Incorporating an Audit Firm
February 2011
The Institute of Certified Public Accountants in Ireland
Incorporation of an Audit Firm
Until recently S.187 (2) of the Companies Act 1990 prohibited a corporate body from
conducting an audit.
However the European Communities (Statutory Audits) (Directive 2006/43/EC) Regulations
2010 deleted S.187 (2), allowing a statutory auditor or audit firm to undertake statutory audit
work through a corporate body. This commenced with effect from 20th May 2010 with respect to
all audits completed after that date.
If you are considering the incorporation of your practice you should consider the following
points.
Registration with CPA
You will need to ensure that the new entity is registered with CPA as a statutory audit firm
before you conduct any audit work. Please contact the Professional Standards Department at
[email protected] to obtain the relevant form.
The CPA Practice and Audit Regulations allow for the incorporation of an audit firm. However if
your firm is not registered with CPA for audit purposes then you should check the relevant
professional body’s regulations.
For a firm to be eligible to apply to register as a statutory audit firm with CPA any partner or
director who is not a member of the Institute must become an affilated partner of the Institute.
51% of the voting rights of the company must be held by statutory auditors.
If the firm’s policies are implemented under the dictation of a management committee, board or
other body, at least 75% of the voting rights in that body are held by statutory auditors.
Public Auditors
The provisions in relation to public auditors included in S.187 (3) and (4) of the 1990 Act have
not been deleted. Therefore a corporate body cannot conduct the audit of a Credit Union or a
company incorporated under either the Industrial and Provident Societies Act 1893 to 1978 or
the Friendly Societies Acts, 1896 to 1993.
Resignation from audit appointments
As the incorporation of your firm will result in a new legal entity conducting the audit you will
need to ensure that the non corporate body has resigned from the audit. You must ensure that
this is conducted in accordance with the Companies Acts.
S.185 (1) of the Companies Act 1990 requires a resigning auditor to serve a notice in writing on
the company stating the intention to resign. Such a notice must also contain a statement to the
effect;
i) that there are no circumstances connected with the resignation to which it relates that
the auditor considers should be brought to the notice of the members or creditors of the
company, or
ii) a statement of any such circumstances as aforesaid.
A copy of such a notice shall within 14 days after the date of such service, be sent to the
registrar of companies.
An auditor serving such a notice shall also notify IAASA within 1 month after the date of
cessation. Information to accompany such a notification to IAASA shall include the following;
i) A copy of the resignation notice served under S.185(1) of the Companies Act 1990
ii) Where the auditor has stated that there are no circumstances that the auditor considers
need to be brought to the notice of members and creditors of the company, the
notification to IAASA shall include a statement of the reasons for the resignation.
Professional Indemnity insurance
You will need to ensure that PII has been obtained in the name of the new corporate entity. You
should discuss your PII requirements with your provider.
Engagement Letters
You should ensure that your engagement letters are updated to reflect the change in
appointment.
Stationary
You should ensure that you firm’s stationary reflect the change and meet legal requirements.
S.196 of the Companies Act 1963 sets out the requirements to disclose details of directors on
all business letters. This information includes;
i) The full name of the company and the company’s legal form
ii) The forename or initials and surnames and any former forenames and surnames of
every director and shadow director, and their nationality if not Irish
iii) The place of registration, the registered number, the address of the company’s
registered office (where this is already shown on the document, the fact that it is the
registered office must be indicated);
Please refer to S.196 for full details.
With effect from 1st April 2007, every Irish registered limited liability company is obliged to
disclose the information in points (i) and (ii) on its emails and website
Taxation
There may be taxation implications of this change which you should also consider.
For further information
If you have any queries on this issue please contact the Professional Standards Department at
01-4251040.