Audit Exemption

Section 106 of the Companies Act 1963 requires all companies to appoint an auditor. However the Companies (Amendment) (No. 2) Act 1999 allows exemption from the audit requirement if the company meets all of the following criteria:

  1. Turnover does not exceed €8.8m;
  2. Balance sheet total does not exceed €4.4m; and
  3. Average number of employees does not exceed 50.

audit exemption

The audit exemption does not apply to:
  1. Parent or subsidiary companies
  2. Public companies; and
  3. Companies limited by guarantee.
Small companies, although not required to have an audit, are required to:
  1. Prepare accounts in accordance with the Companies Act that show a true and fair view and
  2. Maintain proper books of account
Late annual returns excludes small companies from availing of the audit exemption in that year and the following year.

Meeting the criteria for exemption and voluntarily choosing to have an audit

Directors should consider the following factors when deciding whether an audit is worthwhile:
  1. Cost of the audit
  2. Usefulness of the information and the time it takes to get it
  3. The auditor provides an independent review of the accounting systems. This may alert management to potential weaknesses and the auditor can suggest possible improvements.
  4. The auditor will review the accounting records, the accounting policies and ensure legal requirements have been met and express an opinion on whether or not they agree with the statutory requirements. Should management lack accounting expertise the advice of the auditor can be invaluable in assisting the directors to meet their statutory duties.
  5. An audit will help identify misstatements and omissions. This will improve the quality of the information management has available for decision making.
  6. Credibility of the published accounts will be improved. This can make it easier for the company to raise finance.
  7. The annual audit may act as a deterrent thereby reducing the incidence of employee fraud.
  8. The auditor, with an extensive knowledge of the business is in a good position to advise the directors on other areas (taxation, computer safety etc.)
  9. Audited accounts can reassure potential purchasers (if applicable).

What questions do you have?

We are happy to help. Please post your comment below or call us on 01 677 9000. 

If this article helped you, please share it with other businesses.