceding financial year.

Unless the financial year in respect of which the audit exemption is being claimed is the first financial year of the company, the company must also have satisfied all the conditions set out in section 32(3) in respect of the preceding financial year. For instance, if the most recent company's annual return with accounts was delivered late to the CRO or if the current years return is being delivered late, the company is not entitled to the audit exemption, notwithstanding that it may satisfy all the remaining conditions.

"Balance sheet total", in relation to any financial year of a company, means-

  • (a) Where Format 1 of the balance sheet formats set out in the Schedule to this Act [Companies (Amendment) Act 1986] is adopted by the company, the aggregate of the amounts shown in the company's balance sheet for that year under headings corresponding to items A (fixed assets) and B (current assets) in the format,
  • (b) Where Format 2 of those formats is adopted by the company, the aggregate of the amounts so shown under "Assets", and
  • (c) Where the company prepares IFRA individual accounts, the aggregate of the amounts shown as assets in the balance sheet.

All relevant legislation can be downloaded from http://www.irishstatutebook.ie/

 

Effects of the Legislation - Points to watch...

  • The directors of exempt companies are still obliged to prepare accounts which comply with the Companies Acts 1963 to 2012 and show a true and fair view i.e. comply with the Companies (Amendment) Act, 1986 (layout of accounts) and with accounting and financial reporting standards.
  • The Articles of Association of existing companies may require the company to appoint auditors. Therefore to take advantage of the audit exemption legislation a special resolution amending the articles may be necessary.

It is impossible to summarise all aspects of the legislation here and therefore clients should read a copy of the Act in order to gain a full knowledge of the law or give us a call for further information.