ICAI Calls For Increase In Audit Exemption Threshold For Irish Firms

by Jason Gorringe, Tax-News.com, London

21 March 2006

The Institute of Chartered Accountants in Ireland (ICAI) has published a position paper calling for an increase in the audit exemption threshold to the maximum level permitted under European law.

Currently, the maximum permitted level under EU law is a turnover of EUR7.3m - but the current Irish equivalent is EUR1.5m.

The ICAI argues that the disparity between the threshold level in Ireland against that of the UK (GBP5.6m) raises competitiveness questions for Irish businesses.

Furthermore, the paper argues that the introduction of new and complex auditing standards (International Standards on Auditing) for all audits this year compounds this problem further.

Commenting on the disparity, ICAI President, John Greely, noted that:

“The bottom line is that a company based in Dundalk is now facing a different and more costly audit regime than its counterpart north of the border. This is a competitiveness issue for our SME sector."

"The problem has existed since the UK raised their audit exemption threshold to GBP5.6m soon after the Irish Government raised the threshold here to EUR1.5m. Moves in Europe, would allow the UK Government to increase this threshold even further."

"While ICAI is fully supportive of the introduction of ISAs there is no doubt that issues arise, including cost, when the standards are applied to the SME sector."

The ICAI paper suggests that alternative forms of assurance, short of the statutory audit, be considered for companies that would not face an audit were the threshold raised to the maximum permitted level.

Mr Greely added that:

“An audit remains a critical pillar in the accountability and governance regimes that apply to Irish and international public interest entities. However, the statutory audit is currently being used as a ‘one size fits all’ model for external assurance requirements that it is not designed or necessary to fulfil."

"The level of statutory and reporting obligations that now arise from an audit are such that an alternative form of assurance should be considered for smaller entities. The law already provides that a minority group of shareholders can request an audit even in a company entitled to avail of audit exemption, if they feel the circumstances require it.”

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