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44 2003

Companies (Auditing and Accounting) Act 2003

PART 3

Other Measures to Strengthen the Regulation of Auditors

Amendment of section 182 of Act of 1990 (interpretation of Part X).

34. —Section 182 of the Act of 1990 is amended as follows:

(a) in the definition of “public auditor” by substituting “1896 to 1993;” for “1896 to 1993.”;

(b) by inserting the following after the definition of “public auditor”:

“ ‘the Act of 2003’ means the Companies (Auditing and Accounting) Act 2003;

‘the 1993 Regulations’ means the European Communities (Accounts) Regulations 1993 (S.I. No. 396 of 1993);

‘the 1992 Regulations’ means the European Communities (Companies: Group Accounts) Regulations 1992 (S.I. No. 201 of 1992).”;

(c) by renumbering that section as section 182(1) and inserting the following:

“(2) For the purposes of sections 205B and 205D, each of the following is considered to be an affiliate of an auditor in a financial year:

(a) if the auditor is a firm—

(i) any other firm where, at any time during the financial year, both firms were under common ownership and control,

(ii) any body corporate in which the auditor, any firm mentioned in subparagraph (i) or (iv) or any body corporate mentioned in subparagraph (iii) or (iv) was, at any time in the financial year, entitled to exercise or control the exercise of 20 per cent or more of the voting rights at a general meeting,

(iii) any body corporate that was, at any time in the financial year, in the same group as a body corporate mentioned in subparagraph (ii),

(iv) any other firm, or body corporate, that because of the use of a common name or corporate identity or the sharing of common professional services could reasonably be considered to be associated with the auditor,

(b) if the auditor is an individual—

(i) any partnership in which the auditor was, at any time in the financial year, a partner,

(ii) any body corporate in which the auditor, any partnership mentioned in subparagraph (i) or any body corporate mentioned in subparagraph (iii) was, at any time in the financial year, entitled to exercise or control the exercise of 20 per cent or more of the voting rights at a general meeting,

(iii) any body corporate that was, at any time in the financial year, in the same group as a body corporate mentioned in subparagraph (ii).

(3) A reference in this Part to group accounts is to be construed as follows:

(a) in accordance with the 1992 Regulations, in the case of an undertaking to which those Regulations apply;

(b) in accordance with the Principal Act, in the case of any other undertaking.”.

Amendment of section 187 of Act of 1990 (qualifications for appointment as auditor).

35. —Section 187 of the Act of 1990 is amended as follows:

(a) by inserting the following after subsection (1):

“(1A) A firm shall be qualified for appointment as auditor of a company or as a public auditor if—

(a) at least one member of the firm is entitled to hold a practising certificate from a body referred to in subparagraph (i), (ii) or (iii) of subsection (1)(a) and is otherwise qualified under the applicable subparagraph for appointment as auditor of a company or as a public auditor, and

(b) the particulars required by sections 199 and 200 in respect of such a member have been forwarded to the registrar of companies.

(1B) A body referred to in subsection (1A) may grant a practising certificate to a firm that satisfies the conditions in that subsection, and, if a practising certificate is granted—

(a) each member of the firm who from time to time during the currency of the certificate is qualified for appointment as auditor of a company or as a public auditor is deemed to hold the certificate, and

(b) the name of such a member is deemed to be entered in the register of auditors.”;

(b) in subsection (2), by substituting “corporate,” for “corporate.” in paragraph (g) and by inserting the following after paragraph (g):

“(h) a person in whose name a share in the company is registered, whether or not that person is the beneficial owner of the share,”;

(c) by inserting the following after subsection (13) (inserted by section 72 of the Company Law Enforcement Act 2001 ):

“(14) An authorisation granted to a person under subsection (1)(a)(iv) ceases to have effect on the expiry of 3 years after the commencement of this subsection unless, within that 3 year period, the person becomes a member of, or becomes subject to the regulations of, a body of accountants recognised for the purposes of section 187.

(15) On an authorisation ceasing to have effect under subsection (14), the person to whom it was granted ceases to be qualified for appointment as auditor of a company or as a public auditor.”.

Amendment of Act of 1990 — new section 192A.

36. —The Act of 1990 is amended by inserting the following after section 192:

“Statutory backing for disciplinary procedures of prescribed accountancy bodies.

192A.—(1) In this section—

‘client’ includes an individual, a body corporate, an unincorporated body of persons and a partnership;

‘disciplinary committee’ means any disciplinary committee or tribunal (however called) of a prescribed accountancy body;

‘member’, in relation to a prescribed accountancy body, means—

(a) a person, or

(b) a firm,

that is, or was at the relevant time, subject to the investigation and disciplinary procedures approved by the Supervisory Authority under section 9 (2)(c) of the Act of 2003 for that body;

‘prescribed accountancy body’ has the meaning given by section 4 of the Act of 2003;

‘refusal’ includes failure and ‘refuses’ includes fails;

‘relevant person’, in relation to an investigation of a member of a prescribed accountancy body, means—

(a) a member of the prescribed accountancy body,

(b) a client or former client of such a member,

(c) if the client or former client is a body corporate, a person who is or was an officer, employee or agent of the client or former client, or

(d) any person whom the prescribed accountancy body reasonably believes has information or documents relating to the investigation other than information or documents the disclosure of which is prohibited or restricted by law;

‘standards’, in relation to a prescribed accountancy body, means the rules, regulations and standards that body applies to its members and to which, by virtue of their membership, they are obliged to adhere.

(2) For the purposes of an investigation of a possible breach of a prescribed accountancy body's standards by a member, a disciplinary committee may require a relevant person to do one or more of the following:

(a) produce to the committee all books or documents relating to the investigation that are in the relevant person's possession or control;

(b) attend before the committee;

(c) give the committee any other assistance in connection with the investigation that the relevant person is reasonably able to give.

(3) For the purposes of an investigation referred to in subsection (2), the disciplinary committee may—

(a) examine on oath, either by word of mouth or on written interrogatories, a relevant person,

(b) administer oaths for the purpose of that examination, and

(c) record, in writing, the answers of a person so examined and require that person to sign them.

(4) The disciplinary committee may certify the refusal to the High Court if a relevant person refuses to do one or more of the following:

(a) produce to the committee any book or document that it is the person's duty under this section to produce;

(b) attend before the committee when required to do so under this section;

(c) answer a question put to the person by the committee with respect to the matter under investigation.

(5) On receiving a certificate of refusal concerning a relevant person, the Court may enquire into the case and, after hearing any evidence that may be adduced, may do one or more of the following:

(a) direct that the relevant person attend or re-attend before the disciplinary committee or produce particular books or documents or answer particular questions put to him or her by that committee;

(b) direct that the relevant person need not produce a particular book or document or answer a particular question put to him or her by that committee;

(c) make any other ancillary or consequential order or give any other direction that the Court thinks fit.

(6) The production of any books or documents under this section by a person who claims a lien on them does not prejudice the lien.

(7) Any information produced or answer given by a member of a prescribed accountancy body in compliance with a requirement under this section may be used in evidence against the member in any proceedings whatsoever, save proceedings for an offence (other than perjury in respect of such an answer).”.

Amendment of section 194 of Act of 1990 (duty of auditors).

37. —Section 194 of the Act of 1990 is amended as follows:

(a) in paragraph (b) of subsection (3A) (inserted by the Company Law Enforcement Act 2001 ) by substituting “access to books and documents” for “access to documents”;

(b) in subsection (3A) by substituting “being information, books or documents” for “being information or documents”;

(c) in subsection (4) by substituting “subsection (1), (3A), (5) or (5A)” for “subsection (1), (3A) or (5)”;

(d) in subsection (5) by inserting “(other than an indictable offence under section 125(1) or 127(12) of the Principal Act)” after “an indictable offence under the Companies Acts”;

(e) by inserting the following after subsection (5) (inserted by the Company Law Enforcement Act 2001 ):

“(5A) Where the auditors of a company notify the Director of any matter pursuant to subsection (5), they shall, in addition to performing their obligations under that subsection, if requested by the Director—

(a) furnish the Director with such further information in their possession or control relating to the matter as the Director may require, including further information relating to the details of the grounds on which they formed the opinion referred to in that subsection,

(b) give the Director such access to books and documents in their possession or control relating to the matter as the Director may require, and

(c) give the Director such access to facilities for the taking of copies of or extracts from those books and documents as the Director may require.

(5B) Nothing in this section compels the disclosure by any person of any information that the person would be entitled to refuse to produce on the grounds of legal professional privilege or authorises the inspection or copying of any document containing such information that is in the person's possession.”.

Amendment of section 198 of Act of 1990 (register of auditors).

38. —The following is substituted for section 198 of the Act of 1990:

“Register of auditors.

198.—(1) The registrar of companies shall maintain a register containing the names of persons or firms that have been notified to him as qualified for appointment as auditor of a company or as public auditor.

(2) A person shall not—

(a) act as an auditor of a company or as a public auditor,

(b) describe himself as an auditor of a company or as a public auditor, or

(c) so hold himself out as to indicate, or be reasonably understood to indicate, that he is, or is registered as, an auditor of a company or a public auditor,

unless—

(i) his name is entered, or is deemed under subsection (3) to be entered, in the register of auditors and he holds a valid practising certificate, or

(ii) he is a member of a firm that holds a valid practising certificate under section 187(1B) and he is deemed under that section to hold a practising certificate.

(3) In the following circumstances, the name of a person is deemed to be entered in the register of auditors:

(a) if the person becomes qualified for appointment as an auditor or is granted an authorisation by the Supervisory Authority under section 187(1) and if the time allowed under section 200(1), (2) or (3) for forwarding that person's particulars to the registrar of companies has not yet expired;

(b) if the person is entitled to have his name entered in the register of auditors and his particulars have been forwarded to the registrar of companies in accordance with section 200(1), (2) or (3) but his name has not yet been entered in that register.

(4) This section does not apply to the Comptroller and Auditor-General.

(5) A person who contravenes subsection (2) is guilty of an offence and is liable—

(a) on summary conviction, to a fine not exceeding €2,000 and, for continued contravention, a daily default fine not exceeding €60, and

(b) on conviction on indictment, to a fine not exceeding €12,500 and, for continued contravention, a daily default fine not exceeding €300.

(6) In this section and sections 199 and 200, ‘address’ in relation to a person means—

(a) the person's usual business address, and

(b) if the person is a partner or employee of a firm, the name of the firm and the address of its head office.”.

Amendment of section 199 of Act of 1990 (provisions concerning register of auditors).

39. —Section 199 of the Act of 1990 is amended as follows:

(a) by substituting the following for subsection (1):

“(1) Subject to subsection (2), a body of accountants which has been recognised by the Supervisory Authority under section 191 shall, within one month after such recognition, deliver to the registrar of companies, the name and address of each of its members who is qualified for appointment under the Companies Acts as auditor of a company or public auditor.”;

(b) in subsection (2) by substituting “whose recognition is continued under section 32 (2) of the Act of 2003” for “whose recognition is renewed”;

(c) by inserting the following after subsection (2):

“(2A) A body of accountants referred to in subsection (1) or (2) shall, as soon as possible but not later than 6 months after the event, notify the registrar of companies of any change in the particulars previously provided to him under the applicable subsection.”;

(d) by inserting the following after subsection (3):

“(3A) A person referred to in subsection (3) or in section 32 (6) of the Act of 2003 shall notify the registrar of companies—

(a) at least once in each year during the currency of the authorisation referred to in that subsection or section, as the case may be, of the fact that the person holds the authorisation,

(b) as soon as possible but not later than one month after the event, of any change in the particulars provided by the person to the registrar, and

(c) as soon as possible but not later than one month after ceasing to hold the authorisation, of the occurrence of that event.”;

(e) by substituting the following for subsection (4):

“(4) If default is made in complying with subsection (1) or (2A), the body of accountants concerned shall be guilty of an offence.”;

(f) by inserting the following after subsection (4):

“(5) Information required to be delivered to the registrar of companies under this section shall be delivered in such form and manner as that registrar may specify.”.

Amendment of section 200 of Act of 1990 (duty to keep registrar informed).

40. —Section 200 of the Act of 1990 is amended as follows:

(a) by inserting the following after subsection (2):

“(2A) A body of accountants referred to in subsection (1) or a recognised body of accountants referred to in subsection (2) shall, as soon as possible but not later than 6 months after the event, notify the registrar of companies of any change in the particulars previously provided to him under the applicable subsection.”;

(b) by inserting the following after subsection (3):

“(3A) A person referred to in subsection (3) shall notify the registrar of companies—

(a) at least once in each year during the currency of the authorisation referred to in that subsection, of the fact that the person holds the authorisation,

(b) as soon as possible but not later than one month after the event, of any change in the particulars provided by the person to the registrar, and

(c) as soon as possible but not later than one month after ceasing to hold the authorisation, of the occurrence of that event.”;

(c) by substituting the following for subsection (4):

“(4) If default is made in complying with subsection (1) or (2A), the body of accountants concerned, or the recognised body of accountants concerned, shall be guilty of an offence.”;

(d) by inserting the following after subsection (4):

“(5) Information required to be delivered to the registrar of companies under this section shall be delivered in such form and manner as that registrar may specify.”.

Amendment of Act of 1990 — new section 205A.

41. —The Act of 1990 is amended by inserting the following in Part X after section 205:

“Accounting standards.

205A.—(1) In this section—

‘accounting standards’ means—

(a) statements of accounting standards, and

(b) any written interpretation of those standards,

issued by any body or bodies prescribed by regulation;

‘relevant undertaking’ means—

(a) a company, or

(b) an undertaking referred to in Regulation 6 of the 1993 Regulations,

but does not include a company or an undertaking of a class exempt under section 48 (1)(j) of the Act of 2003 from this section.

(2) Each relevant undertaking shall ensure—

(a) that its annual accounts and, where relevant, its group accounts include a statement as to whether they have been prepared in accordance with applicable accounting standards, and

(b) that any material departure from applicable accounting standards, the effect of the departure and the reasons for it are noted in the annual accounts and, where relevant, in the group accounts.

(3) Accounting standards are applicable to a relevant undertaking's annual accounts and, where relevant, to its group accounts, if those standards are, in accordance with their terms, relevant to its circumstances and those accounts.

(4) Where a relevant undertaking fails to comply with subsection (2), each company or other entity that forms all or part of that undertaking is guilty of an offence.”.

Amendment of Act of 1990 — new section 205B.

42. —The Act of 1990 is amended by inserting the following in Part X:

“Audit committee.

205B.—(1) In this section—

‘affiliate’ in relation to an auditor, means a firm, body corporate or partnership considered under section 182(2) to be an affiliate of the auditor at the relevant time;

‘amount of turnover’ and ‘balance sheet total’ have the same meanings as in section 8 of the Companies (Amendment) Act 1986 ;

‘internal audit’ means an examination of the internal control system of a public limited company, a large private company or a relevant undertaking that is conducted within the public limited company, large private company or undertaking or otherwise at the request of its audit committee, directors or other officers;

‘internal auditor’ means a person who conducts an internal audit;

‘large private company’ means either of the following:

(a) a private company limited by shares that, in both the most recent financial year of the company and the immediately preceding financial year, meets the following criteria:

(i) the balance sheet total of that company exceeds for the year—

(A) €25,000,000, or

(B) if an amount is prescribed under section 48 (1)(l) of the Act of 2003 for the purpose of this provision, the prescribed amount;

(ii) the amount of turnover of that company exceeds for the year—

(A) €50,000,000, or

(B) if an amount is prescribed under section 48 (1)(l) of the Act of 2003 for the purpose of this provision, the prescribed amount;

(b) a private company limited by shares if the company and all its subsidiary undertakings together, in both the most recent financial year of that company and the immediately preceding financial year, meet the criteria in paragraph (a);

‘parent undertaking’and ‘subsidiary undertaking’ have the same meaning as in the 1992 Regulations;

‘relevant undertaking’ means either of the following:

(a) an undertaking referred to in Regulation 6 of the 1993 Regulations that, in both the most recent financial year and the immediately preceding financial year of the undertaking, meets the following criteria:

(i) the balance sheet total of that undertaking exceeds for the year—

(A) €25,000,000, or

(B) if an amount is prescribed under section 48 (1)(l) of the Act of 2003 for the purpose of this provision, the prescribed amount;

(ii) the amount of turnover of that undertaking exceeds for the year—

(A) €50,000,000, or

(B) if an amount is prescribed under section 48 (1)(l) of the Act of 2003 for the purpose of this provision, the prescribed amount;

(b) an undertaking referred to in Regulation 6 of the 1993 Regulations if that undertaking and all of its subsidiary undertakings together, in both the most recent financial year and the immediately preceding financial year of the parent undertaking, meet the criteria in paragraph (a).

(2) Subject to subsection (16), the board of directors of a public limited company (whether listed or unlisted) shall establish and adequately resource a committee of directors, to be known as the audit committee, with the following responsibilities:

(a) reviewing, before they are presented to the board of directors for approval—

(i) the company's annual accounts, and

(ii) if the company is a parent undertaking, the group accounts of the group of undertakings of which the company is the parent undertaking;

(b) determining whether the annual accounts so reviewed comply with section 205A(2) and whether, in the committee's opinion, they give at the end of the financial year a true and fair view of—

(i) the state of affairs of the company, and

(ii) the profit or loss of the company, even if, by virtue of section 3(2) of the Companies (Amendment) Act 1986 , section 3(1) of that Act does not apply to the company's profit and loss account;

(c) determining whether the group accounts so reviewed comply with section 205A(2) and whether, in the committee's opinion, they give at the end of the financial year a true and fair view of—

(i) the state of affairs of the group of undertakings of which the company is the parent undertaking, and

(ii) the profit or loss of that group;

(d) recommending to the board of directors whether or not to approve the annual accounts and group accounts so reviewed;

(e) determining, at least annually, whether in the committee's opinion, the company has kept proper books of account in accordance with section 202;

(f) reviewing, before its approval by the board of directors, the statement required to be made under section 205E(5) and (6);

(g) determining whether, in the committee's opinion, the statement so reviewed—

(i) complies with section 205E(5) and (6), and

(ii) is fair and reasonable and is based on due and careful enquiry;

(h) recommending to the board of directors whether or not to approve a statement reviewed under paragraph (f);

(i) advising the board of directors as to the recommendation to be made by the board to the shareholders concerning the appointment of the company's auditor;

(j) monitoring the performance and quality of the auditor's work and the auditor's independence from the company;

(k) obtaining from the auditor up to date information to enable the committee to monitor the company's relationship with the auditor, including, but not limited to, information relating to the auditor's affiliates;

(l) recommending whether or not to award contracts to the auditor or an affiliate of the auditor for non-audit work;

(m) satisfying itself that the arrangements made and the resources available for internal audits are in the committee's opinion suitable;

(n) reporting, as part of the report under section 158 of the Principal Act, on the committee's activities for the year, including, but not limited to, the discharge of its responsibilities under paragraph (j);

(o) performing any additional functions prescribed by regulation under section 48 (1)(m) of the Act of 2003;

(p) performing any other functions relating to the company's audit and financial management that are delegated to it by the board of directors.

(3) Subject to subsection (16), the board of directors of each large private company and of each relevant undertaking shall either—

(a) establish an audit committee that—

(i) has all or some of the responsibilities specified in subsection (2), and

(ii) subject to subsection (8), otherwise meets the requirements of this section,

or

(b) decide not to establish an audit committee.

(4) The board of directors of each large private company and of each relevant undertaking to which subsection (3) applies shall state in their report under section 158 of the Principal Act—

(a) whether the company or undertaking, as the case may be, has established an audit committee or decided not to do so,

(b) if the company or undertaking, as the case may be, has established an audit committee, whether it has only some of the responsibilities specified in subsection (2), and

(c) if the company or undertaking, as the case may be, has decided not to establish an audit committee, the reasons for that decision.

(5) For the purpose of applying subsection (2) to a large private company or relevant undertaking that decides under subsection (3)(a) to establish an audit committee with some or all of the responsibilities specified in subsection (2)—

(a) a reference in any applicable paragraph of subsection (2) to a public limited company or the company is to be construed as a reference to the large private company or relevant undertaking, as the case may be, and

(b) subsection (2) applies to the extent specified by the large private company or the relevant undertaking with any other modifications necessary for that purpose.

(6) The audit committee is to consist of such directors as the board of directors concerned thinks fit, provided, subject to subsection (8), both of the following requirements are met:

(a) the committee consists of not fewer than 2 members;

(b) all those appointed to the committee qualify under subsection (7).

(7) A director qualifies for appointment to the audit committee unless he or she—

(a) is, or was at any time during the 3 years preceding appointment to the committee—

(i) an employee of the company or undertaking concerned, or

(ii) an employee of any subsidiary of the company concerned or of a subsidiary undertaking of the undertaking concerned,

or

(b) is the chairperson of the board of directors.

(8) The requirements specified in paragraphs (a) and (b) of subsection (6) do not apply if—

(a) only one director on the board of directors of the company or undertaking concerned qualifies under subsection (7),

(b) that director—

(i) is appointed as the sole member of the audit committee, or

(ii) is appointed as the chairperson of an audit committee consisting of not more than 2 members (including the chairperson) and has, in the case of an equal division of votes, a second or casting vote,

(c) any conditions prescribed under section 48 (1)(m) of the Act of 2003 are met, and

(d) the directors of the company or undertaking concerned state in their report under section 158 of the Principal Act the reasons for the company's or undertaking's exemption from those requirements.

(9) Written terms of reference concerning the audit committee's role in the audit and financial management of the company or relevant undertaking concerned shall—

(a) be prepared and approved by the board of directors,

(b) be submitted for the information of the shareholders of the company or undertaking concerned at its annual general meeting, and

(c) be reviewed each year by the board of directors.

(10) Without limiting the matters that may be included under subsection (9), the terms of reference must—

(a) specify how the audit committee will discharge its responsibilities, and

(b) provide for a programme of separate and joint meetings with the management, auditor and internal auditor of the company or undertaking concerned.

(11) Subsection (9) applies also in relation to any amendments of the audit committee's terms of reference.

(12) Where the board of directors of a public limited company to which subsection (2) applies fails to establish an audit committee that is constituted in accordance with this section, each director to whom the failure is attributable is guilty of an offence.

(13) Where a director of a large private company or relevant undertaking to which subsection (3) applies fails to take all reasonable steps to comply with the requirements of subsection (4), the director is guilty of an offence.

(14) A reference in this section to the directors of a relevant undertaking is to be construed in the case of an undertaking that does not have a board of directors as a reference to the corresponding persons appropriate to that undertaking.

(15) For the purpose of applying this section to a partnership that is referred to in Regulation 6 of the 1993 Regulations and that is a relevant undertaking—

(a) the partnership is to be treated as though it were a company formed and registered under the Companies Acts,

(b) a reference in this section to a report under section 158 of the Principal Act is to be construed as a reference to a report under Regulation 14 of the 1993 Regulations, and

(c) this section applies with any other modifications necessary for that purpose.

(16) This section does not apply to—

(a) a public limited company that is a wholly owned subsidiary undertaking of another public limited company, or

(b) any company or undertaking of a class exempted under section 48 (1)(j) of the Act of 2003 from the application of this section.”.

Amendment of Act of 1990 — new section 205C.

43. —The Act of 1990 is amended by inserting the following in Part X:

“Disclosure of accounting policies.

205C.—(1) In this section ‘relevant undertaking’ means—

(a) a company, or

(b) an undertaking referred to in Regulation 6 of the 1993 Regulations,

but does not include a company or an undertaking of a class exempted under section 48 (1)(j) of the Act of 2003 from this section;

(2) A relevant undertaking shall disclose in the notes to its annual accounts the accounting policies adopted by the undertaking in determining—

(a) the items and amounts to be included in its balance sheet, and

(b) the amounts in its profit and loss account.

(3) The accounting policies that a relevant undertaking is required to disclose under this section include, but are not limited to, those relating to the depreciation and diminution in the value of its assets.

(4) Where a relevant undertaking fails to comply with subsection (2), each company or other entity that forms all or part of that undertaking is guilty of an offence.”.

Amendment of Act of 1990 — new section 205D.

44. —The Act of 1990 is amended by inserting the following in Part X:

“Disclosure of remuneration for audit, audit-related and non-audit work.

205D.—(1) In this section—

‘affiliate’ in relation to an auditor, means a firm, body corporate or partnership considered under section 182(2) to be an affiliate of the auditor;

‘audit committee’ means the committee established under section 205B;

‘audit-related work’ means work required by any relevant undertaking, body or person to be done by an auditor of the relevant undertaking by virtue of his or her position as auditor of that undertaking, but does not include audit work;

‘audit work’ means—

(a) in relation to a relevant undertaking other than a partnership referred to in Regulation 6 of the 1993 Regulations, work required to fulfil the duties imposed under section 193 of this Act on an auditor of a company, and

(b) in relation to a partnership referred to in Regulation 6 of the 1993 Regulations, work required to fulfil the duties imposed under Regulation 22 of those Regulations on an auditor appointed by the partners;

‘connected undertaking’, in relation to a relevant undertaking, means an undertaking that under the 1992 Regulations, or under those Regulations as applied by Regulation 9 of the 1993 Regulations, is—

(a) a subsidiary undertaking of the relevant undertaking,

(b) a joint venture of the relevant undertaking proportionally consolidated in accordance with Regulation 32 of the 1992 Regulations, or

(c) an associated undertaking of the relevant undertaking;

‘firm’ means a firm that qualifies for appointment as auditor of a company or as a public auditor under section 187(1A);

‘non-audit work’ means work other than audit work or audit-related work;

‘relevant undertaking’ means—

(a) a company, or

(b) an undertaking referred to in Regulation 6 of the 1993 Regulations,

but does not include a company or an undertaking of a class exempted under section 48 (1)(j) of the Act of 2003 from this section;

‘remuneration’ includes benefits in kind and payments in cash.

(2) Subject to subsection (5), a relevant undertaking shall disclose in the notes to its annual accounts relating to each financial year beginning on or after the commencement of this section the following information:

(a) the remuneration for all work in each category specified in subsection (3) that was carried out for the relevant undertaking or a connected undertaking of the relevant undertaking, during that financial year—

(i) by an auditor of the relevant undertaking, and

(ii) by any firm or individual that, at any time during the financial year, was an affiliate of the auditor;

(b) the remuneration for all work in each category specified in subsection (3) that was carried out for the relevant undertaking or a connected undertaking of the relevant undertaking, during the preceding financial year—

(i) by an auditor of the relevant undertaking, and

(ii) by any firm or individual that, at any time during the financial year, was an affiliate of the auditor;

(c) where the remuneration referred to in paragraph (a) or (b) is for non-audit work, the nature of the work;

(d) where all or part of the remuneration referred to in paragraph (a) or (b) is in the form of a benefit in kind, the nature and estimated monetary value of the benefit.

(3) Remuneration must be disclosed under subsection (2) for each of the following categories of work carried out as described in that subsection:

(a) audit work;

(b) audit-related work;

(c) non-audit work.

(4) Where the auditor of a relevant undertaking is a firm, any work carried out by a partner in the firm is considered for the purposes of this section to have been carried out by the auditor.

(5) The disclosure requirements of this section apply in relation to a financial year of the relevant undertaking only if—

(a) the aggregate of the remuneration for all work in each specified category that was carried out as described in subsection (2)(a) in that financial year exceeds €1,000, and

(b) the aggregate of the remuneration for all work in each specified category that was carried out as described in subsection (2)(b) in the preceding financial year exceeds €1,000.

(6) Where the remuneration required to be disclosed by a relevant undertaking in respect of a financial year for non-audit work exceeds the aggregate of the remuneration required to be disclosed in respect of that year for audit work and audit-related work, the audit committee shall state in its report for that year under section 205B(2)(m)—

(a) whether it has satisfied itself that the carrying out of the non-audit work by the auditor or an affiliate of the auditor has not affected the auditor's independence from the relevant undertaking, and

(b) if it has satisfied itself to that effect, the reasons for the decision to have the non-audit work carried out by the auditor or an affiliate of the auditor.

(7) Subsection (6) applies also where the relevant undertaking has no audit committee, but in that case the required statement shall be made by the directors in their report under section 158 of the Principal Act.

(8) Where more than one firm or individual has been appointed as the auditor of a relevant undertaking in a single financial year, separate disclosure in respect of the remuneration of each of them and of their affiliates must be provided in the notes to the company's annual accounts.

(9) The auditor of a relevant undertaking shall provide the directors of that undertaking with the information necessary to enable the auditor's affiliates to be identified for the purposes of this section.

(10) Where a relevant undertaking fails to comply with subsection (2), (3) or (8), each company or other entity that forms all or part of that undertaking is guilty of an offence.

(11) Where the audit committee of a relevant undertaking fails to comply with subsection (6) or the directors of a relevant undertaking fail to comply with that subsection as applied by subsection (7), each member of the committee or each director of the undertaking, as the case may be, to whom the failure is attributable is guilty of an offence.

(12) Where an auditor fails to comply with subsection (9), the auditor is guilty of an offence.

(13) Section 205B(14) applies in relation to any reference in this section to the directors of a relevant undertaking and section 205B(15) applies for the purpose of applying this section to a partnership.”.

Amendment of Act of 1990 — new sections 205E and 205F.

45. —The Act of 1990 is amended by inserting the following in Part X:

Directors' compliance statement and related statement.

205E.—(1) In this section—

‘amount of turnover’ and ‘balance sheet total’ have the same meanings as in section 8 of the Companies (Amendment) Act 1986 ;

‘relevant obligations’, in relation to a company, means the company's obligations under—

(a) the Companies Acts,

(b) tax law, and

(c) any other enactments that provide a legal framework within which the company operates and that may materially affect the company's financial statements;

‘tax law’ means—

(a) the Customs Acts,

(b) the statutes relating to the duties of excise and to the management of those duties,

(c) the Tax Acts,

(d) the Capital Gains Tax Acts,

(e) the Value-Added Tax Act 1972 and the enactments amending or extending that Act,

(f) the Capital Acquisitions Tax Act 1976 and the enactments amending or extending that Act,

(g) the statutes relating to stamp duty and to the management of that duty, and

(h) any instruments made under an enactment referred to in any of paragraphs (a) to (g) or made under any other enactment and relating to tax.

(2) This section applies to—

(a) a public limited company (whether listed or unlisted), and

(b) a private company limited by shares,

but it does not apply to a company referred to in paragraph (a) or (b) that is of a class exempted under section 48 (1)(j) of the Act of 2003 from this section or to a company referred to in paragraph (b) while that company qualifies for an exemption under subsection (9).

(3) The directors of a company to which this section applies shall, as soon as possible after the commencement of this section or after this section becomes applicable to the company, prepare or cause to be prepared a directors' compliance statement containing the following information concerning the company:

(a) its policies respecting compliance with its relevant obligations;

(b) its internal financial and other procedures for securing compliance with its relevant obligations;

(c) its arrangements for implementing and reviewing the effectiveness of the policies and procedures referred to in paragraphs (a) and (b).

(4) The directors' compliance statement (including any revisions) must—

(a) be in writing,

(b) be submitted for approval by the board of directors,

(c) at least once in every 3 year period following its approval by the board, be reviewed and, if necessary, revised by the directors, and

(d) be included in the directors' report under section 158 of the Principal Act.

(5) The directors of a company to which this section applies shall also include in their report under section 158 of the Principal Act a statement—

(a) acknowledging that they are responsible for securing the company's compliance with its relevant obligations,

(b) confirming that the company has internal financial and other procedures in place that are designed to secure compliance with its relevant obligations, and, if this is not the case, specifying the reasons, and

(c) confirming that the directors have reviewed the effectiveness of the procedures referred to in paragraph (b) during the financial year to which the report relates, and, if this is not the case, specifying the reasons.

(6) In addition, the directors of a company to which this section applies shall in the statement required under subsection (5)—

(a) specify whether, based on the procedures referred to in that subsection and their review of those procedures, they are of the opinion that they used all reasonable endeavours to secure the company's compliance with its relevant obligations in the financial year to which the annual report relates, and

(b) if they are not of that opinion, specify the reasons.

(7) For the purposes of this section, a company's internal financial and other procedures are considered to be designed to secure compliance with its relevant obligations and to be effective for that purpose if they provide a reasonable assurance of compliance in all material respects with those obligations.

(8) Where the directors of a company to which this section applies fail—

(a) to prepare, or to cause to be prepared, a directors' compliance statement as required by subsections (3) and (4)(a) to (c),

(b) to include a directors' compliance statement in the directors' report as required by subsection (4)(d), or

(c) to comply with subsections (5) and (6),

each director to whom the failure is attributable is guilty of an offence.

(9) A private company limited by shares qualifies for an exemption from this section in respect of any financial year of the company if—

(a) its balance sheet total for the year does not exceed—

(i) €7,618,428, or

(ii) if an amount is prescribed under section 48 (1)(l) of the Act of 2003 for the purpose of this provision, the prescribed amount,

and

(b) the amount of its turnover for the year does not exceed—

(i) €15,236,856, or

(ii) if an amount is prescribed under section 48 (1)(l) of the Act of 2003 for the purpose of this provision, the prescribed amount.

Auditor's review of compliance statement and related statements.

205F.—(1) The auditor of a company to which section 205E applies shall undertake an annual review of—

(a) the directors' compliance statement under subsections (3) and (4) of that section, and

(b) the directors' statement under subsections (5) and (6) of that section,

to determine whether, in the auditor's opinion, each statement is fair and reasonable having regard to information obtained by the auditor, or by an affiliate of the auditor within the meaning of section 205D, in the course of and by virtue of having carried out audit work, audit-related work or non-audit work for the company.

(2) The auditor shall—

(a) include in the auditor's report appended to the company's annual accounts a report on, and the conclusions of, the review undertaken under subsection (1), and

(b) where any statement reviewed under subsection (1) is not, in the auditor's opinion, fair and reasonable—

(i) make a report to that effect to the directors, and

(ii) include that report in the auditor's report appended to the annual accounts.

(3) Where, in the auditor's opinion, the directors have failed—

(a) to prepare, or to cause to be prepared, a directors' compliance statement as required by section 205E(3) and (4)(a) to (c),

(b) to include a directors' compliance statement in the directors' report as required by section 205E(4)(d), or

(c) to comply with section 205E(5) and (6), the auditor shall report that opinion and the reasons for forming that opinion to the Director of Corporate Enforcement.

(4) Section 194(6) applies, with the necessary modifications, in relation to an auditor's compliance with an obligation imposed on him by or under this section as it applies in relation to an obligation imposed by or under section 194.

(5) A person who contravenes this section is guilty of an offence.”.

Amendment of section 127 of Act of 1963 (annual return date).

46. —Section 127 of the Act of 1963 (inserted by section 60 of the Company Law Enforcement Act 2001 ) is amended as follows:

(a) by substituting the following for subsection (1):

“(1) The annual return of a company shall be made up to a date that is not later than its annual return date, except that the first annual return of a company incorporated after the commencement of section 46 of the Companies (Auditing and Accounting) Act 2003 shall be made up to the date that is its first annual return date.”;

(b) in subsection (5) by inserting “, subject to subsection (8),” after “, the annual return date is”;

(c) by substituting the following for subsection (8):

“(8) Where the annual return of a company is made up to a date earlier than its annual return date, the annual return date shall thereafter be each anniversary of the date to which that annual return is made up, unless the company elects in the annual return to retain its existing annual return date or establishes a new annual return date pursuant to subsection (9).”.

Amendment of section 128 of Act of 1963 (documents to be annexed to annual return).

47. —Section 128 of the Act of 1963 is amended by substituting the following for subsection (6):

“(6) Nothing in this section requires the balance sheet of a private company or any document or report relating to the balance sheet, other than the report prepared in accordance with subsection (6B), to be annexed to the annual return.

(6A) Nothing in subsection (4) or in section 2(1) of the Companies (Amendment) Act 1986 exempts any of the following companies from the requirement to annex to its annual return the report prepared in accordance with subsection (6B):

(a) a private company not trading for the acquisition of gain by the members;

(b) a company to which subsection (4)(c) applies;

(c) a company in respect of which an order under subsection (5) is in force.

(6B) The auditors of a company referred to in subsection (6) or (6A) shall prepare a separate report to the directors which—

(a) confirms that they audited the accounts for the relevant year, and

(b) includes within it the report made to the members of the company pursuant to section 193.

(6C) A copy of the report prepared in accordance with subsection (6B) shall be certified by a director and by the secretary of the company to be a true copy of that report and shall be attached to the company's annual return.”.