Audit Exemption in the Republic of Ireland
A more cost effective and faster option for company financial statement filing in the Republic of Ireland is to prepare audit exempt financial statements.
What companies can avail of audit exemption:
- Small Companies
- Small Groups
- Dormant Companies
To qualify as a small company and avail of this exemption, a company must satisfy two or more of the following conditions in the current financial year and in the preceding financial year (unless it is its first financial year) (s.350(2), (3) & (5) Companies Act 2014);
- The balance sheet total does not exceed €6m
- Turnover does not exceed €12m
- The number of employees does not exceed 50
Audit exemption applies to any group company if the group as a whole qualifies as a Small Group. The entire group and all its subsidiary undertakings must, taken as a whole, satisfy two of the following 3 conditions in order to claim a Group Company Audit Exemption:
The above conditions must be met in the year (the conditions must also be met in the preceding year unless it is the holding company’s first financial year). (s359 (5) CA2014).In relation to the aggregate figures for turnover and balance sheet total – ‘net’ means after set-offs and other adjustments made to eliminate group transactions —
- The balance sheet total of the holding company and subsidiaries taken as a whole does not exceed €6m net (or €7.2m gross)
- The amount of turnover of the holding company and subsidiaries taken as a whole does not exceed €12m net (or €14.4m gross)
- The average number of persons employed by the holding company and its subsidiaries does not exceed 50.
- in the case of Companies Act financial statements, in accordance with schedule 4, and
- in the case of IFRS financial statements, in accordance with international financial reporting standards; ‘gross’ means without those set-offs and other adjustments (section 280a Companies Act 2014)
The dormant company audit exemption is not specific to any company size. A company can qualify to claim audit exemption based on the fact that it is dormant.
The directors of the company must:
- be of the opinion that in respect of the financial year concerned, the company is dormant and will satisfy the conditions specified at (a) and (b) below, and
- decide that the company should avail of the exemption in that year (and record that decision in the minutes of the meeting concerned):
- it has no significant accounting transaction (ie. a transaction that is required by s.281 and s.282 Companies Act 2014, to be entered in the company’s accounting records); and
- its assets and liabilities comprise only permitted assets and liabilities (ie. investments in shares of, and amounts due to or from, other group undertakings).
In determining whether or when a company is dormant for the purposes of s.365, the following shall be disregarded:
- any transaction arising from the taking of shares in the company by a subscriber to the constitution as a result of an undertaking of him or her in connection with the formation of the company;
- any transaction consisting of the payment of;
- a fee to the Registrar on a change of the company’s name;
- a fee to the Registrar on the re-registration of the company; or
- a fee to the Registrar for the registration of an annual return (including any fee of an increased amount by virtue of regulations under section 889(6)).
Late Filing of Financial Statements
If financial statements are filed late in the Companies Registration Office, the audit exemption is retained for the year in which financial statements are filed late, however, for the two years following the late filing of the financial statements, audited financial statements must be filed in the CRO.
Proposals to Develop the Legislation in the Future
The legislation regarding the law around audit exemption is currently under review with the following amendment under consideration.
- A two-step regime for late filing:
We await confirmation on whether the proposed amendment will be passed. For further information please contact Nigel Mayberry or any other member of the business services team at PKF.
- No loss of audit exemption for first late filing
- Loss of audit exemption for two years on a second late filing inside a five-year period