Companies Act 2014: The Audit Exemption
The Audit Exemption
The new Companies Act 2014 has extended the current audit exemption regime with a view to making it easier for small and medium enterprises to do business.
Under the new legislation, the threshold limits for availing of audit exemption has been increased for medium sized companies while those relating to small companies remain the same. The changes relate to turnover (increased to €20,000,000) and total assets (increased to €10,000,000). The increased thresholds will enable additional companies to avail of reduced disclosure and filing obligations.
The Companies Act 2014 also allows companies limited by guarantee and private unlimited companies to avail of audit exemption. Previously audit exemption applied to private limited companies only. This change will have an impact on charities which are registered as companies limited by guarantee and some property management companies. However, public limited companies and companies with listed securities on the market may not avail of audit exemption.
Another significant change can be seen in relation to small companies. In order to qualify as ‘small’, companies will only have to meet two of the three size criteria for the purposes of claiming an audit exemption. Currently small companies have to satisfy all 3 conditions. The conditions are as follows-
- A. the amount of the turnover of the company does not exceed €8.8 million;
- B. the balance sheet total of the company does not exceed €4.4 million;
- C. the average number of employees of the company does not exceed 50.
The audit exemption will now extend to parent companies and its subsidiaries who form a small group. This is a significant and welcome development.
Dormant companies will also able to avail of audit exemption if they have no significant accounting transactions in respect of the financial year concerned and their assets and liabilities comprise only permitted assets and liabilities (being investments in shares of, and amounts due to or from, other group undertakings).
Section 330 provides that members holding 10% of the voting rights in a company may require that it not avail of the audit exemption.
If circumstances arise where the company is not entitled to avail of audit exemption in respect of the financial year concerned, it is the duty of the directors of the company to appoint statutory auditors of the company as soon as possible.
For further information on this topic please contact Enda Newton or Brid McCoy of our Corporate Department.