Audit exemption changes
The legislation changes for audit exemption under Section 22 of the Companies (Corporate Governance, Enforcement and Regulatory Provisions) Act 2024 have commenced and the Companies Registration Office (CRO) has confirmed the following:
- Late annual returns filed up to midnight on 15 July 2025 will require an audit for the following two annual returns.
- Effective from midnight on 15 July 2025, audited financial statements are required if a company filed late twice in the last five years.
The five-year reference period is effectively starting from midnight on 15 July 2025 for companies who are not currently filing audited accounts due to loss of audit exemption for late filing of annual returns preceding the enactment.
This provision relates to a change to the current audit exemption regime, whereby small and micro-sized companies will not, in future, automatically lose the privilege of audit exemption on a first occasion, in a five-year period, of late filing of an annual return with the CRO.
Any group company being late will trigger an audit requirement for the whole group
Section 22 will replace section 363 of the Companies Act 2014.
The new section only applies to non-group audit exemption. Any group company being late will trigger an audit requirement for the whole group for the two following years. The facility to apply to the District Court to deem a return, or number of returns, on time is still available, but of course has to be applied for before you file the return.
Assisted decision making
The Decision Support Service, which registers decision support arrangements and supervises decision supporters, requires a decision-making representative to make an annual report. This report will include a list of assets, liabilities, income and expenses for the person concerned.
In a very unusual application of their powers, the DSS has said that the report for the year to 30 June 2025 is due on 30 June 2025. It is unclear how instantaneous financial statements can be prepared for the person concerned and submitted on the same day as the period end to which they are made up.
Recent private equity practice buy-out structures are in the spotlight
However, the DSS has said that it is willing to consider an extension for report preparation if the decision supporter submits a request, in writing, explaining why an extension is required. The DSS also states that the report can ‘include the relevant dates in the report and provide updated information as soon as possible – or where the timeframe is no more than one month prior to the report due date, the relevant information can be included in the following years report’.
ACCA is engaging with the DSS to seek an amendment to the reporting regime.
Investment in audit firms
The Companies Act 2014 has some quite strict requirements in respect to the ownership of an audit firm. The law has been reflected in the ACCA audit firm ownership rules with the underlying principle being that the audit firm must be controlled by statutory auditors.
There have been suggestions that some of the recent private equity practice buy-out schemes in the UK and Ireland have stretched the definitions with structures that include voting and non-voting shares, and the regulators have also expressed concern at some of the legal structures being put in place.
Audit firms holding a UK audit licence will also note the guidance issued by Financial Reporting Council (FRC) and the change in firm ownership requirements being implemented in the UK. Accountancy Europe has also published a research report on Private equity investments in accountancy firms.
UK regulator news
The Financial Reporting Council (FRC) has published emerging findings from its market study examining how effectively the audit market serves small and medium-sized enterprises, and has launched a consultation on new guidance to help auditors deliver more proportionate audits of these businesses. The Guidance for audits of smaller and/or less complex entities and the emerging findings report are available from the FRC website.
The Charity Regulator has guidance on appraisals for voluntary board members
The FRC also published its Annual Enforcement Review 2025 where it noted that nine investigations were concluded during its 2024/25 year, with financial sanctions totalling £14.5m imposed. More details are here.
The FRC has also published its Annual Review of Audit Quality 2025. The report identified ‘continued improvement in audit quality’ and some areas where improvements could be made.
Board appraisal for charities
Volunteer directors in a charity can sometimes misunderstand their role and particularly the scope of their responsibilities as a director. The separation of the executive and board functions are frequent issues on many charity boards. One way to address this is to undertake formal annual performance appraisals for each board member. The Charity Regulator has published very useful guidance on undertaking appraisals for volunteer board members: Board appraisal for Non-Complex Charities and Board appraisal for Complex Charities. The resource could also very easily be adapted for credit union boards.
Sustainability assurance
Although waves 2 and 3 of the Corporate Sustainability Reporting Directive have been postponed for two years, there is still a reasonable cohort of audit firms providing assurance over sustainability reports by companies. The assurance is usually provided in accordance with ISSA 5000. A case study on the use of ISSA 5000 is available here.
The Corporate Enforcement Authority logged 157 indictable offence reports
Amendments to the application of the Corporate Sustainability Reporting Directive in Ireland were published here. As previously reported, the application dates for wave 2 and 3 companies have been extended by two years, but the statutory instrument also tidies up some unintended consequences in the legislation.
The EU Commission has adopted a recommendation on voluntary sustainability reporting for small and medium-sized companies (SMEs). The recommendation presents a voluntary standard for SMEs (VSME) that will make it easier for SMEs that are not covered by the Corporate Sustainability Reporting Directive (CSRD) to respond to specific requests for sustainability information from large financial institutions and companies.
CEA Annual Report
Ireland’s Corporate Enforcement Authority has published its Annual Report 2024. Of interest to auditors were the 157 indictable offence reports, the vast majority of which related to non-compliance with accounting standards. There were, however, also 20 incidences of breach of director loan provisions reported and 15 inadequate accounting records reported.
The report concludes with several case studies that illustrate the work of the CEA and, in some cases, provide some background to cases that were summarily reported in the mainstream media.
