How to avoid a costly Statutory Audit

Many companies are required to attach audited accounts to their annual returns under the terms of the Companies Amendment Act, 1986. However, an exemption from audit is available for small companies. This can reduce the administrative burden as well as professional fees.

An audit is an independent examination of a company’s financial statements. The auditor forms an opinion on the financial statements and attaches a report to the financial statements. Because auditors are bound by strict auditing standards, even for small companies, an audit can be expensive.

If a company claims exemption from audit, an auditor does not have to be appointed and a company can either prepare its own accounts are appoint an accountant to prepare them.

How to Qualify

The conditions to be satisfied to claim audit exemption are as follows:

  • The company must be a Private Limited Company. A private company limited by guarantee without share capital is not entitled to audit exemption.
  • Turnover must not exceed €8.8 million in the current year and preceding year.
  • Balance sheet total is less than €4.4 million at the end of the current year and preceding year.
  • Average number of employees must not exceed 50 in the current year and preceding year.
  • 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 (e.g. banks, insurance companies).
  • The Annual Return and accounts to the CRO must have been filed on time in the current year and preceding year.

Audit Exemption Process

In order to avail of the exemption, the directors of the company must convene a meeting to decide that the company will avail of the exemption for the financial year (provided it will meet the criteria) and record that decision in the minute book. Directors will need to be mindful that third parties may still require an audit to be completed such as bankers or grant agencies.

The company will then inform the auditor that the company will be claiming audit exemption. The auditor must then write to the company and state whether there are any circumstances connected with the decision of the company to terminate his/her appointment that he/she considers should be brought to the notice of the members or creditors of the company. If there are such circumstances, the auditor must detail them in the notice to the company. The auditor must also send a copy of this notice to the Registrar of Companies within 14 days.

It is not possible to claim audit exemption for a financial year that has already ended.

Accounts Disclosures

Once audit exemption has been claimed, it is a requirement to include the following statement on the Balance Sheet:

“We as directors of ABC Limited state that:

(a)    that the company is availing itself of the exemption provided for by Part III of the Companies (Amendment)(No. 2) Act 1999

(b)   that the company satisfies the conditions specified in section 32 of the 1999 Act (as amended by section 53 of the Companies (Auditing and Accounting) Act 2003, section 9 Investment Funds Companies and Miscellaneous Provisions Act 2006 and the Companies (Amendment)(No.2) Act 1999 (Section 32) Order 2012)

(c)    that the shareholders of the company have not served a notice on the company under section 33(1) in accordance with section 33(2) of the 1999 Act

(d)   we acknowledge the company’s obligations under the Companies Acts 1963 – 2012, to keep proper books of account and prepare accounts which give a true and fair view of the state of affairs of the company at the end of its financial year and of its profit or loss for such a year and to otherwise comply with the provisions of those Acts relating to accounts so far as they are applicable to the company”

Claiming audit exemption can save both time and fees and is worth considering if there are no third parties who require audited accounts.  However, once claimed, directors should ensure that annual returns are filed on time so that the company doesn’t lose audit exemption.

Remember that even if a company has claimed audit exemption, it must still file an annual return.

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2 thoughts on “How to avoid a costly Statutory Audit

  1. Bridgette Compton Reply

    Our company has audit exemption. I am the new accountant and previously worked in the UK. I have never filed accounts in Ireland. We still qualify for audit exemption and all previous years accounts have been filed on time. My question is when I file the latest set of accounts, is there a box to tick to say that we are still claiming audit exemption or is just filing the accounts which have the necessary notes on the balance sheet suficient. I have signed up to file through core.ie.

  2. Orla Linehan Post authorReply

    Hi Bridgette,

    Thanks for your comment. When you are completing the Annual Return Form B1 on CORE, there will be a box to tick to confirm the company is claiming audit exemption.

    Best regards,

    Orla

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