Audit Issues

Auditor’s Rights

The statutory auditor has a right of access at all reasonable times to the accounting records of the company. He may require officers of the company to furnish such information and explanations as appear to be within their knowledge.

It is an offence on the part of officers of the company, to fail to furnish the requisite information, explanations or comply with requirements made by the auditor for the performance of his functions. It is a defence to prove that it was not reasonably possible for the person concerned to comply with the requirement, but that he complied as soon as reasonably practicable thereafter. Officers include de facto directors and shadow directors.

The auditor may make requirements of subsidiary undertakings whether a company, partnership or an unincorporated body. It is the duty of the subsidiary undertaking, to give the statutory auditor of the holding company, such information and explanations as he requires for the purpose of discharge of his functions. It is the duty of the holding company if required by the statutory auditor to take all reasonable steps open to ensure such cooperation.

If an undertaking or body fails to comply with the requirement within five days of being so required, an officer of the undertaking or body concerned and the body or the undertaking itself is guilty of an offence. It is a defence to prove that it was not reasonably possible for the person to comply with the requirement at the time, provided that he complied as soon as reasonably possible.

It is an offence, knowingly to make a false or misleading statement to an auditor. This applies to a statement made to an auditor, whether orally or in writing which conveys, or purports to convey, any information or explanation which the auditor is entitled to require. An officer includes an employee of the company, any director or shadow director of it.

Notice to ODCE I

If the statutory auditor of the company forms the opinion that the company has contravened or is contravening, any of its obligations, in respect of

  • keeping adequate financial records;
  • compliance with the requirements for such records;
  • access to records;
  • where records are kept; or
  • the retention of records

then he must as soon as may be, serve a notice on the company stating his opinion and within 7 days, notify the CRO in the prescribed form of the notice and forward a copy to ODCE.

Where the auditor forms the opinion that the company has contravened these obligations but following such contravention, the directors have taken the necessary steps to comply, then the obligation to notify does not apply if he is of the opinion that the contravention is minor or otherwise immaterial in nature.

Notice to ODCE II

Where the statutory auditor makes a notification, he shall, if requested by the ODCE, furnish it such information as it requires, including an explanation of the reasons for his opinion. He shall give access to the ODCE, to documents and facilities for inspecting and taking copies. Written information given in response to a request by the ODCE is admissible in legal proceedings (other than for an offence) without further proof until the contrary is shown.

No professional or legal duty to which statutory auditor is subject by reason of his appointment is contravened, and no liability to the company, its shareholders, creditors or interested parties shall attach to the auditors, by reason of compliance with the above obligations.

Nothing is to compel the disclosure by any person of information that he would be entitled to refuse to produce on the grounds of legal professional privilege or authorises the inspection or copying of any documents containing such information that is in his possession.

The failure to make the requisite notification is a category 3 offence.

Notice of Serious Offences

Where, in the course of, or by virtue of, carrying out an audit of the financial statements, information comes into the possession of the statutory auditor that leads him to form the opinion that there are reasonable grounds for believing that the company, an officer or its agent has committed a category 1 or 2 offence, then the statutory auditor shall, forthwith, notify the opinion to ODCE and provide it with particulars of the grounds on which he has formed that opinion.

Where the statutory auditor so notifies the ODCE, he shall furnish it with such further information in his possession or control relating to the matter as it may require. He must give the ODCE access to books and documents in his possession and control relating to the matter as it may require. He must give it such access to facilities for taking copies or extracts, etc. as it may require.

No professional or legal duty to which the statutory auditor is subject by virtue of his appointment is contravened and no liability to the company, shareholders or creditors arises, by reason of compliance with these obligations. He cannot be compelled to disclose information which would be subject to legal professional privilege.

The failure to make the requisite notification is an offence.


The remuneration of the auditor is set by the annual general meeting or in such manner as the AGM determines. Details of auditor’s remuneration for all services is to be disclosed. Every company, other than excepted companies, must set out in their accounts, the total remuneration paid to auditors.

The disclosure must be divided into audit work, non-audit work, and audit related to work.  Both benefits in kind and monetary sums must be set out.  In the case of non-audit work, it must include remuneration for work to affiliates of the auditor.  There is a de minimis threshold of €1000.

Where the total value of non-audit work exceeds that of audit and audit-related work, in cases where an audit committee stands appointed, it must state, and in other cases, the directors must state, that they are satisfied with the auditor’s independence.  If they are satisfied, they must explain why non-audit work has been undertaken.

Auditor’s Report

The duty of the auditor is to report to the members on the financial statements examined, including the statutory balance sheet, profit and loss and group accounts, which are to be laid before the general meeting. The auditor’s report must identify the accounts comprised in his audit and set out the financial reporting framework applied. He must set out the scope of the audit report.

The auditor’s report must state the following.

  • whether proper accounts have been kept in accordance with the Companies Acts;
  • whether he has obtained all information and explanations which to the best of their knowledge and belief, are necessary for the purpose of the audit;
  • whether proper books of account have been kept;
  • whether proper returns adequate for their audit have been received from branches not visited;
  • whether the company’s balance sheet and profit and loss account conform with the books of account and returns;
  • whether the accounts give a true and fair view in accordance with the relevant financial framework of the state of affairs of the company (or a group company) in the case of a balance sheet at the financial year-end and in the case of profit and loss account of the profits and losses of the company (or the group) in the relevant financial period;
  • whether there is a situation which requires the convening of a general meeting under the statutory provision in that regard, by reason of a critical loss of capital.

The auditors must confirm whether the contents of the director’s report are consistent with the accounts

The auditors must qualify their certificate if they are not satisfied as to the above. They must set out their reservations.  Since 2005, auditors may emphasise certain matters without qualifying their report.

Auditor’s Duties

The statutory auditor is under a general duty to carry out his services with professional integrity. He must make in the form prescribed, a report to the members on the statutory financial statements laid before members, during his tenure of office.

The scope of the auditor’s duties and what is expected of him will depend on the particular circumstances.  He must at least comply with the statutory minimum. His further duties will depend on the scope of his engagement. He may analyse and comment on the affairs of the company to the directors and bring matters to their attention.

Auditors owe a duty to the company to exercise reasonable care and skill.  Formerly, it was said that an auditor was not a bloodhound but a watchdog.  It has been said that the modern standard requires something more.  If something suspicious comes to the auditor’s attention, then he should follow up on it.  The duty must not be approached in a mechanical way.

Auditor’s Negligence

The evolution of civil liability for professional negligence over the last 50 years, has involved auditors’ liability in many key cases.  Since the mid-1960s, liability for so-called negligent misstatement, essentially the negligent provision of a professional service in this context, is now well-established.

Through the 1970s and 1980s, the English courts promulgated an expansive concept of negligence.  This appeared to provide a much wider prospective liability for auditors, in terms of the class of persons to whom they might be liable for negligence in audit work.

The more expansive cases were reversed in the early 1990s by the House of Lords, including specifically in a landmark case concerning auditor’s liability.  The case involved a takeover bid in which the plaintiffs claimed to have relied on audited accounts which were misleading.  The House of Lords held that the auditors did not have a duty of care to all prospective investors, nor indeed to individual shareholders.  The duty was owed primarily to the company.

The court was of the view that the more expansive concept negligence which appeared to have been accepted in earlier cases, was against public policy, in that it allowed prospective liability to a wide class of indeterminate persons, over a prolonged period. The auditor’s duties were owed to the shareholders as a body, represented by the company. In the absence of a specific assumption of duty to an indivdual shareholder, the appropriate remedy, if any, lay with the company.

The more restrictive English approach to negligence has now been followed in Ireland.

Audit Committee

The board of larger private companies must give consideration to the establishment of an audit committee. It must explain the reasons why it is not established if this is so.  Failure to comply with the obligation is an offence. The requirement applies to companies whose balance sheet exceeds €25 million and whose annual turnover exceeds €50 million. Certain subsidiaries are exempted.The audit committee is

  • to review the annual accounts of the company or the group;
  • determine whether the accounts or group accounts comply with the accountancy standards and give a true and fair view;
  • make recommendations to the board as to whether accounts should be approved by it;
  • review the manner in which accounts are being kept;
  • advise the board on recommendations as to the appointment of auditors;
  • monitor the company’s auditors;
  • satisfy itsellf of the independence of the auditor;
  • determine whether the auditor should carry out non-audit work;
  • satisfy themselves that the arrangements and resources for internal audits are suitable;
  • report annually to the board on how they carry out their functions.

The audit committee must consist of at least two directors.  Not more than two may be directors who were employees within the previous three years.  The chairperson of the board cannot be a member of the committee.

A sole director is not disqualified.  Accordingly, he may be the sole member of the committee.  The committee may consist of three directors, but the qualified director must be the chairperson and have a casting vote.

References and Sources

Primary References

Companies Act 2014 (Irish Statute Book)

Companies Act 2014: An Annotation (2015) Conroy

Law of Companies 4th Ed.  (2016)     Courtney

Keane on Company Law 5th Ed. (2016) Hutchinson

Other Irish Sources

Tables of Origins & Destinations Companies Act 2014 (2016) Bloomsbury

Introduction to Irish Company Law    4th Ed. (2015) Callanan

Bloomsbury’s Guide to the Companies Act 2015      Courtney & Ors

Company Law in Ireland 2nd Ed. (2015) Thuillier

Pre-2014 Legislation Editions

Modern Irish Company Law   2nd Ed. (2001) Ellis

Cases & Materials Company Law 2nd Ed. (1998) Forde

Company Law 4th Ed. (2008)  Forde & Kennedy

Corporations & Partnerships in Ireland (2010) Lynch-Fannon & Cuddihy

Companies Acts 1963-2012   (2012)  MacCann & Courtney

Constitutional Rights of Companies   (2007)  O’Neill

Court Applications Under the Companies Act (2013) Samad

Shorter Guides

Company Law – Nutshell 3rd Ed. (2013) McConville

Questions & Answers on Company Law (2008)        McGrath, N & Murphy

Make That Grade Irish Company Law 5th Ed. (2015) Murphy

Company Law BELR Series (2015)   O’Mahony

UK Sources

Companies Act 2006 (UK) (

Statute books Blackstone’s statutes on company law (OUP)

Gower Principles of Modern Company Law 10th Ed. (2016) P. and S. Worthington

Company Law in Context 2nd Ed. (2012) D Kershaw

Company Law (9th Ed.) OUP (2016) J Lowry and A Dignam

Cases and Materials in Company law 11th Ed (2016) Sealy and Worthington


UK Practitioners Services

Tolley’s Company Law Handbook

Palmer’s Company Law