On 15 June 2016, the Minister for Jobs, Enterprise and Innovation signed the European Union (Statutory Audits) (Directive 2006/43/EC, as amended by Directive 2014/56/EU, And Regulation (EU) No 537/2014) Regulations 2016 (S.I. No. 312 of 2016) (the ‘Regulations’) which came into operation on the 17 June 2016. One of the impacts of the Regulations is that IAASA is now responsible for the adoption of the auditing framework in Ireland.
Prior to the coming into force of the Regulations, the UK’s Financial Reporting Council (‘FRC’) was the audit standard setter in Ireland. The practical consequence of the Regulations is that, post-17 June 2016, the FRC can no longer issue auditing standards for both the UK and Ireland. The FRC audit framework continues to apply to Irish audit engagements with financial periods beginning before 17 June 2016.
The FRC’s audit framework is comprised of:
- International Standard on Quality Control (UK) 1;
- International Standards on Auditing (UK); and
- FRC Revised Ethical Standard June 2016.
With regard to which auditing framework to adopt for Irish audit engagements in relation to financial periods beginning on or after 17 June 2016, the options identified are to:
- adopt an Irish version of the UK FRC standards under licence from the FRC;
- adopt the international standards under licence from the International Federation of Accountants (‘IFAC’) and provide Irish guidance; or
- create Irish auditing standards.
The first two options are based on the premise that licence agreements can be put in place with either the FRC or IFAC. It is IAASA’s intention to issue a full public consultation paper to seek views on this matter in Q3/2016.
It is envisaged that the public consultation process will not be completed until Q4 2016, having allowed ample time for respondents to consider all aspects of the matter. Prior to the consultation and for the purposes of consistency for Irish auditors, IAASA has been in discussions with the FRC on obtaining a licence to use its audit framework in Ireland. While IAASA’s work is almost complete on tailoring the existing FRC standards for use in Ireland, the licence with the FRC is not in place as yet. It should be noted that this is a temporary measure until the public consultation takes place. In terms of tailoring the UK FRC audit framework for use in Ireland, the exercise consists of removing UK references and replacing them with Irish references and amending the framework in any area where it is in conflict with Irish company law. The changes are expected to be minimal on the basis that the UK audit framework has already been consulted on extensively and this included Irish stakeholders.
In summary, IAASA’s plan is to:
- obtain a licence from the UK FRC;
- tailor the UK FRC audit framework for use in Ireland until completion of the public consultation process;
- issue a full public consultation paper to seek views on which audit framework should be adopted in Ireland;
- obtain public consultation responses and provide feedback on the consultation; and
- adopt an audit framework for Ireland and enter into licensing agreement with the FRC or IFAC, as appropriate.
IAASA’s indicative time table on the adoption of auditing standards may be accessed here