Tutorial 3 - Company Accounts, Audits and CRO Filings

Question 1

s281(AR)

Answer 1

A company has to keep accounting records or cause them to be kept

Question 2

s282(1)

Answer 2

Basic requirements for Accounting Records;
Adequate accounting records are those that are sufficient to:
- Correctly record and explain the transactions of the company,
- Enable, at any time, the assets, liabilities, financial position and profit or loss of the company to be determined with reasonable accuracy
- Enable the directors to ensure that any financial statements of the company, required to be prepared under section 290 or 293, and any directors’ report required to be prepared under section 325, comply with the requirements of this Act and, where applicable, Article 4 of the IAS (International Accounting Standards) Regulation.
- Enable those financial statements of the company so prepared to be audited.

Question 3

s282(2) (AR)

Answer 3

• Continuous and consistent basis
• Timely manner
• Bound book or other means
• Falsification precautions

Question 4

s282(3)

Answer 4

• Enter income and expenditure
• Assets and liabilities record

Question 5

s282(4)

Answer 5

Adequate Accounting Records - FS which show a true and fair view of the financial position, assets, liabilities and profit or loss of the company

Question 6

Financial Statements - s290(1)

Answer 6

Directors prepare entity FS for the company for each financial year
FS - Summary of the assets, liabilities and financial position of the company alone with p/l since date of previous FS

Question 7

s288(1) and (2)

Answer 7

• End of first FY = No more than 18 months since DoI
• 12 months (7 day MoE)

Question 8

s273 (FS)

Answer 8

Directors - FS with annual returns annexed
- 21 days before AGM (BS/P&L, additional statements; DR)

Question 9

s175 (AGMs)

Answer 9

• Hold an AGM every year
• Specified as AGM in the notice
• No more than 15 months between AGMs

Question 10

s186 (AGMs)

Answer 10

• AGM includes consideration of FS/DR/Auditor’s report unless 360/365 exemption
• Members review affairs of company

Question 11

s181 (AGMs)

Answer 11

Unless company constitution differs (greater notice) - AGMs and EGM for passing a special resolution = 21 days’ notice minimum

Question 12

s342 (CRO Returns)

Answer 12

• Definition of “annual return”

Question 13

s345(2) (CRO Returns)

Answer 13

• Company incorporated before section commenced - Existing ARD is next ARD after commencement and that date in subsequent years

Question 14

s345(3) (CRO returns)

Answer 14

Company incorporated on or since Act commenced - First ARD = 6 months after incorporation and subsequent ARD = anniversary of first ARD

Question 15

Draw out a timeline for directors’ statutory obligations

Answer 15

1. Set up company on X date
   - AR kept day to day
   - Regular DM with minutes taken to consider these accounts
2. 6 months after incorporation
   - First annual return filed with CRO
   - No FS required to be annexed
3. 12 months after first annual return (18 months after incorporation)
   - FS prepared and FYE date set
   - Company AGM scheduled
   - AGM notice given (annexed FS; 21 days)
   - ARD
   - ARD + 56 days - CRO filings must be made

Question 16

s336 (Auditors)

Answer 16

(1) The report required by section 391 to be made by the statutory auditors of a company on statutory financial statements to be laid before the company in general meeting shall comply with the requirements of this section.
(2) The statutory auditors’ report shall include—
(a) an introduction identifying the entity financial statements, and where appropriate, the group financial statements, that are the subject of the audit and the financial reporting framework that has been applied in their preparation, and
(b) a description of the scope of the audit identifying the auditing standards in accordance with which the audit was conducted.
(3) The statutory auditors’ report shall state clearly the statutory auditors’ opinion as to—
(a) whether the statutory financial statements give a true and fair view—
(i) in the case of an entity balance sheet, of the assets, liabilities and financial position of the company as at the end of the financial year
(ii) in the case of an entity profit and loss account, of the profit or loss of the company for the financial year,
(iii)in the case of group financial statements, of the assets, liabilities and financial position as at the end of the financial year and of the profit or loss for the financial year of the undertakings included in the consolidation as a whole, so far as concerns the members of the company,
(b) whether the statutory financial statements have been properly prepared in accordance with the relevant financial reporting framework and, in particular, with the requirements of this Act (and, where applicable, Article 4 of the IAS Regulation).

Question 17

What is the role of the company’s auditor?

Answer 17

• Directors obliged to have statutory auditor unless entitled to and availing of audit exemption
• Examine FS and report findings to members
• AGM and available to company members (s336)
• FR = True and fair view of the company’s transactions; evidence that no “material misstatement” whether caused by fraud or error
• Assess:
• whether the accounting policies are appropriate to the company’s circumstances and have been consistently applied and adequately disclosed;
• the reasonableness of significant accounting estimates made by the directors; and
• the overall presentation of the financial statements.”

Question 18

If you were a director removing a statutory auditor, what would you need to do to make that happen? How do you appoint another auditor in their place?

Answer 18

• Directors can only recommend removal to members (members power in certain circumstances)
• s394 - Remove and replace with qualified other person having given nomination notice to members by ordinary resolution at a general
• s395 - Removing an auditor - “Good and substantial grounds for the removal related to the conduct of the auditor with regard to the performance of his or her duties as auditor of the company or otherwise” or be in the company’s opinion, in the best interests of the company”.
• To make use of the audit exemption, upon filing to the CRO there must be an exemption statement on the bottom of the balance sheet, making of use of this exact language - “I/We, as director(s) of (company name), state that:
  (a) the company is availing itself of the exemption provided for by Chapter 15 of Part 6 of the Companies Act 2014,
  (b) the company is availing itself of the exemption on the grounds that the conditions specified in s.358 are satisfied,
  (c) the shareholders of the company have not served a notice on the company under s.334(1) in accordance with s.334(2),
  (d) we acknowledge the company’s obligations under the Companies Act 2014, to keep adequate accounting records and prepare Financial Statements which give a true and fair view of the assets, liabilities and financial position of the company at the end of its financial year and of its profit or loss for such a year and to otherwise comply with the provisions of Companies Act 2014 relating to Financial Statements so far as they are applicable to the company,
  *(e) the company has relied on the specified exemption contained in s.352 Companies Act 2014;
  has done so on the grounds that the company is entitled to the benefit of that exemption as a small company and the abridged Financial Statements have been properly prepared in accordance with s.353 Companies Act 2014.”
• Audit exemption - Terminate appointment of auditor - Serve a notice on auditor and 21 days to respond; Received - 14 days to write tp CRO
• Appoint auditor if no longer entitled to rely on exemption

Question 19

s609

Answer 19

• Personal liability of directors upon company insolvency

Question 20

Not having adequate accounting records

Answer 20

• Category 2 offence generally – section 286
• Category 1 offence not to have adequate accounting records where company has become insolvent and contravention lead to insolvency/resulted in uncertainty/impeded orderly winding up/continuous period of 3 years/10% value of assets of company transaction recorded incorrectly (Section 286)

Question 21

Brosnan v Sommerville [2007] 4 IR 135

Answer 21

• Previously, high threshold – Only minor errors tolerated; Courtney - Now more reasonable standard

Question 22

Inspection of Accounting Records

Answer 22

• Inspection available at all reasonable times (usually business hours) without charge to officers of the company or others entitled under the CA 2014.
• NB for directors – auditors have express statutory right to inspect
• Enforced by injunction/court order – section 797 CA 2014 (director as member)
• Healy v Healy Homes Ltd [1973] IR 209 – director can be accompanied by accountant to inspect
• Kenny J – “The purpose of [the provisions] is to compel companies to keep proper books of account: one of the ways in which this important object is achieved is by imposing an obligation on each director to make sure that this is being done. But a director who is not trained in accountancy cannot decide whether proper books of account are being kept unless an accountant is allowed to inspect them… It follows that a director’s right to inspect books of account necessarily involves that an accountant nominated by [them] may do this”
• Accompanied by director/with written direction from director/may be required to give written undertaking
• Director may be refused inspection where sought for improper purpose (Oxford Legal Group Ltd v Sibbasbridge Services plc [2008] 2 BCLC 381)

Question 23

s887

Answer 23

Offence for company officer to destroy, mutilate or falsify book or document re company’s property/affairs, be privy to them or to the making of a false entry in company books or documents

Question 24

Company changing its annual return date

Answer 24

• Company can change financial year-end date – on notice to Registrar
• Only permissible once every 5 years
• If more than once in 5 years – apply to CEA for permission (section 288(10)
• Application made by company
• NB – does not alter NARD!

Question 25

Approving FS

Answer 25

• Before circulation – approved by directors
• Only where satisfied true and fair view (section 324 of CA 2014)
• Approved at board of directors’ meeting – where 2/more directors, or by written resolution signed by all directors. Company’s constitution may specify.
• Balance sheet must state names of directors approving – category 2 offence to approve if not true and fair view. Also category 2 to file with CRO without being signed

Question 26

Auditor Eligibility

Answer 26

• Eligible:
• Member of recognised accountancy body - ACCA, ICAI, ICAEW, ICAS, ICPAI, IIPA
• Member State auditor - Competent authority approved
• Third country auditor- Aptitude test