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Subsidiary Audits

A frequent question we receive from international clients is in relation to what group and local Audit requirements apply for their Irish subsidiary or stand alone companies.  We work with several large international groups to provide group and local audit services to those Irish subsidiaries.  

Do I need an audit?

The common initial question we are asked is whether the Irish company can avail of audit exemption due to its size. Where the company is a standalone company then this is to be considered under the Small company Audit exemption. Where the Irish company is a subsidiary or where there are a number of Irish companies (forming a sub group) then this would be an intermediate parent of the group and would need to consider the small group audit exemption:  

Small Company Audit Exemption

In order for an Irish registered company to qualify for the small company audit exemption the 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):

• Balance sheet total does not exceed €6m
• Turnover does not exceed €12m
• Number of employees does not exceed 50

Also, the company must not come within any of the 18 classes of companies listed in the Fifth Schedule to the 2014 Act (generally financial services / banks and insurance). More importantly the company’s annual return, to which Financial Statements are attached, must be filed on time for the year in question and the previous year. It is therefore vital to maintain on time annual return filings with the CRO in order to maintain the audit exemption for these smaller companies.  In many cases due to a simple failure to file on time in the prior period leads the company into a 2 year period of audited financial statements for the Irish entity.  

The look through - Small Group Company Audit Exemption

However even if the individual subsidiary company qualifies as a small company, where it is part of a group then it must also consider whether it can avail of the small group company audit exemption.  Thus, it is a ‘look through’ position and where the subsidiary forms part of a larger group it may still require to be audited. 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 conditions must be met in the year and also in the preceding year unless it is the holding company’s first financial year):

• The balance sheet total of 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)

‘net’ means after set-offs and other adjustments made to eliminate group transactions

• The average number of persons employed by the holding company and its subsidiaries does not exceed 50.

So just because an individual Irish subsidiary company is ‘small’ may not mean it can avail of audit exemption automatically.  This is essential for many international groups to understand for their Irish companies within the group.  

Contact

As many international groups now have Irish entities within their structures they should consider their local Irish Audit and Advisory needs and whether our specialist subsidiary audit services could work for them. With our services you have a professional and dedicated Audit team with local knowledge and international experience from a contactable team.  We ensure that the local statutory audit and financial statements requirements of the subsidiaries are completed and filings maintained.   For an initial meeting or discussion, please contact: Aidan Scollard FCA Partner and Registered Auditor - Roberts Nathan Email aidan.scollard@robertsnathan.com Office + 353 1 876 4550 Mobile +353 86 25 23 026     The content of this blog is intended to convey general information and educational advice. It should not be relied upon as professional advice. We have done our best to ensure that the information provided by Roberts Nathan is accurate and up-to-date but unintended errors or misprints may occur. If you wish to obtain business advice or taxation advice please do not hesitate to get in contact with a member of our team.  

What are the key issues for CEOs and CFOs of UK corporate groups with Irish subsidiaries to consider?

The change

A growing number of UK groups are approaching us around their group and local Audit requirements for their Irish subsidiary companies.  In part this has happened due to recent changes (July this year) where the Institute of Chartered Accountant England and Wales (ICAEW) have decided to revoke their status as a Recognised Accounting body (RAB) in Ireland. This means that for UK member Audit firms of ICAEW they will no longer be registered by them to sign off audits on the Irish companies within their client groups. 

Subsidiary Audit

We work with several Irish and UK based subsidiary companies of large international groups to provide group and local audit services.  Many of these are household names with subsidiaries that can avail of audits from firms outside of the parent group audit firm and have expert auditor service requirements. Where the local subsidiary is not a significant component within the overall group then Parent / Group Auditors will often be satisfied to have the subsidiary audited by a firm which is not necessarily part of their network, and this is where we come in. We have been engaged recently on a number of these audits where local management have chosen to avail of audit services from firms other than Big4/5 as previously mandated by their group.  We can act as Auditor to companies with group reporting and audit assurance requirements to the group level based on our large firm backgrounds and experience.   We have been involved in multi-national audits to include reporting to the group finance function and group external Auditors.  We speak their ‘language’ and can communicate effectively and efficiently and ensure that all reporting deadlines and obligations are met.

Audit Requirements Ireland - Do I need an audit?

The common initial question we are asked is whether the Irish company can avail of audit exemption due to its size.  This is referred to as the Small company Audit exemption: Small Company Audit Exemption  What must a company do to qualify for the small company exemption? In order for a company to qualify for the small company audit exemption the 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):

• Balance sheet total does not exceed €6m 
• Turnover does not exceed €12m 
• Number of employees does not exceed 50

Also the company must not come within any of the 18 classes of companies listed in the Fifth Schedule to the 2014 Act (generally financial services / banks and insurance).  More importantly the company’s annual return, to which Financial Statements are attached, must be filed on time for the year in question and the previous year. It is therefore vital to maintain annual return filings in CRO (equivalent to Companies House) to maintain the audit exemption for these smaller companies. However even if the individual subsidiary company qualifies as a small company, where it is part of a group then it must also consider whether it can avail of the small group company audit exemption.  Thus, it is a ‘look through’ position and where the subsidiary forms part of a larger group it may still require to be audited.   Small Group Company Audit Exemption 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 conditions must be met in the year and also in the preceding year unless it is the holding company’s first financial year):

• The balance sheet total of 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.

 

Filings and Efficiencies 

With our services;

• You have a professional and dedicated Audit team with local knowledge and international experience from a contactable team.  
• We can ensure that the local statutory audit and financial statements of the subsidiaries are completed.  
• We can also have the local statutory Audit completed efficiently at the same time as group financial reporting and group audit reporting thus saving time and avoiding the need for a return visit or information requests from Auditors later in the year when you are in your normal monthly reporting cycles.

This is an option that many CFOs of subsidiaries and their accounting teams have found to be hugely beneficial and allows for a better long-term relationship with their local Auditors.  

Contact

As we approach the accounting year end for many companies now could be a good time to have a review of your Audit and Advisory needs and whether our specialist subsidiary audit services could work for your company. For a confidential initial brief meeting or discussion, please contact:  Aidan Scollard FCA Partner and Registered Auditor  Roberts Nathan Email aidan.scollard@robertsnathan.com Office + 353 1 876 4550 Mobile +353 86 25 23 026