Essential Advisors Mix - A


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Essential Advisors Mix - A

  1. 1. Education & Training The Essential Advisors Mix 2011 Auditing Update 2011 and New Developments in the Profession Presenter: Des O’Neill CPA; A.C.I.S; ACCA OmniPro Education & TrainingUnit 3 South Court, Block D, Iveagh Court,Wexford Road Business Park, 5 – 8 Harcourt Road,Carlow. Dublin 2.059 9183888 01
  2. 2. Auditing Update 2011- New Developments in the ProfessionContents PageNew Developments Affecting the Profession 1Irish Audit Resource List 2011 26Annual Firm Review Checklist 29OmniPro ISA File Review Checklist 33An Overview of Anti-Money Laundering Requirements for Firms 44European Communities (Statutory Audit) Regulations 46Principal Features of the Charities Acts 2009 52Minister Alan Shatter TD Speech on Charities November 2011 62Irish Audit Resource List 2011 70Summary of Changes to the Clarity ISA’s 73Audit Letter of Engagement 97Audit Planning Letter 107Audit Planning Meeting 111Audit Conclusion Meeting 115Audit Findings Letter 120Summary of Unadjusted Differences 124Component Materiality and Sample Size Calculation 125Accountants Resource Centre 2011 Extracts 126Letter of Representation 140
  3. 3. New Developments Affecting the Profession• What is hot in Monitoring Visits?• New Anti-Money Laundering Procedures• The new EC Audit Regulations• Property Management Companies – The impact of the Multi-Unit Development Act• Charitable Company Audits – The New Charities Regulatory Authority? New Developments Affecting the Profession• Proposed changes to the Solicitors Accounts Regulations• The ODCE and indictable offences• Managing your Accountancy Practice• Practice Incorporation• The Clarity Standards Impact OmniPro Education & Training 1 of 322
  4. 4. What is hot on the Monitoring Agenda?• Clarity ISAs• Updated programmes• Client communications – Letter of engagement, letter of representation, audit findings letters, client meetings• Materiality and summary of unadjusted differences• Management estimates• Group audits What is hot on the Monitoring Agenda?• Ethical threats• Planning detail• Extent of risk assessment• Documentation• Opinion justification and explanation• External confirmations What is hot on the Monitoring Agenda?• Financial statements disclosures and control procedures• ISQC1 Manuals• Annual Compliance Reviews• ODCE Reporting requirements• Modified audit opinions – Going concern, limitation in scope, adverse opinions, multiple significant uncertainties, emphasis of matter OmniPro Education & Training 2 of 322
  5. 5. What is hot on the Monitoring Agenda?• Commission disclosure• Investment business procedures• CPD – IES 7 & IES 8• Client monies and client account usage• Headed paper and practice status• PII Compound firms The Focus of Monitoring in the Future!• Audit Exempt Companies• Unincorporated entities• Expanded review of Anti-Money Laundering• Taxation Reviews• Investment Business• Incorporated practices• Insolvency??? Anti Money Laundering• Criminal Justice (Money Laundering & Terrorist) Act 2010• Commenced July 2010• CCABI Guidance Issued September 2010- M42• Significant changes requiring action• New procedures• New actions• New documentation OmniPro Education & Training 3 of 322
  6. 6. Anti Money Laundering• In a nutshell• Establish and implement revised procedures• Undertake a risk assessment of procedures• Implement a training regime• Verify identify of ALL clients Anti Money Laundering• Customer Due Diligence Provisions• Verify the identity of the beneficial owner• Implement enhanced or simplified due diligence procedures• Obtain information prior to establishing the relationship• Monitor dealings with clients• Report as required Anti Money Laundering• Adopt policies and procedures – Assessment and management of risks – Create and implement internal controls – Monitor and manage compliance – Undertake ongoing training• Keep records OmniPro Education & Training 4 of 322
  7. 7. Anti Money Laundering• Supervision by Competent Authorities• Offences for failure to report• The reporting Obligations• Knowledge and suspicion• Requirement for an MLRO?• CCABI Guidance Document M42 Anti Money Laundering• Procedures Required – AML Procedures Manual• Systems• Risk Assessment• Record Keeping• Reporting Procedures• Communication and Training Anti Money Laundering• Firm risk assessment• How the firm manages anti money laundering and their own procedures• Type of services offered to clients• Client base review• Actual client documentation review• Reporting procedures OmniPro Education & Training 5 of 322
  8. 8. EC Audit Regulations 2010• The European Communities (Statutory Audits) (Directive 2006/43/EC) Regulations 2010• Permitting Statutory Auditors to operate as body corporate;• Incoming Statutory Auditor afforded access to information• Requirements relating to signing of audit reports• Transparency report of Public Interest Entities EC Audit Regulations 2010• Removal of Auditor & Notification Obligations Public Register of Auditors• Independence Provisions for Auditors• Audit Committees for Public Interest Entities• Disclosure of Auditors’ Remuneration of audit & non-audit work• Statutory obligations regarding continuing education, professional ethics, independence and objectivity Property Management Companies• Multi Unit Development Act 2011• Issued January 2011• Commenced 1 April 2011• Common areas must be transferred within 6 months of enactment – 1 October 2011• Sinking fund to be established within 18 months of enactment – 1 October 2012 OmniPro Education & Training 6 of 322
  9. 9. Property Management Companies• Company Law Issues• Financial Reporting Issues• Auditing Issues• ODCE Issues• Practice Management Issues• Risk Issues Property Management Companies• Transfer of Common Areas• Planning• Solicitor communication• Alternative audit evidence• Disclosures• Audit opinion modification Property Management Companies• Fixed Asset register and classification• Collectability of debtors• Related party transactions• Use of a service organisation• Company secretarial completeness and accuracy• Sinking fund and management estimates OmniPro Education & Training 7 of 322
  10. 10. Property Management Companies• Quality control procedures• Independence and ethical issues• Audit planning• Shortcuts on audit programmes• Tailored audit programmes• Fee V quality of audit file V benefit to the client Charities Act 2009• Creation of ‘Charity Regulatory Authority’ (CRA)• Register of Charities• Regulation of charitable organisations• Protection of charitable organisations• Charities Appeal Tribunal• Dissolution of Commissioners of Charitable Donations and Bequests for Ireland Charities Act 2009• Statutory definition of “charitable purpose”• Accounting, audit or independent examination obligations imposed on all charities not incorporated under the Companies Acts• Reporting requirement to the authority if offence committed• Fundraising legislation changes OmniPro Education & Training 8 of 322
  11. 11. Charities Act 2009• Annual Reports, Accounts & Audits• Legal Form for Charities• Relationship with other statutory bodies• Charity trustees• Organisations deemed to be registered The Charities Act and Charities Audits• S 99 commenced 1/9/09 - Mass Cards• S 4 26/06/10 – Minister may provide for any element of the act by laying them before the Oireachtas• S.90 26/06/10 – Power of court to grant relief from liability for breach of trust The Charities Act U-Turn• November 2011• Full Implementation not feasible• Extra employees• Extra cost• Focus on Fund raising codes of practice OmniPro Education & Training 9 of 322
  12. 12. Auditing of Charities• Financial reporting framework• To SORP or not to SORP?• Planning issues – controls and systems• Property valuations, impairments and ownership• Completeness of income• Going concern – recession, future funding, amalgamation Proposed Changes to Solicitors Accounts Regulations• Restricting authorised signatories• Balancing dates at three six and nine months• Books of account to show the true financial position of the practice• Specific instructions where a solicitor authorised by a client not to lodge monies to a client account• Solicitors required to prepare a trial balance at each balancing date Proposed Changes to Solicitors Accounts Regulations• Breach to withdraw monies without an up to date ledger account• Register of Estates• Register of monies placed on joint deposit• Register of client files• Register of undertakings• Register of powers of attorney• Register of wills OmniPro Education & Training 10 of 322
  13. 13. Proposed Changes to Solicitors Accounts Regulations• Register of deeds• Money laundering compliance file• A copy of the financial statements• Minimum monthly back ups• Prohibition on obtaining loans on behalf of clients• Prohibition on borrowing from clients• Prohibition on acting for lender to solicitor Proposed Changes to Solicitors Accounts Regulations• Three months to file the reporting accountants report• Reporting accountant to notify Society of resignation within 7 days and the reasons therefore• Compliance statement to confirm deficit has been cleared and means by which effected• Confirm that procedures in place to ensure future breaches do not occur• Credit balances on the office ledger have been cleared Proposed Changes to Solicitors Accounts Regulations• Reporting accountant to carry out his her examination in accordance with relevant procedures in international standards on auditing• Checks required immediately before and after the balancing dates• Verify that fees drawn in a timely manner• Example a sample of files that constitute a representative sample of the business• Check for compliance with Section 68 OmniPro Education & Training 11 of 322
  14. 14. Proposed Changes to Solicitors Accounts Regulations• Enquire into cash payments• Provide an aged analysis• Review aged analysis for undue delays• Review compliance with Interest Regulations• Review the financial position of the practice and where it gives rise to concerns as to the solvency of the firm provide a statement of the financial position to the Law Society. Proposed Changes to Solicitors Accounts Regulations• More work for the solicitor?• More work for the accountant?• New programmes and procedures• Increased risk• Expanded remit linking process to clarity ISAs• More fees for the accountant? The ODCE and the Auditor• Reporting of indictable offences CLEA 2001• Complaints from shareholders, directors, investors• Investigation and review of own accord• No grey areas OmniPro Education & Training 12 of 322
  15. 15. The ODCE and the Auditor• Incorrect formats of financial statements – FRS, SSAPs, CA – Incorrect or badly worded notes – Committed cashflows – Incorrect formats of abridged accounts• Incorrect audit opinions – Not modified when should be – Modified implying reportable indictable offence but no report – Incorrect wording of opinion The ODCE and the Auditor• Timely reporting of offences – Reason for the delay – Previous period review – The auditor should report forthwith• Communication – Verbal V written – Telephone, writing, fax, email – Timelines and deadlines• Reporting to the regulating Institute The ODCE and the Auditor• Review all files• Review all financial statements• Review all abridged financial statements• Review all audit opinions• Create action plan• Modify correct and regularise• Report on a timely basis OmniPro Education & Training 13 of 322
  16. 16. Managing Accounting Practices in Difficult Times• The simple things shine always shine through - Quality of service• The biggest challenge of all - Communications internal and external• Spice Girls – What you really really want• Looking after the golden goose – the firm & the partners/principle Managing Accounting Practices in Difficult Times• Billing and Collections – In a perfect world Time worked = Time billed = Cash Collected• Optimising Team Performance• Improving Practice Efficiency• The Practice Management Dashboard• Some Lessons Learned Growing Your Practice• Efficiency• Own Clients• Referrals from Existing Clients• Marketing and business development• Winning New Clients• Merger• Acquisition OmniPro Education & Training 14 of 322
  17. 17. Practice Incorporation• European Communities (Statutory Audit) Directive 2006/43/EC• Companies Act 1990• Prohibition under section 187• Change except for appointment of Public Auditors Practice Incorporation• What can you not audit• Public Auditors – Industrial and Provident Societies Acts 1893 to 1978 – Friendly Societies Acts 1896 to 1993• Credit Union Act Section 114• Building Societies Act 1989 Why Not Incorporate?• What can you not audit?• Stamp duty on the sale of goodwill• Professional Services Surcharge• Practice size• Personal borrowings and business structure• Drawing the profits• The long term plan OmniPro Education & Training 15 of 322
  18. 18. Why Incorporate?• Manage risk• Crystallise a capital gain• Create tax free directors loan• Avail of retirement relief or loss relief• Pay tax on profits at reduced tax rate – Top rate income tax V CT rate (& Surcharge)• Facilitate succession and tax planning Practice Incorporation - What to watch for!!!• What is the long term plan• Stamp duty avoidance• Accounting for WIP• Transfer of debtors• Availing of retirement relief• Future and past claimed retirement relief Practice Incorporation - What to watch for!!!• Firm name• PII• IB registration and commissions• Training contracts and HRM• Letters of engagement and client communications• Resignation and IAASA notification OmniPro Education & Training 16 of 322
  19. 19. Practice Incorporation - What to watch for!!!• Goodwill – Basis of valuation – Methodology of transfer• Timing of transfer Clarity Project Approach• Describing an objective for each ISA,• Separating the requirements in each ISA from the application material,• Clarifying the obligations imposed on auditors by the requirements of the ISAs, including eliminating possible ambiguity about the requirements an auditor needs to fulfil arising from the use of the present tense in the guidance to the extant ISAs,• Improving the overall readability and understandability of the ISAs through structural and drafting improvements, and Clarity Project• Reducing the complexity of the existing ISAs – this was seen as being especially important to smaller audit firms with limited technical resources – Small entities application• Increased no of requirements• Clarify obligations on auditors by replacing word “should” with “shall” where relevant• Eliminate ambiguity in existing ISAs by modifying language and clarifying requirements as opposed to information OmniPro Education & Training 17 of 322
  20. 20. Clarity Project• New revised standards effective for periods ending on or after 15th December 2010 ISA 200 – Overall objectives of the Independent Auditor and the conduct of an audit in accordance with the ISAs• Clarify overall objectives of the auditor• The nature and scope of an audit• How the audit meets the objectives of the auditor• purpose of the objectives that are included in all of the other standards• Purpose of an audit – enhance the degree of confidence of intended users of the financial statements ISA 200 – Overall objectives of the Independent Auditor and the conduct of an audit in accordance with the ISAs• To obtain reasonable assurance that the financial statements• Are free from material misstatement either due to fraud or error• Enabling the auditor form an opinion that the FS are prepared in all material respects• In accordance with the applicable financial reporting framework OmniPro Education & Training 18 of 322
  21. 21. ISA 200 – Overall objectives of the Independent Auditor and the conduct of an audit in accordance with the ISAs• Complying with ISAs Relevant to the Audit• Satisfy the objectives stated in the individual ISAs• Comply with the relevant requirements• Respond appropriately when there is failure to achieve an audit objective ISA 200 – Overall objectives of the Independent Auditor and the conduct of an audit in accordance with the ISAs• Determine whether any audit procedures in addition to those required by the ISAs are necessary in pursuance of the objectives stated in the ISAs; ISA 210 – Agreeing the terms of Audit Engagements• Determine whether financial reporting framework to be applied in the preparation of the financial statements is acceptable• Obtain agreement of management that it acknowledges and understands its responsibilities OmniPro Education & Training 19 of 322
  22. 22. ISA 260 – Communication with Those Charged with Governance• Where applicable, explaining why significant accounting practices are not considered most appropriate• Documenting matters communicated orally• Significant difficulties if any encountered during the audit• Significant matters that were discussed or subject to correspondence with managementISA 265 – Communicating Deficiencies in Internal Control to Those Charged with Governance and Management• New Standard• Driven by – EU Audit Directive to report – US Public Company Accounting Oversight Board (PCAOB)• Clarification of material weakness• Deficiency in internal control• Missing controlsISA 320 Materiality in Planning and Performing an Audit• Definition of materiality updated to reflect the size and nature of an item judged in the surrounding circumstances• Introducing guidance on the use of benchmarks but not introducing formulaic rules• Performance materiality and materiality for classes of transactions and account balances OmniPro Education & Training 20 of 322
  23. 23. ISA 402 – Audit Considerations relating to an Entity Using a Service Organisation• Increasing use of service organisations• Need to align the standard with risk assessment standards particularly in relation to internal control• Obtaining Type 2 report from a service auditor• Performing control tests• Using another auditor to perform tests of controlISA 450 Evaluation of Misstatements Identified During the Audit• New Standard• Accumulate all misstatements identified apart from those that are clearly trivial• Re-assess materiality prior to evaluating the effect of uncorrected misstatements in the context of the actual final results• Determining materiality of misstatements – size and effect ISA 505 External Confirmations• “How” of confirmations V “When”• Maintaining control over confirmation requests• Obtain further evidence to resolve doubts about the reliability of responses• Specifying conditions that have to be present if negative confirmations are used• Linking to ISA 330 determine whether they should be used OmniPro Education & Training 21 of 322
  24. 24. ISA 540 Auditing of Accounting Estimates Including Fair Value Accounting Estimates and Related Disclosures• Understanding how management identify transactions that require estimates• How management make estimates• Reviewing outcome of estimates in prior period financial statements and re- estimation if applicable• Evaluating estimation uncertainty and whether this gives rise to risks ISA 550 Related Parties• Audit team discussion in accordance with ISA 315• Obtaining an understanding of the controls – Identify, account for, and disclose related party transactions in accordance with applicable financial reporting framework – Authorise and approve significant transactions outside of normal course of business• Treating identified significant related party transactions outside of the normal course of business ISA 550 Related Parties• Specifying procedures to be preformed if previously undisclosed related party transactions are discovered• Specifying procedures for identified significant related party disclosures – Inspecting contracts – Understanding rationale – Appropriately accounted for and disclosed – Obtaining evidence to support transactions OmniPro Education & Training 22 of 322
  25. 25. ISA 580 Written Representations• Over reliance on written representations• General developments• Not sufficient appropriate audit evidence in own right• Necessary audit evidence but• Must support other audit evidence ISA 600 Special Considerations – Audits of Group Financial Statements (Including the Work of Component Auditors)• Group auditor takes sole responsibility when other auditors are involved in the audit group components• Acceptance• Overall audit strategy and plan• Execution• Conclusion OmniPro Services• Assist Accountants• Maximise profitability• Improve quality of customer service• Be compliant – Institute, audit company & law• Achieve success• Gain peace of mind• The Accountants Resource Centre OmniPro Education & Training 23 of 322
  26. 26. Accountants Resource Centre• Large Company Audit File – Programmes and the integrated working papers and file• Small Company Audit File – Programmes and the integrated working papers and file• Audit Exempt, Sole Trader, Property Management and Charity File• ISQC1 Manual Sole Practitioner and Partner• Template letters and communications• Ongoing technical updates• Members forum OmniPro Services• OmniPro Corporate Consultants – Company Formation Services • Standard Formations for €250.00 (incl VAT) • 24 Hour Turn Around – Company Secretarial Services • Annual Compliance • All Company Secretarial Special Assignments • Company Secretarial Training • Next Door to the Companies Registration Office OmniPro Services• OmniPro Practice Support – Pre-Monitoring Visits – Strategic Planning & Implementation – Practice Development – Practice Sale, Purchase & Merger – In House Training – File Review Services• Practice Incorporation – Valuation – Taxation – General advisory OmniPro Education & Training 24 of 322
  27. 27. OmniPro Services• OmniPro Education & Training – Professional CPD Seminars • Technical CPD • Personal Development Training for Accountants • Online CPD • In House Training OmniPro Supporting Irish Accountants Unit 3, South Court, Iveagh CourtWexford Road Business Park, Harcourt Road Carlow. Dublin 2 059 9183888 01 4110000 OmniPro Education & Training 25 of 322
  28. 28. Auditors Resource List 2011Title Description Source Download1 International Standards on Auditing 2010 Handbook of International Quality Control, Auditing, Review, Other Assurance, and Related Services Pronouncements IAASB General Principles and Responsibilities Overall Objectives of the Independent Auditor and the Conduct of an Audit in200 Accordance with the International Standards on Auditing IAASB Agreeing the Terms of Audit Engagements IAASB Quality Control for an Audit of Financial Information IAASB Audit Documentation IAASB The Auditors Responsibilities relating to Fraud in an Audit of Financial Statements IAASB Consideration of Laws and Regulations in an Audit of Financial Statements IAASB Communication With Those Charged with Governance IAASB Communicating Deficiencies in Internal Control to Those Charged with265 Governance and Management Risk Assesment and Response to Assessed Risks300 Planning an Audit of Financial Statements IAASB Identifying and Assessing the Risks of Material Misstatement through315 Understanding the Entity and Its Environment IAASB Materiality in Planning and Performing an Audit IAASB The Auditors Responses to Assessed Risks IAASB Audit Considerations Relating to an Entity Using a Service Organisation IAASB Evaluation of Misstatements Identified During the Audit IAASB Audit Evidence500 Audit Evidence IAASB Audit Evidence - Specific considerations for Selected Items IAASB External Confirmations IAASB Initial Engagements - Opening Balances IAASB Analytical Procedures IAASB Audit Sampling IAASB Audit of Accounting Estimates, Including Fair Value Accounting Estimates, and540 Related Disclosures IAASB Related Parties IAASB Subsequent Events IAASB Going Concern IAASB Written Representations IAASB Using the Work of Others OmniPro Education & Training 26 of 322
  29. 29. Speicial Considerations - Audits of Group Financial Statements (Including the600 Work of Component Auditors) IAASB Considering the Work of Internal Auditors IAASB Using the work of an Auditors Expert IAASB Audit Conlusions and Reporting700 Forming an Opinion and Reporting on Financial Statements IAASB Modifications to the Opinion in the Independent Auditors Report IAASB Emphasis of Matter Paragraphs and Other Matters Paragraphs in the Independent706 Auditors Report IAASB Comparative Information - Correpsonding Figures and Comparative Financial710 Statements IAASB The Auditors Responsibilities Relating to Other Information in Documents720 Containing Audited Financial Statements IAASB Specialised Areas Audits of Financial Statements Prepared in Accordance with Special Purpose800 Frameworks IAASB Audits of Single Financial Statements and Specific Elements, Accounts or Items of805 a Financial Statement IAASB Engagements to Report on Summary Financial Statements IAASB Ethics 2010 Handbook of Code of Ethics for Professional Accountants IFAC Bulletins2006-1 Auditors Reports on Financial Statements in ROI APB Audit Issues when Financial Market Conditions are Difficult and Credit Facilities2008-1 may be restricted APB Going Concern issues during the Current Economic Conditions APB Auditors Reports on Financial Statements in the United Kingdom APB Practice NotesPN 09 Reports by Auditors under Companies Legislation in ROI APB 11 The audit of Charities in UK APB 15 The audit of Occupational Pension Schemes APB 16 Bank Reports for Audit Purposes in UK APB 19 The Audit of Banks APB 20 The Audit of Insurers APB 21 Audit of Investment Businesses in UK APB 22 Auditors Consideration of FRS 17 Retirement Benefits Defined Pension Schemes APB 23 Auditing Complex Financial Instruments (Interim Guidance) APB 24 Audit of Friendly Societies in UK APB 25 Attendance at Stock Taking APB 26 Guidance on Smaller Entity Audit Documentation (Revised Dec 2009) APB OmniPro Education & Training 27 of 322
  30. 30. PN 27 The Audit of Credit Unions APB Miscellaneous Technical StatementsM01 Auctioneer and House Agents Acts 1947 and 1967 CCABI Institute WebsiteM09 Accouting for goods sold subject to reservation of title CCABI Institute WebsiteM21 Directors obligation under Section 40 of the Companies (Amendment) Act 1983 CCABI Institute WebsiteM22 Credit Unions - ROI CCABI Institute Website Accountants report on license applications to Department of Tourism, TransportM27 and Communications Dublin CCABI Institute WebsiteM31 Accounting for redemption and purchase of own shares by companies in ROI CCABI Institute WebsiteM32 Related party disclosures CCABI Institute WebsiteM35 Solicitors accounts Regulations 1998 - Northern Ireland CCABI Institute WebsiteM37 Restoration of companies to register - ROI CCABI Institute WebsiteM38 Solicitors accounts regulations 2001 - ROI CCABI Institute WebsiteM39 Reporting to third parties CCABI Institute Website Chartered Accountants reports on compilation of financial statements ofM41 incorporated entities CCABI Institute WebsiteM42 Anti Money Laundering Guidance in ROI CCABI Institute WebsiteM43 Compilation of alternative annual reports of certain pension schemes in ROI CCABI Institute Website Guidance reporting Guidance Notes 1 05 UCITS Publication of a simplifiedM44 prospectus issued by Financial Regulator CCABI Institute WebsiteM45 Grant claims CCABI Institute Website Reporting to Financial Regulator under Central Bank and Financial ServicesM46 Authority of Ireland Act 2004 revised January 2005 CCABI Institute Website Guidance for reporting in accordance with client money regulations issued byM47 Financial Regulator February 2004 CCABI Institute Website Chartered Accountants Reports on compilation of Historical Financial informationM48 of Unincorporated Entities CCABI Institute Website6 General ISQC1 International Standard on Quality Control IAASB Guide to Using the ISAs for SMEs IFAC Guide to Quality Control for SMEs Applying ISAs Proportionately with the Size and Complexity of an Entity IFAC Audit Considerations in Respect of Going Concern in the Current Economic Environment IFAC Emerging Practical Issues Regarding the use of External Confirmations in the Audit of Financial Statements IFAC Challenges in Auditing Fair Value Accounting Estimates in the Current Market Environment IFAC The Role of Small and Medium Practices in providing Business Support to Small and Medium sized Enterprises IFAC Quality Control for Small and Medium Sized Practices IFAC OmniPro Education & Training 28 of 322
  31. 31. For Training Purposes OnlyPractice Review Reference Initials DateFile Review InformationPractice Name Year End This form is for guidance purposes only and should be tailored and amended as required, depending on the individual practice. Supporting documentary evidence should be retained as required throughout the questionnairePractice - Review Procedures Relevant Yes No Comment RefHas the firm completed an annualcompliance review in the last 12 months?Was this performed by an independent andsuitably qualified and experienced individual?Have the findings of the latest compliancereview and associated actions beenexecuted accordingly ?Is there any tailoring required for thepurposes of the current review or any issueswhich may affect the nature an focus of thereview ?Any significant changes to the structure ofthe practice?Does the firm have a current Internal ControlProcedures Manual that complies with ISQC1Is there evidence that the procedures set outin the Firms internal control proceduremanual are implemented and fully compliedwithIs the firm adequately authorised to provideall services currently being provided?Control & Ownership of the Firm Relevant Yes No Comment RefAre 51% of the voting rights and more than50% of the partners qualified individuals?Is the firm owned and controlled to matchthe public designation as a firm attaching tothe relevant Institute?Are all partners under the supervision of asuitably qualified person?Have all partners and staff completed anannual declaration of "Fit & Proper" OmniPro Firm Review Checklist 2011 OmniPro Education & Training 29 of 322
  32. 32. For Training Purposes OnlyDocumentation & Procedures Relevant Yes No Comment RefAre letters of engagement issued for allengagementsAre letters of professional clearanceobtained for all new engagementsReview the communications of the firm withthe InstituteAre all these communications completed ona timely basisReview the latest annual return submitted tothe InstituteDoes the firms standard stationary fullycomply with the Institute RegulationsIs there a complaints register maintained bythe firmAre there suitable procedures for identifyingnew clients?Are there suitable anti-money launderingprocedures in place and are theseprocedures implementedIs there a letter of engagement in place withall contractors and /or external consultants?Does the firm hold Practice QualityMonitoring meetings and is there minutesand schedules to support the outcomes ofthese meetings and the associated actionsProfessional Indemnity Insurance Relevant Yes No Comment RefDoes the firm have a current valid PII Policyin placeIs there evidence of continuity of coverDoes the PII policy reflect the level of riskreflected in the client baseDoes the cover comply with the InstituteRegulationsHave there been any claims against thefirms PII PolicyAre there any complaints currently inprocess that may give rise to a claimHave these complaints been recorded andnotified to the Institute and the InsurerIs there run off and/ or alternate cover whereapplicable OmniPro Firm Review Checklist 2011 OmniPro Education & Training 30 of 322
  33. 33. For Training Purposes OnlyCommissions & Client MoniesDoes the firm receive commissionsDoes the firm receive or hold clients moniesHave the clients been notified in advance ofthe fact that commissions are being retainedHave the clients given written authority toretain the commissionsHave any connections with third partyproviders been disclosed to the clientsDoes the firm have a suitably designatedclient money accountHave any client funds been passed throughnon client designated firm controlled bankaccountsIs there sufficient supporting documentationto support all transactions processedthrough the client back account?Has the client bank account beenconsistently reconciled on a timely basisthroughout the period?Ethical ObligationsAre there independence procedures withinthe firmIs there evidence demonstrating that theseprocedures have been complied with on theclient filesHave all partners and staff maintained theirprofessional competence in accordance withthe relevant Institutes CPD requirementsAre annual staff appraisals undertakenDoes the firms internal control proceduresmanual meet the relevant obligations andregulations in relation to HRMHas the firm complied fully with the HRMprocedures set out as part of their InternalControl Procedures ManualDoes the firm have an ethics partner?Are peer or external reviews undertaken aspart of the firms standard procedures?Are these reviews suitably documented andrecorded with clear evidence that therequired follow up actions have beenundertakenIs there consultation agreements in placewith suitably qualified external consultants? OmniPro Firm Review Checklist 2011 OmniPro Education & Training 31 of 322
  34. 34. For Training Purposes OnlyInvestment BusinessIs the firm authorised to perform investmentbusiness?Does the firm have suitable authorisation forthe investment advice it provides to itsclientsAre there suitably documented investmentbusiness procedures?Have these procedures been complied with OmniPro Firm Review Checklist 2011 OmniPro Education & Training 32 of 322
  35. 35. Practice Review Reference Initials Date File Review Information Company Name Year End Financial Information €000 Turnover Audit Fee Profit No.of Employees Balance Sheet Total Net Assets Correct Size Criteria Audit File - Initial Overview ISA Yes No Comment RefO1 Basic File StructureO2 Audit Programs & UsageO3 Lead SchedulesO4 Referencing & Sub ReferencingO5 WP Signed & DatedO6 Partner Review Evident Audit Planning ISA Yes No Comment RefP1 Dated in advance of auditP2 Audit acceptance procedures adequateP3 Ethical standards considered and safeguards appliedP4 Overall audit strategyP5 Engagement team briefedP6 Engagement team selection & budgetP7 Terms of engagement considered and tailoredP8 Letter of engagement issuedP9 Audit planning meeting with client documentedP10 Audit planning letter issuedP11 Consideration of relevant laws and regulationsP12 Initial analytical review performedP13 Client knowledge and background documentedP14 Permanent audit file updatedP15 Understanding the entityP16 Industry regulatory & Other external factorsP17 Nature of the entityP18 Objectives and strategies OmniPro File Review Checklist 2011 V2 OmniPro Education & Training 33 of 322
  36. 36. Audit Planning ISA Yes No Comment RefP19 Measurement and review of Fin PerformanceP20 Internal controls recorded and assessedP21 Accounting systems recorded and assessedP22 Audit risk assessed and identifiedP23 Inherent risk assessedP24 Specific risk assessedP25 Consideration of fraud and errorP26 Enquiries made of management in relation to fraudP27 Management oerride consideredP28 Revenue recognition consideredP29 Specific responses to risk documentedP30 Third party reporting consideredP31 Materiality SetP32 Sample size calculationP33 References made to audit evidence obtained as part of the accounting processP34 Section Scoring Max Score Sectional Audit Execution Audit Area Weighting Total 20 0E1 Fixed Assets Percentage 0%E2 Stocks 0%E3 Debtors 0%E4 Bank & Cash 0%E5 Trade Creditors 0%E6 Other Creditors 0%E7 Loans/Leasing Etc 0%E8 P&L & System Testing 0%E9 Other 0%E10 Other 0%E11 Taxation 0%E12 Company Secretarial 0% OmniPro File Review Checklist 2011 V2 OmniPro Education & Training 34 of 322
  37. 37. E2 Fixed Assets Weight 0% Max Score 0 ISA Yes No Comment Ref1 BS @ LS2 Up To date auitable audit programme in use3 Audit programmes tailored4 Referencing & Sub Referencing5 WP Initialed and Dated6 Partner review7 Section concluded8 Policies Considered9 Fixed Asset register10 Schedule of additions11 Assets physically verified12 Vehicle registration documents13 Disposals14 Title documents inspected15 Insurance cover review16 R&R review17 Lease review18 Intangible FA existence19 Sufficient audit work on section Sectional ScoreE3 Stocks Weight 0% Max Score 0 ISA Yes No Comment Ref1 BS @ LS2 Up To date auitable audit programme in use3 Audit programmes tailored4 Referencing & Sub Referencing5 WP Initialed and Dated6 Partner review7 Section concluded8 Policies Considered9 Final stock sheets10 Mathematical checks11 Stocktake attendance12 Count Checks13 Cut off procedures14 Analytical review15 Slow moving obsolete stock16 3rd party stocks17 Stock pricing18 Work in progress testing19 Independent valuations20 Sufficient audit work on section Sectional Score OmniPro File Review Checklist 2011 V2 OmniPro Education & Training 35 of 322
  38. 38. E4 Debtors Weight 0% Max Score 0 ISA Yes No Comment Ref1 BS @ LS2 Up To date auitable audit programme in use3 Audit programmes tailored4 Referencing & Sub Referencing5 WP Initialed and Dated6 Partner review7 Section concluded8 Policies Considered9 Aged debtors listing on file10 Mathematical checks11 Agreed to control account12 Credit balance verification13 Debtors circularisation14 Traced to post year end receipts15 Third party confirmations16 Bad debt review17 Analytical review18 Cut off testing19 Transaction testing20 Prepayments supported/vouched21 Pre/post year end trans review22 Sufficient audit work on section Sectional ScoreE5 Bank Weight 0% Max Score 0 ISA Yes No Comment Ref1 BS @ LS2 Up To date auitable audit programme in use3 Audit programmes tailored4 Referencing & Sub Referencing5 WP Initialed and Dated6 Partner review7 Section concluded8 Policies Considered9 Bank reconciliation10 O/S Trans traced to pye BS11 Pre/post year end trans review12 Trace to original records13 Bank confirmation14 Cash count15 Disclosure review16 Presentation review17 Sufficient audit work on section Sectional Score OmniPro File Review Checklist 2011 V2 OmniPro Education & Training 36 of 322
  39. 39. E6 Creditors Weight 0% Max Score 0 ISA Yes No Comment Ref1 BS @ LS2 Up To date auitable audit programme in use3 Audit programmes tailored4 Referencing & Sub Referencing5 WP Initialed and Dated6 Partner review7 Section concluded8 Policies Considered9 Aged creditors listing on file10 Mathematical checks11 Agreed to control account12 Debit balance verification13 Reconcile to creditors statements14 Trace to post year end payments15 Third party confirmations16 Quantify reservation of title17 Analytical review18 Cut off testing19 Transaction testing20 Accruals supported/vouched21 Post year end payments traced22 Pre/post year end trans review23 Sufficient audit work on section Sectional ScoreE7 Other Creditors Weight 0% Max Score 0 ISA Yes No Comment Ref1 Supporting documentation2 Post year end payments traced3 VAT/PAYE up to date4 Control accounts prepared5 Reconciliations performed6 Directors loan accounts7 Related co loan accounts8 Sufficient audit work on section Sectional ScoreE8 Loans & Leasing Weight 0% Max Score 0 ISA Yes No Comment Ref1 Lead schedule prepared2 Calculations correct3 Supporting documentation4 Payments traced5 Sufficient audit work on section Sectional Score OmniPro File Review Checklist 2011 V2 OmniPro Education & Training 37 of 322
  40. 40. E9 Profit & Loss & System Testing Weight 0% Max Score 0 ISA Yes No Comment Ref 1 Referencing & Sub Referencing 2 Up To date auitable audit programme in use 3 Audit programmes tailored 4 WP Initialed and Dated 5 Partner review 6 Section concluded 7 Policies Considered 8 Analytical review 9 Detailed analysis10 Supporting documentation11 Wages testing12 VAT testing13 Sales transactions testing14 Cash sales testing15 Timeliness of transactions16 Lifestye review17 Limitation of scope review18 Purchases transaction testing19 Cut off testing20 System Testing21 Sufficient audit work on section Sectional ScoreE10 Investments Weight 0% Max Score 0 ISA Yes No Comment Ref 1 BS @ LS 2 Referencing & Sub Referencing 3 WP Initialed and Dated 4 Partner review 5 Section concluded 6 Adequate testing performed 7 Sufficient audit work on section Sectional ScoreE11 Taxation Weight Yes Max Score ISA Yes No Comment Ref 1 BS @ LS 2 Up To date auitable audit programme in use 3 Referencing & Sub Referencing 4 WP Initialed and Dated 5 Partner review 6 Section concluded OmniPro File Review Checklist 2011 V2 OmniPro Education & Training 38 of 322
  41. 41. Taxation Weight 0% Max Score ISA Yes No Comment Ref 7 Policies Considered 8 Agree to notices of assesment 9 Prepare a tax computation10 Consider defferred tax11 Client advised on time12 Tax and cor. up to date12 Sufficient audit work on section Sectional ScoreE12 Company Secretarial Weight 0% Max Score ISA Yes No Comment Ref 1 BS @ LS 2 Up To date auitable audit programme in use 3 Referencing & Sub Referencing 4 WP Initialed and Dated 5 Partner review 6 Section concluded 7 Policies Considered 8 Meeting minutes examined 9 Reserve movements agreed10 S/H funds split eq/non equity11 Accounts format correct12 Abridged Acs @ with FS13 Statutory books up to date14 Returns filed on time15 Sufficient audit work on section Sectional Score Execution Summary ISA Yes No Comment RefES1 Opening balances agreedES2 Sample selection processES3 Results of samples testedES4 Working papers adequate support opinionES5 Lead schedules showing copmaratives acurateES6 Material balances subject to sufficient audit workES7 Reliance on work of expert appropriateES8 Sufficient conclusions reached on each section OmniPro File Review Checklist 2011 V2 OmniPro Education & Training 39 of 322
  42. 42. Audit Completion ISA Yes No Comment RefC1 Evdience of review and supervisionC2 All outstanding points clearedC3 Summary of significant mattersC4 Significant matters reviewed and dealt withC5 Internal consultation documentedC6 External consultatioin documentedC7 Subsequent events review performedC8 Going Concern consideredC9 Related Party transaction testingC10 Audit Completion ChecklistC11 File completion checklistC12 Points forward documentedC13 Audit opinion accurately reflects work performed on fileC14 External reviews consideredC15 Final analytical reviewC16 Final financial statements reviewedC17 Disclosure checklist usedC18 Letter of representation issuedC19 Forming Opinion ChecklistC20 Audit opinion supported by the WPC21 Audit conclusion meeting documentedC22 Audit findings letter issuedC23 Responses to audit findings obtainedC24 Signed financial statements on fileC25 Third party reportingC26 Audit report complies with ISA 700 Signed Documentation Signed on file DateD1 Financial StatementsD2 Date of directors reportD3 Date of auditors reportD4 Team planning meetingD5 Client planning meetingD6 Audit planning letterD7 Letter of EngagementD8 Letter of RepD9 Audit conclusion meetingD10 Audit Findings letterD11 Directors loansD12 Intercompany loan confirmationsD13 Bank LetterD14 AGMD15 EGMD16 Solicitors LetterD17 Abridged accounts agree to FS OmniPro File Review Checklist 2011 V2 OmniPro Education & Training 40 of 322
  43. 43. Final Scoring Overall Audit File Review Max ScoreBasic File StructureAudit Programs & UsageLead SchedulesReferencing & Sub ReferencingWP Signed & DatedPartner ReviewDocumentationDocumentation of Audit WorkClear Basis for Audit OpinionFinancial Statements Disclosures (See Below)Total Marks 0 OmniPro File Review Checklist 2011 V2 OmniPro Education & Training 41 of 322
  44. 44. Max ScoreFinancial Statements 10 CA/ISA Compliance 10 FRS/SSAP Compliance 2 Accuracy Yes No N/a CommentDated and NumberedInformation PageDirectors Report Yes No N/a CommentOverview /Principal ActivitiesResultsDividend declarationCo Acts 1963 - 2006Risk expansionS90 CLEADirectors ResponsibilitiesAuditors Appt/ContinuanceDirectors RotationDirectors InterestsAuditors Report Yes No N/a CommentTitle Independent Audit ReportContent Independent Audit ReportCo Acts 1963 - 2006Bannerman RulingISA 700/ Bulletin 2006/1Respective ResponsibilitiesBasis of OpinionOpinionS40 CA Act 1983Accounting Policies Yes No N/a CommentBasis of PreparationConsolidationCash Flow StatementTFA & DepreciationFinancial Fixed AssetsStocksCurrenciesLeased AssetsTaxationGovernment GrantsPensionsTurnover OmniPro File Review Checklist 2011 V2 OmniPro Education & Training 42 of 322
  45. 45. P&L Yes No N/a Comment1986 ActFRS 3 - Profit/loss on disp of FAFRS 3 - STRGLFRS 3 - Hist Cost Profit NoteBS Yes No N/a Comment1986 ActFRS 4Cashflow Statement Yes No N/a CommentFRS 1Notes Yes No N/a CommentTurnoverInt Payable and Similar Chgs1986 Act - Stat InformationDirectors RemunerationTransactions with DirectorsDirectors LoansDirectors Interests in Share CapStaff NumbersStaff CostsPensionsTaxationDefferred taxDividendsTangible Fixed AssetsIntangible Fixed AssetsFinancial Fixed AssetsStocksDebtorsCreditorsSeparate Tax HeadsReservation of TitleFRS4 - Debt Maturity AnalaysisGovernment GrantsCalled Up Share CapitalMovements on ReservesReconciliation on S/H FundsCommitmentsContingenciesFRS 8 - Related Party TransControlling PartiesOther FRSs OmniPro File Review Checklist 2011 V2 OmniPro Education & Training 43 of 322
  46. 46. Your Anti Money Laundering RequirementsThe requirements of the Criminal Justice (Money Laundering & Terrorist) Act 2010 havebeen in place for around about a year at this stage. This means that firms should, by now,have established and fully implemented appropriate procedures and policies in respect ofthe business they undertake, their clients and their business, have carried out a riskassessment of their own procedures, adopted reporting procedures and have implementedan appropriate training regime.Whilst firms were already used to verifying the identity of new clients by obtaining proof ofidentity with the requirements that were in place prior to 2010, one of the new requirementsintroduced is to verify the identity of ALL clients both new and existing. As a year haspassed since implementation firms really should have completed the majority of identificationof existing clients at this stage.Several other areas are now covered by the requirements of this Act also, for example, therequirement to have additional verification procedures for non resident clients or for thosethat the firm does not meet in person.In relation to the identification procedures which are to be used, firms have the ability underthe 2010 legislation to be able to rely on the client identification processes of a third partywhere that third party is also a designated person as outlined in the legislation, e.g. amember of another recognised accountancy body, and where that firm has grantedpermission for its identification processes to be used. A firm that is utilising a third partiesidentification processes must be confident that the third party is utilising appropriateprocedures and is confident that if it asks for a copy of identification documents that thesewill be supplied in a timely manner. A firm should be aware that they will be responsible forthe failure to properly identify a client if they rely on a third party for identification and thatidentification process is subsequently found to be flawed or inappropriate.Another of the new requirements is to introduce the concept of risk assessment across notonly the client base but also the risks that are prevalent for the firm. In respect of a firm’sclients, it should risk assess the clients, the type of business sector they are in, the type ofbusiness they do and the type of services that the firm may provide for them.Whilst the legislation does not instruct the appointment of a Money Laundering ReportingOfficer (MLRO) it is probably easier for a firm to do so to ensure that one person has theultimate responsibility to ensure that appropriate procedures are adopted and implementedand that training is undertaken.The appointed MLRO should be a senior member of staff such as a partner, or as aminimum a senior manager as this individual is responsible for: - Risk assessing the firm’s own activities; - Risk assessing the client base ; - Arranging and/or providing training for all members of staff within the firm; OmniPro Education & Training 44 of 322
  47. 47. - Carrying out, or arranging to have carried out, an annual compliance review; - Implementing procedures internally; - Assessing internal reports and making external reports as required; - Providing support to staff to ensure ‘tipping off’ does not occur; and - Liaising with authorities should they require further information.In addition this person needs to have an in depth knowledge of the clients, their businesses,the business sector and more importantly the activities and transactions that would beunusual or even suspicious and which may point to money laundering or terrorist financing.It is also important to realise that your regulator has a strengthened responsibility to ensurethat the firms they regulate are complying with the legislation and as such they will beincluding an assessment of your policies and procedures and the documentation you keepon file as part of an onsite compliance monitoring visit.Prepared by Michelle Kane on behalf of OmniProOmniPro - DublinBlock D, Iveagh Court,Harcourt Road,Dublin 2.01 4110000OmniPro - CarlowUnit 3, Southcourt,Wexford Road Business Park,Carlow059 9183888OmniPro - BelfastForsyth House,Cromac House,Belfast, BT2 8LA048 90511304To assist firms with the implementation of appropriate processes and procedures OmniProPractice Support has developed an Anti Money Laundering Compliance Manual, will providetraining in the implementation of this manual within a firm and offers an Annual ComplianceReview. Should you wish to avail of any of these services then contact Michelle Kane todayfor a quote. OmniPro Education & Training 45 of 322
  48. 48. New Audit Regulations Now Applicable – Are you complying?The European Communities (Statutory Audits) (Directive 2006/43/EC) Regulations 2010were signed into law on 20th May 2010 giving effect to the 8th Company Law Directive onstatutory audits of annual accounts and consolidated accounts.The Regulations impose rules and obligations regarding statutory audits, meaning an auditof individual accounts or group accounts in so far as required by Community law, onstatutory auditors and audit firms, the entities being audited and the supervisory authorities(Accounting Institutes & IAASA). Auditors and audit firms must be approved by a “competentauthority” being a recognised accountancy body before carrying out a statutory audit.The Regulations are applicable to all firms and imposes further obligations on “PublicInterest Entities”. Public Interest Entities are defined as(a) companies or other bodies corporate governed by the law of a Member State whose transferable securities are admitted to trading on a regulated market of any Member State within the meaning of point 14 of Article 4(1) of Directive 2004/39/EC,(b) credit institutions as defined in point 1 of Article 1 of Directive 2000/12/EC of the European Parliament and of the Council of 20 March 2000 relating to the taking up and pursuit of the business of credit institutions, and(c) insurance undertakings within the meaning of Article 2(1) of Directive 91/674/EEC;The main provisions of the Regulations include:-  Permitting Statutory Auditors to operate as body corporate;  Incoming Statutory Auditor afforded access to information  Requirements relating to signing of audit reports  Transparency report of Public Interest Entities  Removal of Auditor & Notification Obligations  Public Register of Auditors  Independence Provisions for Auditors  Audit Committees for Public Interest Entities  Disclosure of Auditors’ Remuneration of audit & non-audit work  Statutory obligations regarding continuing education, professional ethics, independence and objectivityI will now address the main provisions in more detail.Body Corporate permitted to act as Statutory Auditor OmniPro Education & Training 46 of 322
  49. 49. Regulation 6(b) of the Regulations deletes Section 187(20 of the Companies Act 1990 whichprevented a body corporate acting as an auditor. The legislation now provides that astatutory auditor or audit firm may undertake statutory audit work as a corporate body. Thisnew provision gives audit firms the option of operating as a limited company with all thebenefits of limited liability. If a statutory auditor or audit firm acts as auditor of a credit union,friendly society or industrial and provident society, these entities must be audited by a publicauditor then the audit firm must act under a partnership or sole practitioner so they may notbe able to set up as a body corporate or will have to maintain 2 structures. There are anumber of issues to be considered prior to setting up a limited company and these include:-  Contact your Institute advising that you intend on operating as a body corporate and that the regulations of your Institute provide for this.  Obtain legal, tax and pensions advice prior to setting up the Company.  Decide what type of company to be formed (Private Limited or Unlimited)  What name will the company trade as and will there be a requirement to register a business name. Your Institute may have rules regarding what names can be used.  Consider who will act as shareholders & directors?  If there is a Partnership agreement in place should a shareholders’ agreement be prepared  Apply to your Institute to change your registration details and obtain new registration for the body corporate  The sole practitioner or partnership will have to resign as auditor of all clients and seek appointment of the company as auditor. The correct process must be followed as the firm will either resign under Section 185 Companies Act, 1990 or be removed by the company at an EGM. New letters of engagement should be issued.  Other considerations include contacting PII provider, transfer of assets into the company, issuing new employment contracts to employees, notify the Bank, Revenue and all suppliers, new letterhead and disclosures on emails & website.Incoming Statutory Auditor afforded access to informationRegulation 47 provides that where a statutory auditor is replaced the former auditor shallgrant access to all relevant information concerning the audited entity to the incomingstatutory auditor.Requirements relating to signing of audit reportsRegulation 57 amends Section 193 of Companies Act 1990 and now requires that auditreports shall state the individual name of the auditor and be signed and dated; (i) By the statutory auditor (ii) By the statutory auditor designated by the statutory audit firm as being primarily responsible for carrying out the statutory audit on behalf of the audit firm. OmniPro Education & Training 47 of 322
  50. 50. The signature on the audit report shall be the individual auditors own name “for and onbehalf of” the audit firm. This is applicable for financial years of on or after 20 May 2010.Transparency Report of Public Interest EntitiesRegulation 58 requires a statutory auditor which carries out the audit of a “Public InterestEntity” to prepare and publish a transparency report within 3 months of the financial year endof the auditor.The report must be formally approved by the statutory auditor and signed by the auditor. Thereport must be published on a website maintained by or on behalf of the auditor within threemonths of the financial year end and remain available for 3 years. (i) A description of the legal structure and ownership of the subject; (ii) Where the subject belongs to a network, a description of the network and the legal and structural arrangements of the network; (iii) A description of the governance structure of the subject; (iv) A description of the internal quality control system of the subject and a statement by the administrative or managerial body on the effectiveness of its functioning; (v) An indication of when the last quality assurance review referred to in Chapter 2 of Part 8 took place; (vi) A list of public-interest entities for which the subject has carried out statutory audits during the preceding financial year; (vii) A statement concerning the subject’s independence practices which also confirms that an internal review of independence compliance has been conducted; (viii) A statement on the policy followed by the subject concerning the continuing education of statutory auditors referred to in Regulation 39; (ix) financial information showing the significance, from the perspective of the market, of the subject, such as the total turnover divided into fees from the statutory audit of annual and group accounts, and fees charged for other assurance services, tax advisory services and other non-audit services; (x) Information concerning the basis for the remuneration of the principals or partners.This is applies to financial years of the auditor on or after 30 August 2010.Removal of Auditor & Notification ObligationsRegulation 62 inserts Section 161A of Companies Act 1963 which provides if an auditorceases to hold office during the period between the conclusion of the last annual generalmeeting and the conclusion of the next agm by virtue of Section 160 of Companies Act, 1963(removal of an auditor) or Section 185 Companies Act, 1990 (resignation of an auditor), theauditor must notify IAASA within 1 month of the cessation. The notification shall include:- OmniPro Education & Training 48 of 322
  51. 51. (i) Where the auditor has resigned a copy of the resignation notice served under Section 185 Companies Act 1990; or (ii) Where the auditor has been removed at a general meeting pursuant to section 160(5) Companies Act 1963, a copy of any representations that have been sent to the members.The Regulations also restricts a company removing an auditor where there is a divergenceof opinion on accounting treatments. The removal of an auditor has to be in the bestinterests of the company which does not include any illegal or improper motive with regard toavoiding disclosures or detection by the company to comply with the Companies Acts.Public Register of AuditorsThe Companies Registration Office will maintain a register of statutory auditors and auditfirms. The accounting institutes are required to notify the CRO of any changes of statutoryauditors. Statutory auditors are required to notify within one month of any change in theinformation contained in the public register.Independence Provisions for AuditorsRegulations 70-78 set out independence requirements for statutory auditors. Statutoryauditors cannot carry out a statutory audit if there is a relationship between the statutoryauditor or audit firm and the audit entity. The statutory auditor or audit firm will be consideredto have a relationship with an audited entity where there is any direct or indirect financial,business, employment or other relationship from which an objective, reasonable andinformed third party will conclude that the statutory auditors or audit firms independence iscompromised.The statutory auditor or audit firm shall apply safeguards in order to mitigate threats (selfreview, self interest, advocacy, familiarity or trust or intimidation) to their independence.The regulations set out additional reporting and other requirement in case of public interestentities. These include (a) the statutory auditor or audit firm should document in the auditworking papers all significant threats to his/her its independence as well as the safeguardsapplied to mitigate those threats; (b)confirming annually in writing to the audit committee ofthe entity his or her independence from the public interest entity; (c) disclose annually tosuch audit committee any additional services provided to the public interest entity; (d)discuss with such audit committee the threats to the independence of the auditor or firm andthe safeguards applied to mitigate those threats as documented by him/her it; (e) The keyaudit partner(s) not engage in the audit for two years after a period of seven years’involvement and; (f) that a key audit partner not take up a key management position with theentity for two years after resigning from the audit.Audit Committees for Public Interest EntitiesRegulation 91 sets out a requirement for Public Interest Entities to establish an auditcommittee. This requirement commences on 20 November 2010.The members of the audit committee shall include not less than 2 independent directors, oneof whom must have competence in accounting or auditing. “Independent” means the OmniPro Education & Training 49 of 322
  52. 52. directors must have been appointed in a non-executive capacity and at no time during the 3years preceding his or her appointment to the committee did have (a) a material businessrelationship with the public interest entity, either directly, or as a partner, shareholder,director or senior employee of a body that has such a relationship with the entity or (b) aposition of employment in the public interest entity. This may require additional directors tobe appointed to public interest entities to satisfy these criteria.The responsibilities of the audit committee shall include:- (a) the monitoring of the financial reporting process; (b) the monitoring of the effectiveness of the entity’s systems of internal control, internal audit and risk management; (c) the monitoring of the statutory audit of the annual and consolidated accounts; and (d) the review and monitoring of the independence of the statutory auditor or audit firm, and in particular the provision of additional services to the audited entity.Any proposal of the board of directors of a public-interest entity with respect to theappointment of a statutory auditor or audit firm to the entity shall be based on arecommendation made to the board by the audit committee. The statutory auditor or audit firm shall report to the audit committee of the public-interestentity on key matters arising from the statutory audit of the entity, and, in particular, onmaterial weaknesses in internal control in relation to the financial reporting process.The Articles of Association should be reviewed to in regards to the rules on setting upcommittees and may have to be amended to reflect the new provisions.Audit Committees were originally proposed in Section 42 of Companies (Auditing &Accounting) Act 2003, however this section was never enacted and it appears will not beenacted.The Listing Rules of the Irish Stock Exchange provides fo the establishment of an auditcommittee with similar requirements as these regulations. However the Listing Rules operateon a “comply or explain” basis. These Regulations will make the establishment of an auditcommittee mandatory.The Financial Regulator has recently issued a new Corporate Governance Code whichcomes into force on 1st January 2011. The Code is for Credit Institutions and Insurancefirms. The Code contains similar provisions to those in the Regulations but include additionalrequirements including that all members of the Audit Committee should be non-executivedirectors and the majority of them independent.Disclosure of Auditors’ Remuneration of audit & non-audit workRegulation 120 requires that large companies, groups and certain partnerships are requiredto make more detailed disclosures regarding auditors’ remuneration in the notes to itsfinancial statements. OmniPro Education & Training 50 of 322
  53. 53. (a) The audit of individual accounts (b) Other assurance services (c) Tax advisory services (d) Other non-audit servicesThe regulations exempt small, medium-sized companies and subsidiary companiesregardless of size, from the disclosure requirement. IAASA may request medium sizedcompanies to provide the information to them. Failure to make the required disclose is anoffence.Prepared by Conor Sweeney on behalf of OmniProOmniPro - DublinBlock D, Iveagh Court,Harcourt Road,Dublin 2.01 4110000OmniPro - CarlowUnit 3, Southcourt,Wexford Road Business Park,Carlow059 9183888OmniPro - BelfastForsyth House,Cromac House,Belfast, BT2 8LA048 90511304 OmniPro Education & Training 51 of 322
  54. 54. PRINCIPAL FEATURES OF THE CHARITIES ACT 2009 1. Purpose of the Act 2. Statutory definition of “charitable purposes” 3. Charities and political activities 4. The Charities Regulatory Authority 5. The Register of Charities 6. The Charity Appeals Tribunal 7. Modernisation of fundraising legislation 8. Annual reports, accounts & audits 9. Legal form for charities 10. Relationship with other statutory bodies 11. Charity trustees 12. Organisations deemed to be registeredThe Charities Bill 2007 was enacted on 28 February 2009. The Act does not comeinto force automatically on enactment however. It is to be commenced in stagesover time by Ministerial order. Details of commencement of provisions will beavailable at www.pobail.iePlease note that this guide is not a legal interpretation of the Charities Act.Purpose of the ActThe purpose of the Charities Act 2009 is to enact a reform of the law relating tocharities in order to ensure accountability and to protect against abuse of charitablestatus and fraud. It will also enhance public trust and confidence in charities andincrease transparency in the sector. The Charities Act 2009, together with theCharities Acts 1961 and 1973, and the Street and House to House Collections Act1962, will provide for a composite regulatory framework for charities through acombination of new legislative provisions and retention of existing charitieslegislation, with updating, where appropriate. OmniPro Education & Training 52 of 322
  55. 55. Key aspects of the Act include: a definition of “charitable purpose” for the first time in primary legislation; a new Charities Regulatory Authority to be established to secure compliance by charities with their legal obligations and also to encourage better administration of charities; a Register of Charities on which all charities operating in the State must be entered; any organisation in receipt of charitable tax exemptions from the Revenue Commissioners on the establishment day is to be automatically deemed to be registered with the Charities Regulatory Authority; any unregistered organisation that acts in a manner that would lead the public to reasonably believe it is a charity , shall to be guilty of an offence. A requirement for charities to submit annual activity reports to the new Authority; updating of the law relating to fundraising, particularly in relation to collections by way of direct debits and sale of ‘tokens’; the establishment of a Charity Appeals Tribunal; the dissolution of the Commissioners of Charitable Donations and Bequests for Ireland (CCDB) upon establishment of the new Authority, and the transfer at that stage of its functions to the Authority; the transfer to the Authority of all jurisdictions previously vested in the Attorney General by statute or common law in relation to charities; provision for administrative co-operation by the Authority with statutory bodies on relevant regulatory and law enforcement matters, both inside and outside the State; the payment of remuneration to charity trustees for non trustee duties subject to certain conditions provisions for relief from personal liability for charity trustees in respect of any losses accruing to the charity where the trustee has acted in good faith; the establishment of consultative panels to assist the Authority in its work and to ensure effective consultation with stakeholders; 2 OmniPro Education & Training 53 of 322
  56. 56. the sale of a Mass card, without an arrangement with the Catholic Church being in place, to be an offence;2. Statutory definition of “charitable purposes”Charitable status will be dependent on an organisation having charitable purposes, andbeing for the public benefit, rather than having any particular legal form.“Charitable purposes” are to be fully defined for the purposes of the law for the firsttime in primary Irish legislation, as follows: the prevention or relief of poverty or economic hardship; the advancement of education; the advancement of religion; any other purpose that is of benefit to the community, which includes: - the advancement of community welfare, including the relief of those in need by reason of youth, age, ill-health or disability, - the advancement of community development, including rural or urban regeneration, - the promotion of civic responsibility or voluntary work, - the promotion of health, including the prevention or relief of sickness, disease or human suffering, - the advancement of conflict resolution or reconciliation, - the promotion of religious or racial harmony and harmonious community relations, - the protection of the natural environment, - the advancement of environmental sustainability - the advancement of the efficient and effective use of the property of charitable organisations, - the prevention or relief of suffering of animals, - the advancement of the arts, culture, heritage or sciences, and - the integration of those who are disadvantaged, and the promotion of their full participation, in society. 3 OmniPro Education & Training 54 of 322
  57. 57. The advancement of religion is considered to be of public benefit, unless the contraryis proven. The Attorney General must consent to the Authority’s declaration that agift for the purposes of religion is not of public benefit. A gift for the purposes ofreligion is not to be considered of public benefit if the organisation in questionoperates on a profit-driven basis, or if it employs oppressive psychologicalmanipulation of its followers or potential followers.The legislation will make a clear separation between: the determination of charitable status by the Authority, and the determination of entitlement to tax exemption on funds applied for charitable purposes, which is exclusively the function and responsibility of the Revenue Commissioners.The intention is that there will not be shared responsibility in relation to decisions ontax exemptions. The Charities Regulator will determine whether or not anorganisation is a charitable organisation, but it will be a matter solely for the RevenueCommissioners to determine whether or not any funds applied by such anorganisation for charitable purposes should be granted entitlement to tax exemption.3. Charities and political activitiesWhilst the Act does not allow charities to support either a political candidate or aparty, charities will be permitted to promote a political cause but only one relatingdirectly to their charitable purpose. A charity must take care not to become a politicalorganisation, however, and should always remain focused on its charitable purpose,which must be, by virtue of the statutory definition of a “charitable organisation”, itsonly purpose .4. The Charities Regulatory AuthorityA new, independent regulatory body for the charities sector, the Charities RegulatoryAuthority (in Irish, An tÚdarás Rialála Carthanas), is to be established. It is 4 OmniPro Education & Training 55 of 322