S.I. No. 312/2016 - European Union (Statutory Audits) (Directive 2006/43/EC, as amended by Directive 2014/56/EU, and Regulation (EU) No 537/2014) Regulations 2016

• (3) The Supervisory Authority may perform a function (whether in whole or in part or in a particular instance) referred to in section 905(2)(n) of the Companies Act 2014 instead of the recognised accountancy body concerned if—

• (a) the Supervisory Authority—

• (i) is satisfied that the body has failed to perform that function in the circumstances concerned, and

• (ii) is of the opinion that it is in the public interest that it perform that function in those circumstances,

or

• (b) without prejudice to the generality of subparagraph (a), in the case of investigative and administrative disciplinary systems referred to at subparagraph (iv) of that section, the Supervisory Authority is of the opinion that it is in the public interest that it perform that function in the circumstances concerned.

• (4) The costs incurred by the Supervisory Authority in performing, pursuant to paragraph (3), a function referred to in section 905(2)(n) of the Companies Act 2014 instead of the recognised accountancy body concerned shall be defrayed by that body except where money referred to in section 918(3) of the Companies Act 2014 may be used, in accordance with that section 918(3), to defray such costs; for the purposes of this paragraph, in default of payment of the amount of such costs to the Supervisory Authority, the Authority may recover that amount as a simple contract debt in any court of competent jurisdiction.

• (5) The Supervisory Authority shall, as soon as is practicable on or after 17 June 2016, publish on its website information on the assignment of functions effected by this Regulation between the Supervisory Authority and the recognised accountancy bodies.

Annual audit programme and activity report

• (2) The AAPA report shall contain the following information:

• (a) an activity report on the functions performed by the recognised accountancy bodies during the financial year to which the AAPA report relates;

• (b) a work programme concerning the oversight functions referred to in Regulation 32 that the Supervisory Authority proposes to perform during the financial year immediately following the financial year to which the AAPA report relates;

• (c) an activity report regarding the functions of the Supervisory Authority under Regulation (EU) No 537/2014 during the financial year to which the AAPA report relates;

• (d) a work programme regarding the functions of the Supervisory Authority under Regulation (EU) No 537/2014 that the Supervisory Authority proposes to perform during the financial year immediately following the financial year to which the AAPA report relates;

• (e) a report for the financial year to which the AAPA report relates on the overall results of the quality assurance system, including—

• (i) information on recommendations issued, follow-up on the recommendations, supervisory measures taken and relevant sanctions and publication sanctions (within the meaning of section 935A of the Companies Act 2014 ) imposed, and

• (ii) quantitative information and other key performance information on financial resources and staffing, and the efficiency and effectiveness of the quality assurance system.

• (3) The AAPA report may form part of the annual report required under section 928 of the Companies Act 2014 in respect of the same financial year to which the AAPA report relates.

• (4) The Supervisory Authority shall cause the AAPA report to be published on its website not later than 1 July of the year immediately following the financial year to which the report relates.

Operation of certain provisions with regard to particular recognised accountancy bodies

• (2) A provision of these Regulations that confers a function on a recognised accountancy body in relation to a statutory auditor or audit firm shall be read as conferring that function—

• (a) in the case of a statutory auditor who is not a member of a statutory audit firm, on the recognised accountancy body of which the statutory auditor is a member,

• (b) in the case of statutory auditor who is a member of a statutory audit firm, on the recognised accountancy body of which the statutory audit firm is a member, and

• (c) in the case of a statutory audit firm, on the recognised accountancy body of which the statutory audit firm is a member.

• (3) With regard to the function conferred by Regulation 37 on a recognised accountancy body in relation to an individual or firm, paragraph (2) applies as if, for each reference in that paragraph to a statutory auditor or audit firm (as the case may be), there were substituted a reference to the individual or firm, as appropriate.

• (4) A provision of these Regulations requiring that an act is to be done, or enabling an act to be done, by a person (other than a person referred to in paragraph (5)(b)) in relation to a recognised accountancy body shall be read as requiring or enabling it to be done by the person in relation to—

• (a) if the person is not a member of a statutory audit firm, the recognised accountancy body of which the person is a member,

• (b) if the person is a member of a statutory audit firm, the recognised accountancy body of which the statutory audit firm is a member, and

• (c) if the person is a statutory audit firm, the recognised accountancy body of which the statutory audit firm is a member.

• (5) Paragraph (6) applies in the case—

• (a) of a provision of the kind referred to in paragraph (2), (3) or (4), and

• (b) where the provision falls to be applied to a Member State auditor, a Member State audit firm, a third-country auditor or any other person who or which is not a member of a recognised accountancy body (or, as the case may be, the firm of which the person is a member is not a member of a recognised accountancy body).

• (6) The recognised accountancy body that shall perform the function concerned or, as the case may be, in relation to which the act concerned is required or enabled to be done shall be determined—

• (a) by reference to arrangements, in writing entered into by the recognised accountancy bodies amongst themselves for the purpose (which arrangements those bodies are empowered by this paragraph to enter into), or

• (b) in default of—

• (i) such arrangements being entered into, or

• (ii) the provision of such arrangments dealing with the particular case falling to be determined,

by the Supervisory Authority.

• (7) On a determination being made by the Supervisory Authority for the purposes of paragraph (6)(b), a direction in writing, reflecting the terms of the determination, shall be given by it (which direction the Supervisory Authority is empowered by this paragraph to give).

• (8) Arrangements shall not be entered into under paragraph (6)(a) by the recognised accountancy bodies save after consultation by them with the Supervisory Authority.

• (9) Subject to paragraph (10), in consequence of the operation of this Regulation, the function of withdrawal of a particular approval of a statutory auditor or audit firm falls to be discharged by a recognised accountancy body (in this Regulation referred to as the “first-mentioned accountancy body”) that is different from the recognised accountancy body (in this Regulation referred to as the “second-mentioned accountancy body”) that granted the approval-

• (a) the first-mentioned accountancy body shall notify in writing the second-mentioned accountancy body of the proposal by it to withdraw the approval, and

• (b) the second-mentioned accountancy body shall provide such assistance by way of provision of information or clarification of any matter, to the first-mentioned accountancy body as the latter considers it may require so as to inform itself better on any issue bearing on the performance of the function of withdrawal.

• (10) The procedures adopted for the purposes of paragraph (9) by the first-mentioned accountancy body and the second-mentioned accountancy body shall be such as will—

• (a) avoid any unnecessary delay in the performance of the function of withdrawal, and

• (b) respect the requirements of procedural fairness as concerns the auditor or audit firm concerned being able to answer any part of the case made against him, her or it that is informed by those procedures being employed.

• (11) In a case falling within paragraphs (9) and (10), if the approval concerned is withdrawn, the first-mentioned accountancy body, in addition to making the notifications required by Regulation 55 and (where it applies) Regulation 56, shall notify the second-mentioned accountancy body of the withdrawal of approval.

Conflicts of interest to be avoided

• (2) Paragraph (1) applies to—

• (a) the Supervisory Authority,

• (b) the Director of Corporate Enforcement,

• (c) the Registrar of Companies, and

• (d) the recognised accountancy bodies.

PART 4 APPROVAL OF STATUTORY AUDITORS AND AUDIT FIRMS, PROHIBITION ON UNAPPROVED PERSONS ACTING AS AUDITOR, ETC.

Chapter 1 Approval of Statutory Auditors and Audit Firms

Applications for approval, general principle as to good repute, etc.

• (2) A recognised accountancy body may, on foot of an application under paragraph (1), grant approval under these Regulations only to—

• (a) individuals, or

• (b) firms,

who or which are of good repute.

• (3) A recognised accountancy body may, on application made to it by a third-country auditor and in accordance with Regulation 134, approve, under these Regulations, the applicant as a statutory auditor.

• (4) Paragraph (5) applies in the case of an application under paragraph (1)—

• (a) by a firm that is a Member State audit firm in the circumstances where it is not seeking registration in accordance with Regulation 38, or

• (b) by a Member State auditor.

• (5) For the purposes of this Regulation, the fact that the applicant is a Member State audit firm or Member State auditor shall constitute conclusive evidence that the applicant is of good repute unless, arising out of the cooperation referred to in paragraph (6), a counterpart authority in the Member State where the applicant is approved as a statutory audit firm or auditor has notified the Supervisory Authority or a recognised accountancy body that the counterpart authority has reasonable grounds for believing that the good repute of the audit firm or auditor has been seriously compromised.

• (6) The cooperation referred to in paragraph (5) is the cooperation that the State is required to engage in by virtue of Chapter VIII of the Audit Directive.

• (7) On approving a person as a statutory auditor or audit firm, the recognised accountancy body shall assign an individual identification number to the person and a record in writing shall be maintained by the recognised accountancy body of all such numbers assigned by it under this paragraph.

Basis on which audit firms approved in other Member States may carry out audits in State

(2)(a) An audit firm that wishes to carry out statutory audits in the State where the State is not its home Member State shall, before carrying out any such audit, register with the recognised accountancy body with which the key audit partner referred to in paragraph (1) is approved.

• (b) The recognised accountancy body shall ensure that an audit firm which complies with paragraph (1) is registered in accordance with the requirements of Part 6 and Schedule 2.

(3)(a) The recognised accountancy body shall register the audit firm if it is satisfied that the audit firm is registered with the counterpart authority in the audit firm’s home Member State.

• (b) Where the recognised accountancy body intends to rely on a certificate, issued by the counterpart authority in the home Member State, attesting to the registration of the audit firm in the home Member State, the recognised accountancy body may require that such certificate be issued on a date falling within the 3 months immediately preceding that date on which the recognised accountancy body is given that certificate.

• (4) On registering the audit firm, the recognised accountancy body shall assign an individual identification number to the firm and a record in writing shall be maintained by the recognised accountancy body of all such numbers assigned by it under this paragraph.

• (5) The recognised accountancy body shall inform the counterpart authority in the home Member State of the registration of the audit firm.

• (6) Where the Supervisory Authority or a recognised accountancy body receives a notification from another Member State that an audit firm whose home Member State is the State has registered with the counterpart authority in the host Member State, the Supervisory Authority or recognised accountancy body (as the case may be) shall ensure that the registration is recorded in the public register.

Restriction as to persons who may carry out statutory audits

• (a) auditors or audit firms that are approved under these Regulations, or

• (b) audit firms registered in accordance with Regulation 38.

Restriction on acting as statutory auditor

• (a) act as a statutory auditor,

• (b) describe himself or herself as a statutory auditor, or

• (c) so hold himself or herself out as to indicate, or be reasonably understood to indicate, that he or she is a statutory auditor,

unless he or she has been approved in accordance with these Regulations.

Restriction on acting as statutory audit firm

• (a) act as a statutory audit firm,

• (b) describe itself as a statutory audit firm, or

• (c) so hold itself out as to indicate, or be reasonably understood to indicate, that it is a statutory audit firm,

unless it has been approved in accordance with these Regulations or registered in accordance with Regulation 38.

Offence for contravening Regulation 39, 40 or 41

• (a) on a summary conviction, to a class A fine, or

• (b) on conviction on indictment, to a fine not exceeding €50,000 or imprisonment for a term not exceeding 12 months or both.

Conditions for approval as statutory auditor

• (a) a member of a recognised accountancy body and holds an appropriate qualification as referred to in Regulation 45,

• (b) a Member State auditor and complies with Regulation 49, or

• (c) a third-country auditor and complies with Regulations 49 and 134.

Transitional provisions

• (2) Subject to Regulations 53 and 143, a deemed approval of a firm as a statutory audit firm under Regulation 27(4) of the 2010 Audits Regulations that was in force immediately before 17 June 2016 shall continue in force under these Regulations as if it were a deemed approval of that firm as a statutory audit firm under these Regulations.

Appropriate qualification for purpose of Regulation 43(a)

• (2) In paragraph (1), “qualification” means a qualification to undertake an audit of individual accounts and group accounts in so far as required by European Union law.

Conditions for approval as statutory audit firm

• (2) A firm shall not be eligible for approval as a statutory audit firm unless—

• (a) the individuals who carry out statutory audits in the State on behalf of the firm are approved as statutory auditors in accordance with these Regulations,

• (b) the majority of the voting rights in the firm are held by—

• (i) individuals who are eligible for approval in the State or in any other Member State as statutory auditors,

• (ii) audit firms approved as statutory audit firms in the State or in any other Member State, or

• (iii) a combination of such individuals and audit firms,

and

• (c) subject to paragraph (3), the majority of the members of the administrative or management body of the firm are—

• (i) individuals who are eligible for approval in the State or in any other Member State as statutory auditors,

• (ii) audit firms approved as statutory audit firms in the State or in any other Member State, or

• (iii) a combination of such individuals and audit firms.

• (3) Where the administrative or management body of a firm has no more than 2 members, then, for the purposes of subparagraph (c) of paragraph (2), one of those members shall satisfy at least the requirements of that subparagraph.

Powers of Director of Corporate Enforcement

• (a) acting as a statutory auditor or audit firm of a company, or

• (b) purporting to have obtained approval under these Regulations, or registration in accordance with Regulation 38, to so act,

the production of evidence of the person’s approval under these Regulations or, if applicable, registration in accordance with Regulation 38 in respect of any period during which the person so acted or purported to have obtained such approval.

• (2) If the person concerned refuses or fails to produce the evidence referred to in paragraph (1) within 30 days after the date of the demand referred to in that paragraph, or such longer period as the Director of Corporate Enforcement may allow, the person shall be guilty of an offence and shall be liable—

• (a) on summary conviction, to a class A fine, or

• (b) on conviction on indictment, to a fine not exceeding €12,500.

• (3) In a prosecution for an offence under this Regulation, it shall be presumed, until the contrary is shown, that the defendant did not, within 30 days, or any longer period allowed, after the day on which the production was demanded, produce evidence in accordance with paragraph (1).

Evidence in prosecutions under Regulation 47

• (2) Paragraph (1) shall not apply unless a copy of the certificate concerned is served by the prosecution on the defendant, by registered post, not later than 28 days before the day the certificate is produced in court in the proceedings concerned.

• (3) If the defendant in those proceedings intends to contest the statement contained in such a certificate, he or she shall give notice in writing of that intention to the prosecution within 21 days, or such longer period as the court may allow, after the date of receipt by him or her of a copy of the certificate from the prosecution.

Chapter 2 Aptitude Test

Aptitude test to be passed

• (2) Paragraph (1) shall not apply to a Member State auditor or third-country auditor if the recognised accountancy body is satisfied that he or she has otherwise demonstrated sufficient knowledge of the enactments and practice referred to in that paragraph.

• (3) The Supervisory Authority shall, at such time as it thinks it appropriate to do so, issue guidelines to each recognised accountancy body as to the specific matters that a recognised accountancy body should have regard to in reaching a decision that it is satisfied that a person has demonstrated, in accordance with paragraph (2), the knowledge referred to in paragraph (1).

• (4) A recognised accountancy body may charge and impose a fee (of an amount specified from time to time by the Minister sufficient to cover the body’s administrative expenses in respect of the following) on a Member State auditor or third-country auditor in respect of the administration of an aptitude test under this Regulation in relation to him or her.

• (5) A fee imposed under paragraph (4) may, in default of payment, be recovered from the Member State auditor or third-country auditor concerned as a simple contract debt in any court of competent jurisdiction.

Scope of aptitude test

• (a) be conducted in either Irish or English, and

• (b) cover only the applicant’s adequate knowledge of the enactments and practice that are relevant to statutory audits in the State.

• (2) The various matters that shall constitute the contents of the aptitude test shall be decided by the recognised accountancy body after it has received the approval of the Supervisory Authority to the contents of the test.

• (3) A recognised accountancy body shall not alter the contents of an aptitude test approved under paragraph (2) unless the alteration concerned has been approved by the Supervisory Authority.

Adequate standards to be applied in administration of aptitude test

• (2) No standards shall be used by a recognised accountancy body for the purposes of paragraph (1) unless those standards have (with respect to that use) first been approved by the Supervisory Authority.

Chapter 3 Withdrawal of approval

Grounds for mandatory withdrawal of approval in case of statutory auditor

• (2) For the purposes of this Regulation, the cases that can constitute circumstances of an auditor’s good repute being seriously compromised include cases of professional misconduct or want of professional skill on the part of the auditor.

• (3) Without prejudice to Regulation 114 and subject to paragraphs (5) to (7), a recognised accountancy body shall withdraw an approval of an auditor under these Regulations if, but only if—

• (a) circumstances arise (involving acts or omissions on the part of the auditor) from which the recognised accountancy body can reasonably conclude that the auditor’s good repute is seriously compromised, or

• (b) the auditor no longer falls within paragraph (a), (b) or (c) of Regulation 43, or

• (c) in the case of a person who is a statutory auditor referred to in Regulation 44(1)—

• (i) the auditor no longer falls within paragraph (a) of Regulation 43,

• (ii) the auditor is not registered as a statutory auditor in the public register, or

• (iii) the auditor is not subject to the regulation of a recognised accountancy body.

• (4) Unless there do not exist internal appeal procedures of the recognised accountancy body as referred to in paragraph (9)(a), references in paragraphs (5) to (8) to a recognised accountancy body shall be read as references to a recognised accountancy body acting through the disciplinary committee that deals with matters at first instance.

• (5) Subject to paragraph (8), paragraph (6) applies where, having—

• (a) complied with the requirements of procedural fairness in that regard, and

• (b) served any notices required for that purpose or as required by its investigation and disciplinary procedures,

the recognised accountancy body is satisfied that subparagraph (a), (b) or (c) of paragraph (3) applies in the case of an auditor.

• (6) Subject to paragraph (8), the recognised accountancy body shall serve a notice in writing on the auditor stating that—

• (a) it is satisfied that subparagraph (a), (b) or (c) of paragraph (3) applies in the case of the auditor,

• (b) the auditor must take specified steps to cause subparagraph (a), (b) or (c) of paragraph (3) to cease to apply to him or her within a specified period (which shall be not less than one month), and

• (c) if those steps are not taken, it shall withdraw the approval of the auditor.

• (7) Where the recognised accountancy body has served a notice under paragraph (6) on a statutory auditor and the auditor has not, before the expiration of the specified period referred to in paragraph (6)(b), taken the steps referred to in paragraph (6)(b), the recognised accountancy body shall withdraw the approval of the auditor under these Regulations.

• (8) The procedure specified in paragraph (6) need not be employed if the acts or omissions concerned referred to in subparagraph (a) of paragraph (3) are such as, in the opinion of the recognised accountancy body, constitute professional misconduct or want of professional skill on the part of the auditor of a degree that employing that procedure would not be in the public interest but nothing in this paragraph affects the application of the requirements of procedural fairness to the withdrawal of approval.

• (9) If—

• (a) there exist applicable internal appeal procedures of the recognised accountancy body, and

• (b) the investigation and disciplinary procedures of the recognised accountancy body provide that a decision of its disciplinary committee, being a decision of a nature to which this Regulation applies, shall stand suspended or shall not take effect until, as the case may be—

• (i) the period for making an appeal under those procedures has expired without such an appeal having been made,

• (ii) such an appeal has been made and the decision to withdraw the approval confirmed, or

• (iii) such an appeal that has been made is withdrawn,

then, notwithstanding anything in the preceding provisions of this Regulation, the operation of the withdrawal of approval by that disciplinary committee shall stand suspended until the happening of an event specified in subparagraph (b)(i), (ii) or (iii).

• (10) Paragraph (11) applies if—

• (a) there exist applicable internal appeal procedures of the recognised accountancy body, and

• (b) the investigation and disciplinary procedures of the recognised accountancy body do not provide, as referred to in paragraph (9)(b), for the decision of the disciplinary committee referred to in that provision to stand suspended or not to take effect.

• (11) Notwithstanding the internal appeal procedures referred to in paragraph (10)(a), the auditor to whom the decision referred to in paragraph (9)(b) relates may apply to the High Court for an order suspending the operation of the withdrawal pending the determination by the relevant appellate committee of an appeal that he or she is making under those procedures and, where such an application is made, paragraphs (14) to (17) apply to that application with—

• (a) the substitution of references to an appeal under those internal appeal procedures for reference to an appeal under Regulation 54, and

• (b) any other necessary modifications.

• (12) If the relevant appellate committee referred to in paragraph (11) is of the opinion, having regard to the particular issues that have arisen on that appeal, that, in the interests of justice, the disposal by it of an appeal referred to in that paragraph ought to include its proceeding in the manner specified in paragraphs (6) and (7), then, in disposing of that appeal, it shall proceed in the manner so specified.

• (13) The recognised accountancy body shall take all reasonable steps to ensure that any appeal to the relevant appellate committee referred to in paragraph (11) is prosecuted promptly and it shall be the duty of that appellate committee to ensure that any such appeal to it is disposed of as expeditiously as may be and, for that purpose, to take all such steps as are open to it to ensure that, in so far as is practicable, there are no avoidable delays at any stage in the determination of such an appeal.

• (14) Where a recognised accountancy body has made a decision to withdraw the approval of an auditor under this Regulation (that is to say, a final decision of the recognised accountancy body on the matter after the internal appeal procedures (if any) of it have been employed and exhausted), the auditor may apply to the High Court for an order suspending the operation of the withdrawal pending the determination by the High Court of an appeal under Regulation 54 that he or she is making against the withdrawal.

• (15) Subject to paragraph (17), on the hearing of an application under paragraph (14), the High Court may, as it considers appropriate and having heard the recognised accountancy body concerned and, if it wishes to be so heard, the Supervisory Authority (which shall have standing to appear and be heard on the application)—

• (a) grant an order suspending the operation of the withdrawal, or

• (b) refuse to grant such an order,

and an order under subparagraph (a) may provide that the order shall not have effect unless one or more conditions specified in the order are complied with (and such conditions may include conditions requiring the auditor not to carry out statutory audits save under the supervision of another statutory auditor or not to carry out such audits save in specified circumstances).

• (16) Subject to paragraph (17), the High Court may, on application to it by the auditor or recognised accountancy body concerned, vary or discharge an order under paragraph (15)(a) if it considers it just to do so.

• (17) In considering an application under paragraph (14) or (16), the High Court shall have regard to—

• (a) whether, as regards the appeal the applicant is making under Regulation 54 to the High Court, the applicant has a strong case that is likely to succeed before that Court (and, for that purpose, the High Court shall require the applicant to give an indication of the facts that will be relied upon, or of the evidence that will be adduced in the case of facts that are in controversy, by him or her on the hearing of that appeal), and

• (b) the public interest and, in particular, the public interest in ensuring that there is the minimum of disruption, consistent with law, to the discharge by the recognised accountancy body concerned, as a body assigned with the function of granting and withdrawing approval.

Grounds for mandatory withdrawal in case of statutory audit firm

• (2) For the purposes of this Regulation, the cases that can constitute circumstances of an audit firm’s good repute being seriously compromised include cases of professional misconduct or want of professional skill on the part of the audit firm or any of the one or more auditors through whom it acts.

• (3) Without prejudice to Regulation 114 and subject to paragraphs (5) to (7), a recognised accountancy body shall withdraw an approval of an audit firm under these Regulations if, but only if—

• (a) circumstances arise (involving acts or omissions on the part of the audit firm or auditor or auditors through whom it acts) from which the recognised accountancy body can reasonably conclude that the firm’s good repute is seriously compromised,

• (b) the audit firm (not being a firm referred to in subparagraph (c)) no longer falls within subparagraphs (a), (b) and (c) of Regulation 46(2), or

• (c) in the case of a firm which is a statutory audit firm referred to in Regulation 44(2), the firm no longer falls within subparagraph (a) of Regulation 46(2).

• (4) Unless there do not exist internal appeal procedures of the recognised accountancy body as referred to in paragraph (9)(a), references in paragraphs (5) to (8) to a recognised accountancy body shall be read as references to a recognised accountancy body acting through the disciplinary committee that deals with matters at first instance.

• (5) Subject to paragraph (8), paragraph (6) applies where, having—

• (a) complied with the requirements of procedural fairness in that regard, and

• (b) served any notices required for that purpose or as required by its investigation and disciplinary procedures,

the recognised accountancy body is satisfied that subparagraph (a), (b) or (c) of paragraph (3) applies in the case of an audit firm.

• (6) Subject to paragraph (8), the recognised accountancy body shall serve a notice in writing on the audit firm stating that—

• (a) it is satisfied that subparagraph (a), (b) or (c) of paragraph (3) applies in the case of the audit firm,

• (b) the audit firm must take specified steps to cause subparagraph (a), (b) or (c) of paragraph (3) to cease to apply to it within a specified period (which shall not be less than one month), and

• (c) if those steps are not taken, it shall withdraw the approval of the firm.

• (7) Where the recognised accountancy body has served a notice under paragraph (6) on a statutory audit firm and the firm has not, before the expiration of the specified period referred to in paragraph (6)(b), taken the steps referred to in paragraph (6)(b), the recognised accountancy body shall withdraw the approval of the audit firm under these Regulations.

• (8) The procedure specified in paragraph (6) need not be employed if the acts or omissions concerned referred to in subparagraph (a) of paragraph (3) are such as, in the opinion of the recognised accountancy body, constitute professional misconduct or want of professional skill on the part of the audit firm (or the auditor or auditors through whom it acts) of a degree that employing that procedure would not be in the public interest but nothing in this paragraph affects the application of the requirements of procedural fairness to the withdrawal of approval.

• (9) If—

• (a) there exist applicable internal appeal procedures of the recognised accountancy body, and

• (b) the investigation and disciplinary procedures of the recognised accountancy body provide that a decision of its disciplinary committee, being a decision of a nature to which this Regulation applies, shall stand suspended or shall not take effect until, as the case may be—

• (i) the period for making an appeal under those procedures has expired without such an appeal having been made,

• (ii) such an appeal has been made and the decision to withdraw the approval confirmed, or

• (iii) such an appeal that has been made is withdrawn,

then, notwithstanding anything in the preceding provisions of this Regulation, the operation of the withdrawal of approval by that disciplinary committee shall stand suspended until the happening of an event specified in subparagraph (b)(i), (ii) or (iii).

• (10) Paragraph (11) applies if—

• (a) there exist applicable internal appeal procedures of the recognised accountancy body, and

• (b) the investigation and disciplinary procedures of the recognised accountancy body do not provide, as referred to in paragraph (9)(b), for the decision of the disciplinary committee referred to in that provision to stand suspended or not to take effect.

• (11) Notwithstanding the internal appeal procedures referred to in paragraph (10)(a), the audit firm to which the decision referred to in paragraph (9)(b) relates may apply to the High Court for an order suspending the operation of the withdrawal pending the determination by the relevant appellate committee of an appeal that it is making under those procedures and, where such an application is made, paragraphs (14) to (17) apply to that application with—

• (a) the substitution of references to an appeal under those internal appeal procedures for reference to an appeal under Regulation 54, and

• (b) any other necessary modifications.

• (12) If the relevant appellate committee referred to in paragraph (11) is of the opinion, having regard to the particular issues that have arisen on that appeal, that, in the interests of justice, the disposal by it of an appeal referred to in that paragraph ought to include its proceeding in the manner specified in paragraphs (6) and (7), then, in disposing of that appeal, it shall proceed in the manner so specified.

• (13) The recognised accountancy body shall take all reasonable steps to ensure that any appeal to the relevant appellate committee referred to in paragraph (11) is prosecuted promptly and it shall be the duty of that appellate committee to ensure that any such appeal to it is disposed of as expeditiously as may be and, for that purpose, to take all such steps as are open to it to ensure that, in so far as is practicable, there are no avoidable delays at any stage in the determination of such an appeal.

• (14) Where a recognised accountancy body has made a decision to withdraw the approval of an audit firm under this Regulation (that is to say, a final decision of the recognised accountancy body on the matter after the internal appeal procedures (if any) of it have been employed and exhausted), the audit firm may apply to the High Court for an order suspending the operation of the withdrawal pending the determination by the High Court of an appeal under Regulation 54 that it is making against the withdrawal.

• (15) Subject to paragraph (17), on the hearing of an application under paragraph (14), the High Court may, as it considers appropriate and having heard the recognised accountancy body concerned and, if it wishes to be so heard, the Supervisory Authority (which shall have standing to appear and be heard on the application)—

• (a) grant an order suspending the operation of the withdrawal; or

• (b) refuse to grant such an order,

and an order under subparagraph (a) may provide that the order shall not have effect unless one or more conditions specified in the order are complied with (and such conditions may include conditions requiring the audit firm not to carry out statutory audits save under the supervision of one or more statutory auditors or one or more statutory audit firms or not to carry out such audits save in specified circumstances).

• (16) Subject to paragraph (17), the High Court may, on application to it by the audit firm or recognised accountancy body concerned, vary or discharge an order under paragraph (15)(a) if it considers it just to do so.

• (17) In considering an application under paragraph (14) or (16), the High Court shall have regard to—

• (a) whether, as regards the appeal the applicant is making under Regulation 54 to the High Court, the applicant has a strong case that is likely to succeed before that Court (and, for that purpose, the High Court shall require the applicant to give an indication of the facts that will be relied upon, or of the evidence that will be adduced in the case of facts that are in controversy, by it on the hearing of that appeal), and

• (b) the public interest and, in particular, the public interest in ensuring that there is the minimum of disruption, consistent with law, to the discharge by the recognised accountancy body concerned, as a body assigned with the function of granting and withdrawing approval.

Appeals against withdrawal of approval

• (2) An appeal shall not lie under paragraph (1) unless and until any applicable internal appeal procedures of the recognised accountancy body have been employed and exhausted by the person referred to in that paragraph.

• (3) An appeal under paragraph (1) shall be made within one month—

• (a) unless subparagraph (b) applies, after the date of the withdrawal of approval, or

• (b) after the confirmation of that withdrawal on foot of the internal appeal procedures of the recognised accountancy body having been employed.

• (4) On the hearing of an appeal under paragraph (1), the High Court—

• (a) if it is satisfied that the appellant has established that there was not a reasonable basis for the decision of the recognised accountancy body concerned to withdraw the approval, shall cancel the withdrawal of the approval, or

• (b) if it is not so satisfied, shall confirm the withdrawal of the approval.

• (5) For the purposes of paragraph (4), there is a reasonable basis for the decision of the recognised accountancy body if, taking into account the expertise and specialist knowledge possessed by the recognised accountancy body, the decision (and the process that led to its making) was not vitiated by—

• (a) any serious and significant error or a series of such errors,

• (b) a mistake of law, or

• (c) the evidence, taken as a whole, not supporting the decision.

• (6) The High Court may, on the hearing of an appeal under paragraph (1), consider evidence not adduced or hear an argument not made to the recognised accountancy body concerned if the Court is satisfied that—

• (a) there are cogent circumstances justifying the failure to adduce the evidence or make the argument to the recognised accountancy body, and

• (b) it is just and equitable for the Court to consider the evidence or hear the argument, as the case may be.

• (7) A notification of the outcome of an appeal under this Regulation (or of any appeal from a decision of the High Court thereunder) shall be made by the recognised accountancy body concerned to the same persons to whom a notification of a withdrawal of approval must be made by Regulation 55 and (where it applies) Regulation 56.

Certain persons to be notified of withdrawal of approval

• (a) the Supervisory Authority, and

• (b) the Registrar of Companies,

as soon as possible, but not later than one month after the date of withdrawal of approval.

Other persons to be notified of withdrawal of approval

• (2) Where the approval under these Regulations of an audit firm is withdrawn for any reason by the recognised accountancy body, the recognised accountancy body shall, in addition to making the communication specified in Regulation 55, notify the relevant competent authorities of the host Member States, where the statutory auditor is also registered and entered in the public registers of those States pursuant to Articles 15 to 19 of the Audit Directive, of the fact of the withdrawal and the reasons for it.

• (3) If the approval under these Regulations of a statutory auditor or audit firm is withdrawn by the Supervisory Authority, this Regulation and Regulation 55 (other than paragraph (a) of it) shall apply in relation to the withdrawal as if the references in them to the recognised accountancy body were references to the Supervisory Authority and with any other necessary modifications.

• (4) The notifications under this Regulation shall be made as soon as possible, but not later than one month after the date of withdrawal of approval.

PART 5 STANDARDS AND PROVISIONS APPLICABLE TO STATUTORY AUDITORS AND AUDIT FIRMS

Chapter 1 Appointment of Statutory Auditors or Audit Firms

Prohibition of contractual clauses restricting choice of auditors

(2)(a) A contractual clause referred to in paragraph (1) which—

• (i) does not fall within Article 16(6) of Regulation (EU) No 537/2014, and

• (ii) exists on 17 June 2016,

is void on and from that date.

• (b) Paragraph (1) shall not apply to a contractual clause which falls within Article 16(6) of Regulation (EU) No 537/2014 until 17 June 2017.

• (c) A contractual clause referred to in paragraph (1) which—

• (i) falls within Article 16(6) of Regulation (EU) No 537/2014, and

• (ii) exists on 17 June 2017,

is void on and from that date.

• (3) An audited entity that is a public-interest entity shall directly and without delay report to the Supervisory Authority any contractual clause referred to in paragraph (1) that purports to affect it and the circumstances which gave rise to that clause.

• (4) The Supervisory Authority, on receipt of a report under paragraph (3), may, by virtue of its powers under Part 15 of the Companies Act 2014 , share the report with authorities in the State.

Selection procedures for statutory auditors or audit firms by public-interest entities

• (a) the audit committee shall prepare a recommendation for the directors of the entity by carrying out the selection procedure specified in Article 16(3) of Regulation (EU) No 537/2014;

• (b) the audit committee shall submit a recommendation to the directors of the entity for the appointment of statutory auditors or audit firms;

• (c) the recommendation—

• (i) shall be justified and contain at least 2 choices for the audit engagement and shall express a duly justified preference for one of them, and

• (ii) shall state (if such be the case) that the recommendation is free from influence by a third party and that, on and from 17 June 2017, no clause of the kind referred to in Regulation 57(1) has been imposed upon it;

• (d) the proposal by the directors to the general meeting of shareholders or members of the entity for the appointment of statutory auditors or audit firms—

• (i) shall include the recommendation referred to in subparagraph (b) and the preference referred to in subparagraph (c)(i),

• (ii) if it departs from the preference of the audit committee, shall justify the reasons for not following the recommendation of the audit committee, and

• (iii) shall state if the statutory auditor or audit firm recommended by the directors participated in the selection procedure referred to in paragraph (2)(a).

• (2) Paragraph (1) shall not apply if—

• (a) a selection procedure in accordance with Article 16(3) of Regulation (EU) No 537/2014 has been carried out in respect of the appointment of the statutory auditor or audit firm in relation to one or more of the preceding 9 financial years, and

• (b) the statutory auditor or audit firm appointed by the public-interest entity was appointed for the previous financial year.

• (3) Where the public-interest entity is exempt from the requirement for an audit committee under Regulation 115, this Regulation applies to the directors of the public-interest entity.

• (4) Where a public-interest entity relies on the provisions of section 382, 384 or 385 of the Companies Act 2014 , the public-interest entity shall, as soon as is practicable, inform the Supervisory Authority of that fact.

• (5) The appointment of an auditor is invalid if the appointment contravenes a provision of this Regulation.

(6)(a) Subject to subparagraph (b), a public-interest entity shall keep records demonstrating that the selection procedures referred to in paragraph (1) have been carried out.

• (b) The public-interest entity shall keep those records for at least 6 years from the date on which the selection procedures were completed.

• (7) A public-interest entity which contravenes paragraph (6)(a) or (b) shall be guilty of an offence and shall be liable, on summary conviction, to a class A fine.

Appointment of statutory auditors or audit firms by public-interest entities — informing the Supervisory Authority

• (a) where a statutory auditor or audit firm is first appointed by a public-interest entity on or after 17 June 2016, he, she or it shall inform the Supervisory Authority within one month after the date of such appointment that the statutory auditor or audit firm has been appointed to hold office, and

• (b) where a statutory auditor or audit firm which has complied with subparagraph (a) is subsequently appointed by the same or a different public-interest entity, he, she or it shall inform the Supervisory Authority within one month after the date of such appointment that the statutory auditor or audit firm has been appointed to hold office only if, immediately before the time of such appointment, the statutory auditor or audit firm held no such office with any public-interest entity.

• (2) The information shall be submitted in such form and manner as the Supervisory Authority specifies and may be used by the Supervisory Authority in the performance of its functions.

• (3) A statutory auditor or audit firm who or which contravenes paragraph (1) shall be guilty of an offence and shall be liable—

• (a) on summary conviction, to a class A fine, or

• (b) on conviction on indictment, to a fine not exceeding €12,500.

Removal of statutory auditors or audit firms by public-interest entities — supplementary provisions

• (a) shareholders representing 5% or more of the voting rights or of the share capital, or

• (b) the Supervisory Authority,

may bring a claim before the court for the removal of the statutory auditor or audit firm subject to there being good and substantial grounds for bringing such a claim before the court.

• (2) The grounds for bringing the claim before the court must relate to—

• (a) the conduct of the auditor or audit firm with regard to the performance of his, her or its duties as auditor of the public-interest entity or otherwise, or

• (b) the petitioner’s opinion that it is in the best interests of the public-interest entity to do so.

• (3) For the purposes of paragraph (2)—

• (a) diverging opinions on accounting treatments or audit procedures cannot constitute the basis for the passing of any resolution for the purposes of that paragraph, and

• (b) “bestinterests of the public-interest entity” does not include any illegal or improper motive with regard to avoiding disclosures or detection of any contravention by the entity of these Regulations.

Directors’ report to include date of last appointment of statutory auditor or audit firm

• (2) Where a public-interest entity has sought an extension from the Supervisory Authority under Regulation 105, pursuant to Article 17(6) of Regulation (EU) No 537/2014, the directors’ report shall also contain details of the extension granted.

• (3) In this Regulation, “directors’ report” means the directors’ report required by section 325 of the Companies Act 2014 .

Chapter 2 Standards for Statutory Auditors

Continuing education

• (2) The condition is one requiring the person to take part in appropriate programmes of continuing education in order to maintain his or her theoretical knowledge, professional skills and values, including, in particular, in relation to auditing, at a sufficiently high level.

• (3) In the case of a statutory auditor who is a person in relation to whom a recognised accountancy body may, by virtue of Regulation 35, perform functions under these Regulations but either—

• (a) the approval of whom as a statutory auditor has not been granted by that recognised accountancy body, or

• (b) the person is a person referred to in Regulation 44(1),

a like obligation to that referred to in paragraph (2) as regards taking part in appropriate programmes of continuing education is, by virtue of this paragraph, imposed on him or her.

Professional ethics

Independence, objectivity and professional scepticism

Standards for purposes of Regulations 62 to 64

• (a) have adequate standards requiring those auditors and audit firms to comply with the obligations specified in Regulations 62 to 64, and

• (b) institute adequate arrangements for the effective monitoring and enforcement of compliance with such standards.

• (2) No standards shall be used by a recognised accountancy body for that purpose unless those standards have (with respect to that use) first been approved by the Supervisory Authority in accordance with section 905(2)(c) of the Companies Act 2014 .

Arrangements for enforcement of standards

• (a) sanctions which include—

• (i) at the discretion of the recognised accountancy body, in accordance with Regulation 114, the withdrawal of approval under these Regulations as a statutory auditor or audit firm,

• (ii) appropriate penalties,

• (iii) appropriate disciplinary measures,

• (iv) appropriate regulatory sanctions,

and

• (b) making available to the public information relating to the measures taken and the penalties imposed in respect of statutory auditors and audit firms.

Chapter 3 Confidentiality and Professional Secrecy

Rules of confidentiality to apply

• (2) The statutory auditor or audit firm, as the case may be, shall comply with those rules of confidentiality and secrecy.

• (3) In the case of an audit firm registered in accordance with Regulation 38, the rules of confidentiality and secrecy of the recognised accountancy body of which the key audit partner who carries out the statutory audit on behalf of the audit firm is a member shall apply with respect to information and documents to which the audit firm (or a statutory auditor on behalf of the firm) has access when carrying out a statutory audit.

Supplemental provisions in relation to Regulation 67

• (a) that the statutory auditor or audit firm referred to in that Regulation has ceased to be engaged in that audit assignment, or

• (b) that the auditor or audit firm referred to in that Regulation ceases to be—

• (i) a statutory auditor or audit firm, or

• (ii) an auditor or audit firm.

• (2) Accordingly, in such a case—

• (a) the statutory auditor or, as the case may be, audit firm, or

• (b) the former such auditor or, as the case may be, audit firm,

shall continue to comply with the rules of confidentiality and secrecy concerned.

Saving

• (2) Nothing in Regulation 67 or 68 shall operate to impede the enforcement of the provisions of these Regulations or, where applicable, Regulation (EU) No 537/2014.

Rules of confidentiality in relation to entities in third countries

• (2) A statutory auditor or an audit firm that carries out the statutory audit of an undertaking which has issued securities in a third country, or which forms part of a group issuing statutory consolidated financial statements in a third country, may only transfer the audit working papers or other documents relating to the audit of that entity that he, she or it holds to the competent authorities in the relevant third countries under the conditions set out in Chapter 3 of Part 10.

• (3) The transfer of information to the group auditor situated in a third country shall comply with—

• (a) Chapter IV of Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995⁸ on the protection of individuals with regard to the processing of personal data and on the free movement of such data, and

• (b) national personal data protection rules.

Incoming statutory auditor or audit firm to be afforded access to information

Access by recognised accountancy body to audit documents

• (a) furnish to it specified documents, or

• (b) permit it to have access, under specified circumstances, to all relevant documents in the possession or control of the auditor or firm,

within a specified period.

• (2) Without prejudice to the generality of paragraph (1), the powers under that paragraph are exercisable in relation to a statutory auditor or audit firm where a complaint is made to the recognised accountancy body that the statutory auditor or audit firm has contravened a requirement of these Regulations.

• (3) Where the powers under paragraph (1) are exercisable, the following additional power may be exercised by the recognised accountancy body if it considers that the exercise of it is reasonably necessary to enable it to clarify any matter arising from its inspection of the documents concerned, namely a power to require the statutory auditor or a member of the audit firm to—

• (a) attend before it, and

• (b) explain any entry in the documents concerned and otherwise give assistance to it in clarifying the matter concerned.

• (4) In this Regulation, “specified” means specified in the notice concerned.

• (5) Without prejudice to paragraph (6), a person who fails, without reasonable excuse, to comply with a requirement under paragraph (1) or (3) shall be guilty of an offence and shall be liable—

• (a) on summary conviction, to a class A fine, or

• (b) on conviction on indictment, to a fine not exceeding €12,500.

• (6) Where a person fails to comply with a requirement under paragraph (1) or (3), the recognised accountancy body concerned may apply to the High Court for an order compelling compliance by the person with the requirement, and, on the hearing of such application, the High Court may make such an order or such other order as it thinks just.

Access by Supervisory Authority to information and documents held by recognised accountancy bodies or relevant persons

• (a) furnish to it specified documents or information, or

• (b) permit it to have access, under specified circumstances, to all relevant documents in the possession or control of the recognised accountancy body or relevant person,

within a specified period.

• (2) In this Regulation, “relevant person” means—

• (a) a member of a recognised 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 Supervisory Authority reasonably believes has information or documents in relation to the particular function other than information or documents the disclosure of which is prohibited or restricted by law.

• (3) Without prejudice to the generality of paragraph (1), the powers under that paragraph are exercisable in relation to a recognised accountancy body or relevant person where a complaint is made to the Supervisory Authority that the recognised accountancy body or relevant person has contravened a requirement of these Regulations.

• (4) Where the powers under paragraph (1) are exercisable, the following additional power may be exercised by the Supervisory Authority if it considers that the exercise of it is reasonably necessary to enable it to clarify any matter arising from its inspection of the information or documents concerned, namely a power to require an officer of the recognised accountancy body or relevant person to—

• (a) attend before it, and

• (b) explain any entry in the information or documents concerned and otherwise give assistance to it in clarifying the matter concerned.

• (5) In this Regulation, “specified” means specified in the notice concerned.

• (6) A person who fails, without reasonable excuse, to comply with a requirement under paragraph (1) or (4) shall be guilty of an offence and shall be liable—

• (a) on summary conviction, to a class A fine, or

• (b) on conviction on indictment, to a fine not exceeding €12,500.

• (7) Nothing in this Regulation derogates from the powers exercisable by the Supervisory Authority in the circumstances, and under the conditions, specified in section 933, 934 or 935B of the Companies Act 2014 .

Professional privilege

No liability for acts done in compliance with Regulations

• (2) No liability to the entity audited or being audited, its shareholders, creditors, or other interested parties shall attach to the statutory auditor or audit firm by reason of such compliance.

• (3) For the avoidance of doubt, nothing in this Regulation affects the liability of a statutory auditor or audit firm for negligence or breach of duty in the conduct of a statutory audit by him, her or it.

Restriction of section 940 of Companies Act 2014

Chapter 4 Auditing Standards and Audit Reporting

Auditing standards to be applied

• (2) On and from the adoption of international auditing standards, statutory auditors and audit firms shall carry out statutory audits in accordance with those standards.

• (3) The reference in paragraph (2) to the adoption of international auditing standards is a reference to the adoption by the Commission, in accordance with the procedure referred to in Article 26 of the Audit Directive, of international auditing standards.

• (4) For the avoidance of doubt, levies imposed under section 916 of the Companies Act 2014 on that class of prescribed accountancy bodies comprising recognised accountancy bodies may be used for the purpose of meeting expenses properly incurred by the Supervisory Authority in performing its function referred to in section 905(2)(ma) of that Act.

• (5) In this Regulation, “standards” include standards on professional ethics and internal quality control in addition to standards on auditing.

Audit of group accounts — responsibility of group auditor

• (a) in relation to the group financial statements, the group auditor shall bear the full responsibility for the statutory auditors’ report, and