Companies (Statutory Audits) Act 2018

Type Act

Publication 2018-07-25

State In force

Source Irish Statute Book

articles 75

45. Amendment of Principal Act - insertion of sections 957A to 957I

45. Part 15 of the Principal Act is amended, in Chapter 3, by the insertion of the following sections before Chapter 4 of that Part:

“Definitions (sections 957A to 957I)

957AA. In this section and sections 957B to 957I—

‘court’ means the High Court;

‘monetary sanction’, in relation to a relevant director, means the monetary sanction referred to in section 957C(2)(c);

‘public notice of relevant sanction imposed’, in relation to a relevant director, means the publication in accordance with section 957F(1) of the relevant director’s particulars referred to in that section together with the other related particulars referred to in that section;

‘relevant contravention’ has the meaning assigned to it by section 900;

‘relevant decision’, in relation to a relevant director, means—

(a) a decision under section 957B(2) that the director has engaged in conduct giving rise (whether in whole or in part) to a relevant contravention,

(b) if, in consequence of a decision referred to in paragraph (a), the Director decides under section 957B(2) to impose a relevant sanction on the relevant director, the decision to impose that sanction, or

‘relevant director’ has the meaning assigned to it by section 900;

‘relevant sanction’, in relation to a relevant director, means a sanction referred to in section 957C(2);

‘section 957E agreement’ shall be read in accordance with section 957E(1);

‘Supervisory Authority’ has the meaning assigned to it by section 900.

Provisions applicable where Director receives particulars, etc., from Supervisory Authority concerning relevant contravention and relevant director

957B. (1) This section applies where—

(a) the Director has received from the Supervisory Authority particulars referred to in section 936A(2) and (where applicable) information and documents and assistance referred to in section 936A(3), and

(b) in consequence thereof, the Director has investigated under Part 13 a relevant director in order to find whether or not the relevant director has engaged in conduct giving rise (whether in whole or in part) to a relevant contravention.

(2) Subject to section 957I(3) and (4), where the Director finds that a relevant director has engaged in conduct giving rise (whether in whole or in part) to the relevant contravention, the Director may impose such relevant sanction on the relevant director as the Director considers appropriate after having regard to the circumstances referred to in section 957D(2).

(3) Subject to subsection (4), the relevant director the subject of a relevant decision may appeal to the court against the decision.

(4) An appeal under subsection (3) shall be brought within 3 months after the date on which the relevant director was notified of the relevant decision by the Director.

(5) A finding or relevant decision of the Director under this section is not a bar to any civil or criminal proceedings against the relevant director who is the subject of the finding or relevant decision.

(6) Subject to subsection (7), the Director shall, as soon as is practicable after imposing under this section a relevant sanction on a relevant director, give particulars of the relevant director and of the sanction imposed to the Supervisory Authority.

(7) The Director shall immediately communicate to the Supervisory Authority particulars of any direction given by the Director under section 957C(2)(b).

Sanctions which Director may impose on relevant director for certain conduct

957C. (1) This section applies to a relevant director the subject of a decision under section 957B(2) that the director has engaged in conduct giving rise (whether in whole or in part) to a relevant contravention.

(2) Subject to section 957D, the Director may impose on the relevant director one or more of the following sanctions in relation to the relevant contravention:

(a) a direction to the relevant director that he or she cease the conduct giving rise (whether in whole or in part) to the contravention and abstain from any repetition of that conduct;

(b) a direction to the relevant director prohibiting the director, for the period specified in the direction (being a period of not more than 3 years’ duration), from performing functions in audit firms or public-interest entities;

(c) subject to section 957G, a direction to the director to pay an amount, as specified in the direction but not exceeding €100,000, to the Director.

(3) In default of payment of an amount referred to in subsection (2)(c), the Director may recover that amount as a simple contract debt in any court of competent jurisdiction.

Relevant circumstances to be considered in imposing relevant sanctions on relevant director

957D. (1) This section applies to a relevant director the subject of a decision under section 957B(2) that the director has engaged in conduct giving rise (whether in whole or in part) to a relevant contravention.

(2) In imposing a relevant sanction on a relevant director, the Director shall consider the following circumstances:

(a) the gravity and duration of the relevant contravention;

(b) the degree of responsibility of the relevant director;

(d) the amount of profits gained or losses avoided by the relevant director in consequence of the contravention, in so far as they can be determined;

(e) the level of cooperation of the relevant director with the Supervisory Authority or Director, or both;

(f) previous impositions of relevant sanctions on the relevant director.

Resolution of suspected certain conduct by agreement - relevant director

957E. (1) Subject to subsection (2), if the Director believes on reasonable grounds that a relevant director has engaged in conduct (in this section referred to as the ‘relevant conduct’) giving rise (whether in whole or in part) to a relevant contravention referred to in section 936A(1), the Director and the relevant director may, at their absolute discretion, enter into an agreement (in this section referred to as a ‘section 957E agreement’) to resolve the matters relating to such conduct.

(2) The following provisions shall apply to the section 957E agreement:

(a) the agreement may be entered into notwithstanding that no investigation under Part 13 into the relevant conduct has been commenced;

(b) the agreement may be entered into after an investigation under Part 13 into the relevant conduct has been commenced but not, subject to paragraph (d), after it has been completed;

(c) without prejudice to the generality of the terms of the agreement, such terms may include terms under which the relevant director accepts the imposition of one or more relevant sanctions that may be imposed under section 957B(2);

(d) the agreement may be entered into after an investigation under Part 13 has been undertaken and carried out only to the extent to determine which sanctions (if any) referred to in paragraph (c) to impose on the relevant director;

(e) the terms of the agreement are binding on the Director and the relevant director.

(3) Subject to subsection (6), the provisions of sections 957C, 957D, 957F, 957G and 957H shall apply, with any necessary modifications, to any relevant sanctions imposed on a relevant director pursuant to a section 957E agreement as those sections apply to any relevant sanctions imposed on a relevant director otherwise than pursuant to a section 957E agreement.

(4) Subject to subsection (5), where the relevant director with whom the Director has entered into the section 957E agreement fails to comply with one or more of the terms of the agreement, the Director may apply to the court for an order compelling that relevant director to comply with those terms.

(5) In default of payment, any amount agreed to be paid to the Director by the relevant director under the section 957E agreement may be recovered by the Director from the relevant director as a simple contract debt in any court of competent jurisdiction.

(6) The necessary modifications referred to in subsection (3), in so far as section 957F is concerned, include reading that section as if—

(a) the following subsection were substituted for subsection (1) of that section:

‘(1) Subject to subsection (3), the Director shall, in so far as a relevant decision imposes a relevant sanction on a relevant director, as soon as is practicable, publish on his or her website particulars of the relevant contravention to which the relevant sanction relates, particulars of the relevant conduct, particulars of the relevant sanction imposed and particulars of the relevant director on whom the relevant sanction was imposed.’,

(b) subsections (2) and (4) of that section were deleted, and

(7) Section 957I shall be disregarded for the purposes of a section 957E agreement.

Publication of relevant sanction imposed on relevant director

957F. (1) Subject to subsections (2) and (3), the Director shall, in so far as a relevant decision imposes a relevant sanction on a relevant director, as soon as is practicable after—

(a) that decision has been confirmed by the court as referred to in section 957I(4), or

(b) a decision of the court under section 957I(2)(b) has been made to impose a different relevant sanction on the relevant director,

publish on his or her website particulars of the relevant contravention to which the relevant sanction relates, particulars of the relevant conduct, particulars of the relevant sanction imposed and particulars of the relevant director on whom the relevant sanction was imposed.

(2) Subject to subsection (4), if there is an appeal to the court from a confirmation referred to in subsection (1)(a), or a decision referred to in subsection (1)(b), the Director shall, as soon as may be, as he or she considers appropriate, publish particulars on his or her website of the status or outcome of the appeal.

(3) The Director shall publish the particulars, comprising a public notice of a relevant sanction imposed, on an anonymous basis on the Director’s website in any one or more of the following circumstances:

(a) the Director, following an assessment of the proportionality of the publication of those particulars in accordance with subsection (1) in so far as personal data are concerned, is of the opinion that, in relation to the relevant sanction imposed on the relevant director, such publication would be disproportionate;

(b) the Director is of the opinion that the publication of those particulars in accordance with subsection (1) would jeopardise the stability of financial markets or an ongoing criminal investigation;

(c) the Director is of the opinion that the publication of those particulars in accordance with subsection (1) would cause disproportionate damage to the relevant director.

(4) Subsection (2) shall not apply in any case where subsection (3) applies.

(5) The Director shall ensure that particulars published on his or her website in accordance with subsection (1) or (2) remain on his or her website for at least 5 years.

(6) The Director shall, as soon as is practicable after publishing a public notice of a relevant sanction imposed in relation to a relevant director, give particulars of the relevant director and of the relevant sanction imposed to the Supervisory Authority.

Limitations on imposing monetary sanctions on relevant director

957G. (1) If the Director decides to impose a monetary sanction on a relevant director, the Director shall not impose an amount that would be likely to cause the relevant director to be adjudicated bankrupt.

(2) If the conduct engaged in by the relevant director has given rise (whether in whole or in part) to 2 or more relevant contraventions, the Director shall not impose more than one monetary sanction on the relevant director in respect of the same conduct.

Relevant director not to be liable to be penalised twice for same conduct

957H. (1) If the Director imposes a monetary sanction on a relevant director and the conduct engaged in by the relevant director that has given rise (whether in whole or in part) to the relevant contravention is an offence under the law of the State, the relevant director shall not be liable to be prosecuted or punished for the offence under that law.

(2) The Director shall not impose a monetary sanction on a relevant director if—

(a) the relevant director has been charged with having committed an offence under a law of the State and has either been found guilty or not guilty of having committed the offence, and

(b) the offence involves the conduct engaged in by the relevant director that has given rise (whether in whole or in part) to the relevant contravention.

Appeals to and orders of court, including orders confirming decisions of Director

957I. (1) In an appeal under section 957B(3), the court may consider any evidence adduced or argument made, whether or not adduced or made to the Director.

(2) On the hearing of such an appeal, the court may make any order or give any direction it thinks fit, including an order—

(a) confirming the decision under appeal, or

(b) modifying or annulling that decision.

(3) A relevant decision, in so far as it relates to the imposition of a relevant sanction on a relevant director, does not take effect until that decision is confirmed by the court either—

(a) on appeal under section 957B(3), or

(b) on application by the Director under subsection (4).

(4) On application by motion on notice by the Director for an order confirming a decision referred to in subsection (3), the court may make an order confirming the decision or may refuse to make such an order.

(5) On an application under section 957E(4) for an order compelling compliance with a section 957E agreement, the court may make any order or give any direction as it thinks fit.”.

46. Amendment of section 1097 of Principal Act

46. Section 1097 of the Principal Act is amended by the substitution of “section 1551 (which relates to an obligation of a public-interest entity to establish an audit committee)” for “Regulation 115 (which relates to an obligation of a public-interest entity to establish an audit committee) of the 2016 Audits Regulations”.

47. Amendment of section 1291 of Principal Act

47. Section 1291 of the Principal Act is amended, in subsection (1)(a)(iv), by the substitution of “section 1293” for “section 1292”.

48. Amendment of section 1305 of Principal Act

48. Section 1305 of the Principal Act is amended, in subsection (3)(b), by the substitution of “the Audit Directive (within the meaning of Part 27)” for “the Audit Directive (within the meaning of the 2016 Audits Regulations)”.

49. Amendment of section 1401A of Principal Act

49. Section 1401A of the Principal Act is amended, in subsection (4), in the substituted subsection (1) of section 376, by the substitution of “section 366” for “section 367”.

50. Amendment of section 1438 of Principal Act

50. Section 1438 of the Principal Act is amended, in subsection (3), by the insertion of “, and Part 27,” after “Part 6”.

51. Statutory audits

51. The Principal Act is amended by the insertion of the following Part after Part 26:

“PART 27

Statutory Audits

Chapter 1

Preliminary and interpretation

Interpretation (Part 27 and Schedules 19 and 20)

1461. (1) In this Part and Schedules 19 and 20—

‘2010 Audits Regulations’ means the European Communities (Statutory Audits) (Directive 2006/43/EC) Regulations 2010 (S.I. No. 220 of 2010) revoked by Regulation 2(1) of the 2016 Audits Regulations;

‘2016 Audits Regulations’ means the European Union (Statutory Audits) (Directive 2006/43/EC, as amended by Directive 2014/56/EU, and Regulation (EU) No 537/2014) Regulations 2016 (S.I. No. 312 of 2016) revoked by section 3(6) of the Companies (Statutory Audits) Act 2018;

‘AAPA report’ shall be read in accordance with section 930B(1);

‘additional report to the audit committee’ means the report submitted to the audit committee of a public-interest entity by the statutory auditor or audit firm carrying out statutory audits as referred to in Article 11 of Regulation (EU) No 537/2014;

‘approved’, in relation to a statutory auditor or audit firm, means approved under this Part;

‘aptitude test’ means an aptitude test referred to in section 1476(1);

‘audit committee’, in relation to a public-interest entity, means the audit committee established for the entity under section 1551;

‘Audit Directive’ means Directive 2006/43/EC of the European Parliament and of the Council of 17 May 2006[^5] on statutory audits of annual accounts and consolidated accounts, amending Council Directives 78/660/EEC and 83/349/EEC and repealing Council Directive 84/253/EEC, as amended by Directive 2014/56/EU of the European Parliament and of the Council of 16 April 2014[^6] amending Directive 2006/43/EC on statutory audits of annual accounts and consolidated accounts;

‘audit working papers’, in relation to a statutory auditor or audit firm, means material (whether in the form of data stored on paper, film, electronic media or other media or otherwise) prepared by or for, or obtained by the statutory auditor or audit firm in connection with, the performance of the audit concerned, and includes—

(a) the record of audit procedures performed,

(b) relevant audit evidence obtained, and

and a reference to audit working papers in relation to a Member State auditor or audit firm, or a third-country auditor or third-country audit entity, shall be read accordingly;

‘auditing standards’ means the standards adopted by the Supervisory Authority under section 1526 in accordance with which statutory audits shall be carried out;

‘client’ has the meaning assigned to it by section 934(1);

‘Commission’ means Commission of the European Union;

‘counterpart authority’ shall be construed in accordance with section 1553;

‘disciplinary committee’ has the meaning assigned to it by section 900;

‘financial year’—

(a) in relation to the Supervisory Authority and an audited undertaking, shall be read in accordance with section 288, and

(b) in relation to a statutory auditor or audit firm, means any period in respect of which a profit and loss account or income statement is prepared by the auditor or audit firm for income tax or other business purposes, whether that period is of a year’s duration or not;

‘firm’ includes a body corporate;

‘Member State’ means a Member State of the European Union or an EEA state;

‘Member State audit firm’ means an audit entity approved in accordance with the Audit Directive by the counterpart authority of another Member State to carry out audits of accounts or consolidated accounts as required by European Union law;

‘Member State auditor’ means an auditor approved in accordance with the Audit Directive by the counterpart authority of another Member State to carry out audits of accounts or consolidated accounts as required by European Union law;

‘penalty’ includes a sanction and a measure;

‘public-interest entities’ means undertakings that—

(a) have transferable securities admitted to trading on a regulated market of any Member State,

(b) are credit institutions,

(d) are undertakings that are otherwise designated, by or under any other enactment, to be entities referred to in point (d) of Article 2(13) of the Audit Directive;

‘public register’ shall be read in accordance with section 1484;

‘recognised accountancy body’ has the meaning assigned to it by section 900;

‘Regulation (EU) No 537/2014’ means Regulation (EU) No 537/2014 of the European Parliament and of the Council of 16 April 2014[^7] on specific requirements regarding statutory audit of public-interest entities and repealing Commission Decision 2005/909/EC;

‘relevant contravention’ has the meaning assigned to it by section 900;

‘relevant provisions’ has the meaning assigned to it by section 900;

‘relevant sanction’ (except in Chapter 9) has the meaning assigned to it by section 900;

‘standards’ means those standards, as defined in section 900, of a prescribed accountancy body which is a recognised accountancy body;

‘statutory audit’ means an audit of entity financial statements or group financial statements in so far as—

(a) required by European Union law, or

(b) required by national law as regards small companies;

‘statutory audit firm’ means—

(a) an audit firm which is approved in accordance with this Part to carry out statutory audits, or

(b) an audit firm which is registered in accordance with section 1465 to carry out statutory audits;

‘statutory auditor’ means an individual who is approved in accordance with this Part to carry out statutory audits;

‘third country’ means a country or territory that is not a Member State or part of a Member State;

‘third-country competent authority’ means an authority in a third country with responsibilities, as respects auditors and audit entities in that country, equivalent to those of the Supervisory Authority.

(2) A reference in this Part or in Schedule 19 or 20 to a registered third-country auditor or third-country audit entity is a reference to a third-country auditor or third-country audit entity registered under Chapter 21.

(3) A word or expression that is used in this Part or in Schedule 19 or 20 and is also used in the Audit Directive shall have in this Part and that Schedule the same meaning as it has in the Audit Directive.

(4) A word or expression that is used in this Part or in Schedule 19 or 20 and is also used in Regulation (EU) No 537/2014 shall have in this Part and that Schedule the same meaning as it has in that Regulation.

Savings

1462. (1) Subject to Chapter 22, the 2016 Audits Regulations, as in force immediately before the date of commencement of section 3(6) of the Companies (Statutory Audits) Act 2018—

(a) in so far as they related to the conduct of statutory audits and the duties and powers of statutory auditors and audit firms in relation thereto for financial years commencing before that date, shall continue to apply to the conduct of statutory auditors and audit firms in relation thereto for those financial years, and

(b) as regards each other matter provision for which was made by those Regulations before that date, shall continue to make such provision before that date.

(2) For the purposes only of enabling the 2016 Audits Regulations to operate, for the financial years referred to in subsection (1), on and after the date referred to in that subsection, as those Regulations operated immediately before that date, a reference in those Regulations to this Act or a provision of this Act shall be read as a reference to this Act or such provision, as the case may be, as in force immediately before that date.

Application

1463. Save where otherwise provided (including provided by Regulation (EU) No 537/2014), this Part applies—

(a) in so far as it relates to the conduct of statutory audits and the duties and powers of statutory auditors and audit firms in relation thereto, to the conduct of statutory audits for financial years commencing on or after the date referred to in section 1462(1), and

(b) as regards each other matter provision for which is made by this Part, on and from that date.

Chapter 2

Approval of statutory auditors and audit firms

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

1464. (1) A recognised accountancy body may, on application made to it by an individual or a firm, approve, under this Part, the applicant as a statutory auditor or audit firm.

(2) A recognised accountancy body may, on foot of an application under subsection (1), grant approval under this Part only to—

(a) individuals, or

(b) firms,

who are of good repute.

(3) A recognised accountancy body may, on application made to it by a third-country auditor and in accordance with Chapter 20, approve, under this Part, the applicant as a statutory auditor.

(4) Subsection (5) applies in the case of an application under subsection (1)—

(a) by a firm that is a Member State audit firm in the circumstances where it is not seeking registration in accordance with section 1465, or

(b) by a Member State auditor.

(5) For the purposes of this section, 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 that the State is required to engage in by virtue of Part VIII of the Audit Directive, the 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) On approving a person as a statutory auditor or audit firm, a recognised accountancy body shall assign an individual identification number to the person.

(7) The recognised accountancy body shall maintain a record in writing of all numbers assigned by it under subsection (6).

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

1465. (1) An audit firm which is approved in another Member State shall be entitled to carry out statutory audits in the State if the key audit partner who carries out those audits on behalf of the audit firm, both at the time of registration (in accordance with subsection (2)) and at all times during the registration of the firm, complies with the requirements of sections 1464 to 1472.

(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 by which the key audit partner referred to in subsection (1) is approved.

(b) The recognised accountancy body shall ensure that an audit firm which complies with subsection (1) is registered in accordance with the requirements of Chapter 5 and Schedule 20.

(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.

(5) The recognised accountancy body shall maintain a record in writing of all numbers assigned by it under subsection (4).

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

(7) Where 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 recognised accountancy body shall ensure that the registration is recorded in the public register.

Restriction as to persons who may carry out statutory audits

1466. Statutory audits shall be carried out only by—

(a) auditors or audit firms that are approved under this Part, or

(b) audit firms registered in accordance with section 1465.

Restriction on acting as statutory auditor

1467. A person shall not—

(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 this Part.

Restriction on acting as statutory audit firm

1468. A firm shall not—

(a) act as a statutory audit firm,

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

unless it has been approved in accordance with this Part or registered in accordance with section 1465.

Offence for contravening section 1466, 1467 or 1468

1469. A person who contravenes section 1466, 1467 or 1468 shall be guilty of a category 2 offence.

Conditions for approval as statutory auditor

1470. A person shall not be eligible for approval as a statutory auditor unless he or she is—

(a) a member of a recognised accountancy body and holds an appropriate qualification as referred to in section 1472,

(b) a Member State auditor and complies with section 1476, or

Transitional provisions applicable to certain deemed approvals under Regulation 44 of 2016 Audits Regulations

1471. (1) Subject to sections 1479, 1582 and 1583, a deemed approval of a person as a statutory auditor continued in force under the 2016 Audits Regulations by virtue of Regulation 44(1) of those Regulations and in force immediately before the commencement of section 3(6) of the Companies (Statutory Audits) Act 2018 shall continue in force under this Part as if it were a deemed approval of that person as a statutory auditor under this Part.

(2) Subject to sections 1480, 1582 and 1583, a deemed approval of a firm as a statutory audit firm continued in force under the 2016 Audits Regulations by virtue of Regulation 44(2) of those Regulations and in force immediately before the commencement of section 3 (6) of the Companies (Statutory Audits) Act 2018 shall continue in force under this Part as if it were a deemed approval of that firm as a statutory audit firm under this Part.

Appropriate qualification for purpose of section 1470(a)

1472. (1) An individual holds an appropriate qualification, as required by section 1470(a), if he or she holds a qualification granted by a recognised accountancy body whose standards relating to training and qualifications for the approval of a person as a statutory auditor are not less than those specified in Schedule 19.

(2) In subsection (1), ‘qualification’ means a qualification to undertake an audit of entity financial statements and group financial statements in so far as required by European Union law.

(3) A recognised accountancy body may exempt in writing a person who has passed a university or equivalent examination, or who holds a university degree or equivalent qualification, in one or more of the subjects referred to in the test of theoretical knowledge specified in Schedule 19 if the body is satisfied that the passing of that examination, or the holding of that university degree or equivalent qualification, renders it unnecessary for the person to undergo that test in so far as those subjects are concerned.

(4) The Supervisory Authority shall, at such times as it thinks it appropriate to do so, issue guidelines to recognised accountancy bodies as to the specific matters that should be given regard to in reaching a decision under subsection (3) whether or not to grant an exemption under that subsection to a person.

Conditions for approval as statutory audit firm

1473. (1) In this section, references to a firm include references to a Member State audit firm if the firm is not seeking registration in accordance with section 1465.

(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 this Part,

(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

(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 subsection (2)(c), one of those members shall satisfy at least the requirements of that subsection.

Powers of Director

1474. (1) The Director may demand of a person—

(a) acting as a statutory auditor or audit firm of an undertaking, or

(b) purporting to have obtained approval under this Part, or registration in accordance with section 1465, to so act,

the production of evidence of the person’s approval under this Part or, if applicable, registration in accordance with section 1465 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 subsection (1) within 30 days after the date of the demand referred to in that subsection, or such longer period as the Director may allow, the person shall be guilty of a category 3 offence.

(3) In a prosecution for an offence under this section, 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 subsection (1).

Evidence in prosecutions under section 1474

1475. (1) Subject to subsection (2), in proceedings for an offence under section 1474, the production to the court of a certificate purporting to be signed by a person on behalf of a recognised accountancy body and stating that the defendant is not approved under this Part or, if applicable, is not registered in accordance with section 1465, by that recognised accountancy body shall be sufficient evidence, until the contrary is shown by the defendant, that the defendant is not so approved or registered, as the case may be.

(2) Subsection (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 3

Aptitude test

Aptitude test to be passed

1476. (1) Subject to subsection (2), a Member State auditor or third-country auditor applying for approval as a statutory auditor in the State is required to sit and pass an aptitude test to demonstrate his or her knowledge of the enactments and practice that are relevant to statutory audits in the State.

(2) Subsection (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 subsection.

(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 should be given regard to in reaching a decision under subsection (2) whether or not a person has demonstrated the knowledge referred to in subsection (1).

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

(5) A fee imposed under subsection (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.

(6) The amount of a fee imposed under Regulation 49(4) of the 2016 Audits Regulations as those Regulations were in force immediately before the date of commencement of section 3(6) of the Companies (Statutory Audits) Act 2018 shall be the amount of the fee imposed under subsection (4) until such time as the Minister exercises his or her power under that subsection to specify a different amount of such fee.

Scope of aptitude test

1477. (1) The aptitude test shall—

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

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

(2) Subject to subsection (3), 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 subsection (2) unless such alteration has been approved by the Supervisory Authority.

Adequate standards to be applied in administration of aptitude test

1478. (1) Subject to subsection (2), a recognised accountancy body shall apply adequate standards in the administration of the aptitude test.

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

Chapter 4

Withdrawal of approval

Grounds for mandatory withdrawal of approval in case of statutory auditor

1479. (1) For the purposes of this section, 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.

(2) Without prejudice to section 1502 and subject to subsections (4) to (6), a recognised accountancy body shall withdraw an approval of an auditor under this Part if, but only if—

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

(b) the auditor no longer falls within section 1470(a), (b) or (c), or

(i) the auditor no longer falls within section 1470(a),

(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.

(3) Unless there do not exist internal appeal procedures of a recognised accountancy body as referred to in subsection (8)(a), references in subsections (4) to (7) 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.

(4) Subject to subsection (7), subsection (5) 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,

a recognised accountancy body is satisfied that subsection (2)(a), (b) or (c) applies in the case of an auditor.

(5) Subject to subsection (7), the recognised accountancy body shall serve a notice in writing on the auditor stating that—

(a) it is satisfied that subsection (2)(a), (b) or (c) applies in the case of the auditor,

(b) the auditor shall take specified steps to cause subsection (2)(a), (b) or (c) to cease to apply to him or her within a specified period (which shall be not less than one month), and

(6) Where the recognised accountancy body has served a notice under subsection (5) on a statutory auditor and the auditor has not, before the expiration of the specified period referred to in subsection (5)(b), taken the steps referred to in subsection (5)(b), the recognised accountancy body shall withdraw the approval of the auditor under this Part.

(7) The procedure specified in subsection (5) need not be employed if the acts or omissions concerned referred to in subsection (2)(a) 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 subsection affects the application of the requirements of procedural fairness to the withdrawal of approval.

(8) 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 section 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 section, the operation of the withdrawal of approval by that disciplinary committee shall stand suspended until the occurrence of an event specified in paragraph (b)(i), (ii) or (iii).

(9) Subsection (10) 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 subsection (8)(b), for the decision of the disciplinary committee referred to in that provision to stand suspended or not to take effect.

(10) Notwithstanding the internal appeal procedures referred to in subsection (9)(a), the auditor to whom the decision referred to in subsection (8)(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, subsections (13) to (15) apply to that application with—

(a) the substitution of references to an appeal under those internal appeal procedures for reference to an appeal under section 1481, and

(b) any other necessary modifications.

(11) If the relevant appellate committee referred to in subsection (10) 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 subsection ought to include its proceeding in the manner specified in subsections (5) and (6), then, in disposing of that appeal, it shall proceed in the manner so specified.

(12) The recognised accountancy body shall take all reasonable steps to ensure that any appeal to the relevant appellate committee referred to in subsection (10) 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.

(13) Where the recognised accountancy body has made a decision to withdraw the approval of an auditor under this Part (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 section 1481 that he or she is making against the withdrawal.

(14) On the hearing of an application under subsection (13), the High Court may, as it considers appropriate and having heard the recognised accountancy body 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 paragraph (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).

(15) The High Court may, on application to it by the auditor or the recognised accountancy body concerned, vary or discharge an order under subsection (14)(a) if it considers it just to do so.

(16) The procedures under this section are in addition to those procedures in the cases to which section 930C(10) to (12) apply, that are required by section 930C(10) to (12) to be employed.

Grounds for mandatory withdrawal in case of statutory audit firm

1480. (1) For the purposes of this section, the cases that can constitute circumstances of a statutory 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.

(2) Without prejudice to section 1502 and subject to subsections (4) to (6), the recognised accountancy body shall withdraw an approval of an audit firm under this Part 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 paragraph (c)) no longer falls within section 1473(2)(a), (b) and (c), or

(c) in the case of a firm which is a statutory audit firm referred to in section 1471(2), the firm no longer falls within section 1473(2)(a).

(3) Unless there do not exist internal appeal procedures of the recognised accountancy body as referred to in subsection (8)(a), references in subsections (4) to (7) 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.

(4) Subject to subsection (7), subsection (5) 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 subsection (2)(a), (b) or (c) applies in the case of an audit firm.

(5) Subject to subsection (7), the recognised accountancy body shall serve a notice in writing on the audit firm stating that—

(a) it is satisfied that subsection (2)(a), (b) or (c) applies in the case of the audit firm,

(b) the audit firm shall take specified steps to cause subsection (2)(a), (b) or (c) to cease to apply to it within a specified period (which shall not be less than one month), and

(6) Where the recognised accountancy body has served a notice under subsection (5) on a statutory audit firm and the firm has not, before the expiration of the specified period referred to in subsection (5)(b), taken the steps referred to in subsection (5)(b), the recognised accountancy body shall withdraw the approval of the audit firm under this Part.

(7) The procedure specified in subsection (5) need not be employed if the acts or omissions concerned referred to in subsection (2)(a) 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 subsection affects the application of the requirements of procedural fairness to the withdrawal of approval.

(8) If—

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

(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,

(9) Subsection (10) applies if—

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

(10) Notwithstanding the internal appeal procedures referred to in subsection (9)(a), the audit firm to which the decision referred to in subsection (8)(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, subsections (13) to (15) apply to that application with—

(a) the substitution of references to an appeal under those internal appeal procedures for reference to an appeal under section 1481, and

(b) any other necessary modifications.

(13) Where the recognised accountancy body has made a decision to withdraw the approval of an audit firm under this section (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 section 1481 that it is making against the withdrawal.

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

(b) refuse to grant such an order,

and an order under paragraph (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).

(15) The High Court may, on application to it by the audit firm or the recognised accountancy body concerned, vary or discharge an order under subsection (14)(a) if it considers it just to do so.

(16) The procedures under this section are in addition to those procedures in the cases to which section 930C(10) to (12) apply, that are required by section 930C(10) to (12) to be employed.

Appeals against withdrawal of approval

1481. (1) Subject to subsection (2), a person may appeal to the High Court against the withdrawal by the recognised accountancy body of approval under this Part of the person as a statutory auditor or audit firm.

(2) An appeal shall not lie under subsection (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 subsection.

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

(a) unless paragraph (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 subsection (1), the High Court may—

(a) cancel the withdrawal of the approval, or

(b) confirm the withdrawal of the approval.

(5) The High Court may, on the hearing of an appeal under subsection (1), consider evidence not adduced or hear an argument not made to the recognised accountancy body 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.

(6) A notification of the outcome of an appeal under this section (or of any appeal from a decision of the High Court thereunder) shall be made by the recognised accountancy body to the same persons to whom a notification of a withdrawal of approval shall be made by section 1482 and (where it applies) section 1483.

Certain persons to be notified of withdrawal of approval

1482. Without prejudice to section 1483, where the approval under this Part of a statutory auditor or audit firm is withdrawn for any reason by a recognised accountancy body, that fact and the reasons for the withdrawal shall be communicated by the recognised accountancy body to—

(a) the Supervisory Authority, and

(b) the Registrar,

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

1483. (1) Where the approval under this Part of a statutory auditor is withdrawn for any reason by a recognised accountancy body, the recognised accountancy body shall, in addition to making the communication specified in section 1482, notify the relevant competent authorities of the host Member States, where the statutory auditor is also approved 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.

(2) Where the approval under this Part of an audit firm is withdrawn for any reason by a recognised accountancy body, the recognised accountancy body shall, in addition to making the communication specified in section 1482, notify the relevant competent authorities of the host Member States, where the audit firm 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 this Part of a statutory auditor or audit firm is withdrawn by the Supervisory Authority, this section and section 1482 (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 section shall be made as soon as possible, but not later than one month after the date of withdrawal of approval.

Chapter 5

Public register

Public register

1484. (1) Subject to subsection (2) and sections 887(2), 934C(2)(h), 1506(1)(h), 1573 and 1575, the Registrar shall maintain a particular register (in this Part referred to as the ‘public register’) which shall contain the information set out in Schedule 20 in relation to—

(a) statutory auditors and audit firms (other than audit firms which fall within paragraph (b) of the definition of ‘statutory audit firm’),

(b) third-country auditors and third-country audit entities, and

(2) Subject to sections 1582 and 1583, the public register referred to in Regulation 84 of the 2016 Audits Regulations, as that register was in being immediately before the date of commencement of section 3(6) of the Companies (Statutory Audits) Act 2018, shall, on and from that date, be deemed to be the public register referred to in subsection (1), and the other provisions of this Part (including provisions relating to the removal or alteration of entries in the public register) shall apply to that register accordingly.

Notification of information to Registrar

1485. (1) (a) An auditor or audit firm (other than a statutory audit firm which falls within paragraph (b) of the definition of ‘statutory audit firm’) shall, as soon as may be after he or she is approved under this Part as a statutory auditor or audit firm, notify the relevant information to the recognised accountancy body.

(b) A Member State audit firm shall, as soon as may be after it is registered in accordance with section 1465, notify the relevant information to the recognised accountancy body.

(c) A third-country auditor shall, as soon as may be after he or she is approved under this Part as a statutory auditor, notify the relevant information to the recognised accountancy body.

(2) On receipt of a notification under subsection (1) and its having carried out any verification of the information as seems to it to be necessary, the recognised accountancy body, as appropriate, shall notify to the Registrar—

(a) the relevant information contained in the notification, and

(b) (i) subject to subparagraph (ii), the individual identification number assigned by it to the auditor, audit firm or third-country auditor under section 1464(6) or a Member State audit firm under section 1465(4), and

(ii) where—

(I) under section 1464(6) or 1465(4) such a number exists, and

(II) by reason of the circumstances referred to in paragraph (b) of the definition of ‘relevant information’ in subsection (4), the relevant information notified to the recognised accountancy body or Supervisory Authority does not include that number,

the number referred to in paragraph 1(c)(ii) or 2(g) of Schedule 20.

(3) The notifications under subsections (1) and (2) shall each be made in such form and manner as the Registrar specifies.

(4) In this section, ‘relevant information’ means the information set out in paragraph 1 or 2, as the case may be, of Schedule 20, other than that set out—

(a) in subparagraph (b) of that paragraph 1 or 2, or

(b) if, due to the simultaneous registration of a statutory audit firm and the statutory auditors that comprise that firm, the number there referred to is not available at that time, in subparagraph (c)(ii) of that paragraph 1 or subparagraph (g) of that paragraph 2.

(5) For the avoidance of doubt, in the event that a recognised accountancy body is no longer recognised by the Supervisory Authority for the purposes of the relevant provisions or otherwise ceases to exist, the notifications under subsections (1) and (2) shall cease to have effect and the Registrar shall remove all information contained in such notifications from the public register.

Prohibition on certain acts unless registered

1486. (1) A person shall not—

(a) act as, or

(b) represent himself or herself, or hold himself or herself out, as being,

a person falling within a category of persons entered, or entitled to be entered, in the public register unless the person is entitled to be entered, and the name of the person is duly entered, in the public register.

(2) A person who contravenes subsection (1) shall be guilty of a category 2 offence.

Obligation of statutory auditor or audit firm to notify certain information

1487. (1) Each statutory auditor and audit firm and Member State audit firm shall, as soon as may be but not later than one month after the event, notify the recognised accountancy body of any change in the information contained in the public register relating to him or her.

(2) On receipt of a notification under subsection (1) and its having carried out any verification of the information stated to have changed as seems to it to be necessary, the recognised accountancy body shall notify the change in information to the Registrar without undue delay.

(3) The Registrar shall, as soon as may be but not later than one month after receipt of the notification referred to in subsection (2), amend the public register to reflect the change of information so notified.

(4) A person who, without reasonable excuse, contravenes subsection (1) shall be guilty of a category 4 offence.

Information shall be signed

1488. (1) Information notified under section 1485(1) or 1487(1) by a statutory auditor or audit firm (including a Member State audit firm) shall be signed by the statutory auditor or, as the case may be, a person on behalf of the statutory audit firm.

(2) The signature referred to in subsection (1) may be an electronic signature (within the meaning of Article 3(10) of Regulation (EU) No 910/2014 of the European Parliament and of the Council of 23 July 2014[^8] on electronic identification and trust services for electronic transactions in the internal market and repealing Directive 1999/93/EC) if the provision of a signature in that form complies with any requirements in that behalf of the Registrar of the kind referred to in section 13(2)(a) of the Electronic Commerce Act 2000.

(3) If information is notified under section 1485(1) or 1487(1) without being signed as required by subsection (1), the person concerned shall be guilty of a category 4 offence.

Chapter 6

Standards for statutory auditors

Continuing education

1489. (1) It shall, by virtue of this section alone, be a condition of a statutory auditor’s approval (or, in the case of a statutory auditor referred to in section 1471, deemed approval) granted under this Part (or under any predecessor to this Part) that he or she shall 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.

(2) The Supervisory Authority shall, at such times as it thinks it appropriate to do so, issue guidelines to the recognised accountancy bodies with regard to what constitutes compliance with the condition referred to in subsection (1).

Professional ethics

1490. A recognised accountancy body shall subject statutory auditors and audit firms to principles of professional ethics, including at least their public interest function, their integrity and objectivity and their professional competence and due care.

Independence, objectivity and professional scepticism

1491. Statutory auditors and audit firms are subject to the independence, objectivity and professional scepticism requirements of sections 1533 to 1544 and 1547.

Standards for purposes of sections 1489 to 1491

1492. (1) A recognised accountancy body shall, in respect of statutory auditors and audit firms—

(a) have adequate standards requiring those auditors and audit firms to comply with the obligations specified in sections 1489 to 1491, 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).

Arrangements for enforcement of standards

1493. The arrangements for enforcement referred to in section 1492(1)(b) shall include, in accordance with sections 1501 and 1502, provision for—

(a) sanctions which include—

(i) at the discretion of the recognised accountancy body, in accordance with section 1501, the withdrawal of approval under this Part 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 7

Quality assurance

Quality assurance by Supervisory Authority of statutory audit of public-interest entities and third-country auditors, etc.

1494. (1) The Supervisory Authority shall put in place a quality assurance system as set out in Article 26 of Regulation (EU) No 537/2014.

(2) The Supervisory Authority shall ensure that it has in place a quality assurance system of registered third-country auditors and third-country audit entities to whom this Part or Regulation (EU) No 537/2014 applies.

(3) Sections 1496 and 1497 shall not apply to the statutory audit of entity and group financial statements of public-interest entities unless specified in Regulation (EU) No 537/2014.

(4) The Supervisory Authority may publish on its website the findings and conclusions of individual inspections undertaken as part of the quality assurance system referred to in subsection (1).

System of quality assurance to be put in place

1495. (1) The Supervisory Authority, in accordance with this Part, shall oversee the quality assurance system implemented by the recognised accountancy bodies.

(2) A recognised accountancy body shall ensure that it has in place a system of quality assurance of—

(a) the body’s members’ activities as statutory auditors and audit firms of entities not referred to in section 1494(1) and (2), and

(b) the activities, as statutory auditors and audit firms, of persons who, though not members of the recognised accountancy body, are persons in relation to whom the body may perform functions under the relevant provisions.

Organisation of quality assurance system

1496. (1) A recognised accountancy body shall organise its quality assurance system in such a manner that—

(a) the system is independent of the reviewed statutory auditors and audit firms,

(b) the funding for the system is secure and free from any possible undue influence by statutory auditors or audit firms,

(d) the persons who carry out quality assurance reviews have appropriate professional education and relevant experience in statutory audit and financial reporting combined with specific training on quality assurance reviews,

(e) the selection of reviewers for specific quality assurance reviews is effected in accordance with an objective procedure designed to ensure that there are no conflicts of interest between reviewers and the statutory auditor or audit firm under review,

(f) the scope of quality assurance reviews of audits, supported by adequate testing of selected audit files, includes, except where otherwise agreed with the Supervisory Authority, an assessment of—

(i) compliance with applicable auditing standards and independence requirements,

(ii) the quantity and quality of resources spent,

(iii) the audit fees charged, and

(iv) the internal quality control system of the audit firm,

(g) each quality assurance review is the subject of a report in writing which includes the main conclusions of the review,

(h) a quality assurance review of each statutory auditor or audit firm takes place on the basis of an analysis of risk, at least, subject to subsection (5) and section 1497, every 6 years,

(i) statutory auditors and audit firms take all reasonable steps to ensure that recommendations arising from quality assurance reviews of them are implemented within a reasonable period,

(j) there is published annually by it the overall results of quality assurance reviews carried out by it in the year concerned, and

(k) quality assurance reviews are appropriate and proportionate in view of the scale and complexity of the activity of the reviewed statutory auditor or audit firm.

(2) For the purpose of subsection (1)(e), at least the following criteria shall apply to the selection of reviewers:

(a) reviewers have appropriate professional education and relevant experience in statutory audit and financial reporting combined with specific training on quality assurance reviews;

(b) a person does not act as a reviewer in a quality assurance review of a statutory auditor or audit firm until at least 3 years have elapsed since that person ceased to be a partner or an employee of, or otherwise associated with, that statutory auditor or audit firm;

(c) reviewers shall declare (if such be the case) that there are no conflicts of interest between them and the statutory auditor and the audit firm to be reviewed.

(3) For the purpose of subsection (1)(k), a recognised accountancy body, when undertaking quality assurance reviews of the statutory audits of entity or group financial statements of medium or small companies, shall take account of the fact that auditing standards adopted in accordance with Article 26 of the Audit Directive are designed to be applied in a manner that is proportionate to the scale and complexity of the business of the audited undertaking.

(4) If a statutory auditor or audit firm fails to take all reasonable steps to ensure that recommendations arising from a quality assurance review of him or her are implemented within a reasonable period, the recognised accountancy body shall take appropriate action, including, where applicable, subjecting the statutory auditor or audit firm, as the case may be, to the system of disciplinary actions or penalties referred to in the relevant provisions.

(5) The period of at least 6 years referred to in subsection (1)(h) shall be a continuation of the system that was in place under the 2010 Audits Regulations when the first quality assurance reviews were required to be completed and as that system was continued by the 2016 Audits Regulations.

Quality assurance review deemed to include individual auditors in certain cases

1497. For the purpose of section 1496(1)(h), a quality assurance review conducted in relation to a statutory audit firm shall be regarded as a quality assurance review of all statutory auditors carrying out audits on behalf of the firm provided that the firm has a common quality assurance policy with which each such statutory auditor is required to comply.

Right of recognised accountancy body as regards professional discipline

1498. A recognised accountancy body shall have the right to take disciplinary actions or impose sanctions in respect of statutory auditors and audit firms who carry out audits and shall have procedures in place to facilitate the taking or imposition of such action or sanctions.

Chapter 8

Investigations and sanctions

System of investigation and penalties

1499. (1) Subject to subsection (2), each recognised accountancy body shall, in respect of those auditors and audit firms in relation to whom, by virtue of section 930C, it may perform functions, institute arrangements to ensure that there are effective systems of investigations and penalties to detect, correct and prevent the inadequate execution of a statutory audit by those statutory auditors and audit firms.

(2) Subsection (1) shall not be construed to empower a recognised accountancy body referred to in that subsection to impose a penalty on a statutory auditor or audit firm of a public-interest entity in the case of a relevant contravention committed by that auditor or audit firm that relates (whether in whole or in part) to that entity.

Privileges, etc.

1500. (1) A witness before a recognised accountancy body is entitled to the same immunities and privileges as a witness before the High Court.

(2) Nothing in the arrangements referred to in section 1499(1) compels the disclosure by any person of any information that the person would be entitled to refuse to produce on the grounds of legal professional privilege or authorises the inspection or copying of any document containing such information that is in the person’s possession or control.

(3) Any information produced or answer given by a person (howsoever described) in compliance with arrangements referred to in section 1499(1) may be used in evidence against the person in any proceedings whatsoever, save proceedings for an offence (other than perjury in respect of such an answer).

(4) A finding or decision of a recognised accountancy body under arrangements referred to in section 1499(1) is not a bar to any civil or criminal proceedings against the person (howsoever described) who is the subject of the finding or decision.

Duty of each recognised accountancy body with regard to sanctions

1501. (1) Each recognised accountancy body shall ensure that the contractual and other arrangements that exist between it and its members are such as enable the imposition by it of effective, proportionate and dissuasive penalties in respect of statutory auditors and audit firms in cases where statutory audits are not carried out by them in accordance with the relevant provisions.

(2) The contractual and other arrangements referred to in subsection (1) shall comply with the requirements of procedural fairness.

(3) By virtue of this section, the contractual and other arrangements referred to in subsection (1) that subsist for the time being between a recognised accountancy body and its members shall operate and have effect so as to enable the imposition by the recognised accountancy body—

(a) of penalties of a like character to those referred to in that subsection, and

(b) in the cases referred to in that subsection,

in respect of persons who, though not members of the recognised accountancy body, are persons in relation to whom it may, by virtue of section 930C, perform functions under the relevant provisions.

Scope of penalties and publicity in relation to their imposition

1502. (1) The penalties referred to in section 1501, provision for which shall be made by the means referred to in that section, shall, where appropriate, include withdrawal of approval under this Part or, if applicable, withdrawal of registration under section 1465 and a temporary prohibition referred to in point (c) of Article 30a(1) of the Audit Directive and a temporary prohibition (in so far as it relates to a member of an audit firm) referred to in point (e) of that Article.

(2) Subsection (1) is without prejudice to sections 1479 and 1480.

(3) Unless there do not exist internal appeal procedures of a recognised accountancy body as referred to in section 1479(8)(a) or 1480(8)(a), the reference in subsection (4) to a recognised accountancy body shall be read as a reference to a recognised accountancy body acting through the disciplinary committee that deals with matters at first instance.

(4) Without prejudice to section 930C(10) to (12), a recognised accountancy body may, save where, in its opinion, proceeding in this manner would not be in the public interest, adopt procedures analogous to those in section 1479(4) to (6) or 1480(4) to (6) as regards affording the statutory auditor or audit firm an opportunity to rectify the matters that have occasioned the investigation concerned and the proposed exercise of the power of withdrawal of approval referred to in subsection (1).

(5) If—

(a) there exist internal appeal procedures, as referred to in section 1479(8)(a) or 1480(8)(a), of a recognised accountancy body, and

(b) the investigation and disciplinary procedures of the recognised accountancy body provide that a decision of its disciplinary committee referred to in subsection (3), being a decision of a nature to which this section 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 section, the operation of the withdrawal of approval by that disciplinary committee shall stand suspended until the occurrence of an event specified in paragraph (b)(i), (ii) or (iii).

(6) If—

(a) there exist internal appeal procedures, as referred to in section 1479(8)(a) or 1480(8)(a), of a recognised accountancy body, and

(b) the investigation and disciplinary procedures of the recognised accountancy body do not provide, as referred to in subsection (5)(b), for the decision of the disciplinary committee referred to in that provision to stand suspended or not to take effect,

then, notwithstanding anything in those procedures, the auditor or audit firm to whom that decision 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 internal appeal procedures.

(7) Where an application under subsection (6) is made to the High Court, subsections (10) to (12) apply to the application with—

(a) the substitution of references to an appeal under those internal appeal procedures for references to an appeal under section 1481, and

(b) any other necessary modifications.

(8) If the relevant appellate committee referred to in subsection (6) 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 subsection ought to include procedures analogous to those, as referred to in subsection (4), provided by section 1479(4) to (6) or 1480(4) to (6) being adopted by it, then, in disposing of that appeal, it shall adopt procedures analogous to those in section 1479(4) to (6) or 1480(4) to (6).

(9) A recognised accountancy body shall take all reasonable steps to ensure that any appeal to the relevant appellate committee referred to in subsection (6) 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.

(10) Where a recognised accountancy body has made a decision to withdraw the approval of an auditor or audit firm under this section (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 or 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 section 1481 that he or she is making against the withdrawal.

(11) On the hearing of an application under subsection (10), 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 paragraph (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 or audit firm not to carry out statutory audits save under the supervision of one or more other statutory auditors or audit firms or not to carry out such audits save in specified circumstances).

(12) The High Court may, on application to it by the auditor or audit firm or recognised accountancy body concerned, vary or discharge an order under subsection (11)(a) if it considers it just to do so.

(13) The fact of one or more—

(a) measures having been taken against, or

(b) one or more penalties having been imposed on,

a statutory auditor or audit firm by a recognised accountancy body shall be disclosed by the recognised accountancy body to the public and that disclosure shall, if the recognised accountancy body considers it appropriate, include such further particulars with respect to the matter as it thinks fit.

(14) Subject to subsection (15), the manner of such disclosure, and the time at which it is made, shall be such as the recognised accountancy body determines to be appropriate.

(15) The recognised accountancy body shall establish, in writing, criteria the purpose of which is to govern the determination by it of the matters referred to in subsection (14), and those criteria shall require the prior approval of the Supervisory Authority.

Chapter 9

Actions to be taken after decision by recognised accountancy body that statutory auditor or audit firm of public-interest entity has committed relevant contravention

Definitions (Chapter 9)

1503. In this Chapter—

‘contravention concerned’, in relation to a specified person, means the relevant contravention committed by the specified person in consequence of which the relevant decision was made;

‘monetary sanction’ means the monetary sanction referred to in section 1506(1)(g);

‘public notice of relevant sanction imposed’, in relation to a specified person, means the publication in accordance with section 1508(1) of the specified person’s particulars referred to in that section together with the other particulars referred to in that section;

‘relevant decision’, in relation to a specified person, means a decision under section 1504(6) by the Supervisory Authority to impose a relevant sanction on the specified person for the relevant contravention committed by the specified person;

‘relevant sanction’ means a sanction referred to in section 1506(1);

‘specified person’ means the statutory auditor or audit firm the subject of a relevant decision.

Initial actions to be taken after decision by recognised accountancy body that statutory auditor or audit firm of public-interest entity has committed relevant contravention

1504. (1) Without prejudice to the generality of sections 933, 934 and 934E and subject to subsection (9), this section applies where—

(a) a recognised accountancy body has completed an investigation of a statutory auditor or audit firm of a public-interest entity and—

(i) has found that the auditor or audit firm has committed a relevant contravention that relates (whether in whole or in part) to that entity, and

(ii) would, but for section 1499(2), be minded to impose a penalty on the auditor or audit firm for that contravention,

and

(b) the period within which an appeal (if any) referred to in Chapter 8 may be made against the decision referred to in paragraph (a) has expired without any such appeal having been made or, if such an appeal has been made, that decision has been confirmed or the appeal has been withdrawn.

(2) The recognised accountancy body shall, as soon as is practicable after this section applies to a statutory auditor or audit firm of a public-interest entity and a relevant contravention committed by the auditor or audit firm, give the Supervisory Authority—

(a) particulars of the auditor or audit firm, the public-interest entity and the relevant contravention,

(b) copies of any reports arising out of the investigation, together with copies of any other documents relevant to the investigation, that explain how the recognised accountancy body conducted the investigation and reached the decision referred to in subsection (1)(a), and

(3) Where the Supervisory Authority receives from the recognised accountancy body the particulars and copies referred to in subsection (2) but is not satisfied that it has sufficient information to perform its functions under subsections (5) to (8), it may, by notice in writing given to the recognised accountancy body, require the body to provide it with such further information specified in the notice within the period (being a period of not less than 30 days from the body’s receipt of the notice) specified in the notice.

(4) The recognised accountancy body shall comply with a notice under subsection (3) given to it.

(5) Subsection (6) applies where the Supervisory Authority receives from the recognised accountancy body the particulars and copies referred to in subsection (2) (and, if applicable, any further information required by a notice under subsection (3) given to that body) and, after considering those particulars and copies (and, if applicable, that further information), it is satisfied that the statutory auditor or audit firm has committed the relevant contravention and the Supervisory Authority is minded to impose a relevant sanction on the auditor or auditor firm for that contravention.

(6) Subject to section 1511(3) and (4), the Supervisory Authority may impose a relevant sanction on the statutory auditor or audit firm of the public-interest entity for the relevant contravention and, for that purpose, it shall have regard to (but is not bound by) the penalty referred to in subsection (1)(a)(ii).

(7) Where under subsection (6) the Supervisory Authority imposes a relevant sanction on the statutory auditor or audit firm of the public-interest entity for the relevant contravention, it shall, as soon as is practicable after so imposing such sanction, by notice in writing given to the recognised accountancy body, give particulars of the sanction imposed.

(8) Where the Supervisory Authority is not satisfied as referred to in subsection (5), it shall, as soon as practicable after reaching that decision, by notice in writing given to the recognised accountancy body, advise the body that it is not so satisfied and the reasons therefor.

(9) (a) Subject to paragraph (b), where a recognised accountancy body is minded to commence an investigation of a statutory auditor or audit firm in respect of a statutory audit of a public-interest entity, it shall, before commencing such investigation and in the interests of assisting the Supervisory Authority to make a decision as to whether or not, instead of the investigation, it would be more appropriate for the Supervisory Authority to take action under section 934 or 934E, give the Supervisory Authority particulars of the auditor or audit firm and the public-interest entity and the grounds on which it is so minded.

(b) The recognised accountancy body shall not commence an investigation referred to in paragraph (a) until it has the consent in writing of the Supervisory Authority to do so.

Appeal against relevant decision

1505. (1) Subject to subsection (2), the specified person may appeal to the High Court against the relevant decision.

(2) An appeal under subsection (1) shall be brought within 3 months after the date on which the specified person was notified by the Supervisory Authority of the relevant decision.

Sanctions which Supervisory Authority may impose on specified person

1506. (1) Subject to section 1507, the Supervisory Authority may impose on the specified person one or more of the following sanctions in relation to the contravention concerned:

(a) a direction by the Supervisory Authority to the specified person that he or she cease the conduct giving rise (whether in whole or in part) to the contravention and to abstain from any repetition of that conduct;

(b) a direction by the Supervisory Authority to the specified person to remediate the conduct giving rise (whether in whole or in part) to the contravention;

(c) a reprimand or severe reprimand by the Supervisory Authority to the specified person in relation to the conduct giving rise (whether in whole or in part) to the contravention;

(d) a declaration by the Supervisory Authority that the statutory auditors’ report concerned does not meet the requirements of section 336 or 337 or, where applicable, Article 10 of Regulation (EU) No 537/2014;

(e) a direction by the Supervisory Authority to the specified person (being any one or more of a statutory auditor or key audit partner) prohibiting him or her, for the period specified in the direction (which may be up to and including an indefinite period), from carrying out statutory audits or signing statutory auditors’ reports, or both;

(f) if the specified person is an audit firm, a direction by the Supervisory Authority to the firm, or to an officer, member or partner of the firm, or to both, prohibiting the firm or, as the case may be, the officer, member or partner, for the period specified in the direction (which may be up to and including an indefinite period) from performing functions—

(i) in the case of the firm, as an audit firm, or

(ii) in the case of the officer, member or partner, in audit firms or public-interest entities;

(g) subject to section 1509, a direction by the Supervisory Authority to the specified person to pay an amount, as specified in the direction but not exceeding—

(i) €100,000 in the case of a specified person who is an individual, or

(ii) in the case of a specified person which is an audit firm, €100,000 multiplied by the number of statutory auditors in the firm at the time that the relevant contravention occurred (and irrespective of whether any particular statutory auditor was or was not a party to the relevant contravention),

to the Supervisory Authority;

(h) an order excluding the specified person from having his or her particulars entered, or continuing to be entered, in the public register in respect of one or more recognised accountancy bodies.

(2) In default of payment of an amount referred to in subsection (1)(g), the Supervisory Authority may recover that amount as a simple contract debt in any court of competent jurisdiction.

(3) A person the subject of a direction under subsection (1) shall comply with the direction.

(4) Where applicable, the Supervisory Authority shall direct the recognised accountancy body of which the specified person is a member to take any necessary action on foot of the imposition of a relevant sanction on the person and that body shall comply with the direction.

Relevant circumstances to be considered in imposing relevant sanctions on specified person

1507. In imposing a relevant sanction on a specified person, the Supervisory Authority shall consider the following circumstances:

(a) the gravity and duration of the contravention concerned;

(b) the degree of responsibility of the specified person;

(c) the financial strength of the specified person (including, in the case of a specified person who is not an individual, the total turnover of the specified person or, in the case of a specified person who is an individual, the annual income of the individual);

(d) the amount of profits gained or losses avoided by the specified person in consequence of the contravention concerned, in so far as they can be determined;

(e) the level of cooperation of the specified person with the Supervisory Authority and the recognised accountancy body of which the specified person is a member;

(f) previous relevant contraventions committed by the specified person.

Publication of relevant sanction imposed on specified person, etc.

1508. (1) Subject to subsections (2) and (3), the Supervisory Authority shall, in so far as a relevant decision imposes a relevant sanction on a specified person, as soon as is practicable after—

(a) that decision has been confirmed by the High Court as referred to in section 1511(3), or

(b) a decision of the High Court under section 1511(2)(b) has been made to impose a different relevant sanction on the specified person,

publish on its website particulars of the contravention concerned, particulars of the relevant sanction imposed and particulars of the specified person on whom the relevant sanction was imposed.

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