Many companies are required to attach audited accounts to their annual return to the Companies Office. 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 not be a Public Limited Company, Public Unlimited Company, Investment Company, credit institution, insurance undertaking or any company referred to in the Fifth Schedule to the 2014 Act
- Turnover must not exceed €12 million in the current year and preceding year.
- Balance sheet total is less than €6 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.
- Small group companies may qualify for audit exemption
- The Annual Return and accounts to the CRO must have been filed on time in the preceding year. If an annual return is filed late, the financial statements must be audited for the following two years.
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.
Once audit exemption has been claimed, it is a requirement to include the following statement on the Balance Sheet:
I/We, as director(s) of (company name), state that:
(a) the company is availing itself of the exemption provided for by Chapter 15 of Part 6 of the Companies Act 2014,
(b) the company is availing itself of the exemption on the grounds that the conditions specified in s.358 are satisfied,
(c) the shareholders of the company have not served a notice on the company under s.334(1) in accordance with s.334(2),
(d) we acknowledge the company’s obligations under the Companies Act 2014, to keep adequate accounting records and prepare Financial Statements which give a true and fair view of the assets, liabilities and financial position 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 Companies Act 2014 relating to Financial Statements so far as they are applicable to the company,
(e) the company has relied on the specified exemption contained in s.352 Companies Act 2014; and has done so on the grounds that the company is entitled to the benefit of that exemption as a small company and the abridged Financial Statements have been properly prepared in accordance with s.353 Companies Act 2014. [If claiming exemption from filing full financial statements also.]
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.
As always, if you have any queries, please leave a comment below.