IAASA & Auditors

IAASA

The Irish Auditing and Accounting Supervisory Authority  is the competent authority  for oversight of statutory auditors.  It is also the competent Authority  for EU law purposes for oversight quality assurance investigation and sanction of certain third country auditors and audit entities.

The IAASA must be satisfied that the body of accountants recognised have the capacity to ensure compliance with standards applicable to its members. It must be satisfied that they will effectively perform their functions under the legislation.

Supervisory Powers

The Authority  has extensive powers of investigation into the bodies it supervises. The Authority  may issue a notice to a body of accountants to cease carrying out functions or to take certain action in relation to the carrying out of its functions.

The Authority  has enquiry powers in relation to how accountancy bodies use their own disciplinary procedures. It has  powers to investigate the use of these powers.

The Authority  itself may simultaneously investigate a business or individual who is a member of an accountancy body. The provisions also apply to former members.

It may apply  sanctions on foot of investigations. The Authority  may direct an accountancy body of which a person is a member who has been subject to a sanction, to take necessary action as a result of the sanction. It may enter agreements with  prescribed bodies in relation to the resolution of suspected non-compliance.

Fines imposed by the Authority  are recoverable as a debt.  Appeal provisions exist. The appeal period from a decision of the Authority  is three months.

Sanctions

Sanctions may be imposed by the Authority  on auditors who are found to have contravened the standards applicable including

• cessation of a particular conduct
• remediation of conduct
• reprimands
• declaration against a statutory auditor’s report
• banned from carrying out audits or signing of reports
• a fine
• exclusion from the public register

The Authority  may apply unilaterally to the High Court to ban a person from carrying out statutory audits and signing audit reports where it believes that the breach warrants the protection of the public.

Application of Sanctions

The Authority  and any person may resolve any  matter under investigation by way of an agreement. This may involve the imposition of a sanction and payment of costs. Breach of the agreement may be enforced upon application to court. The Authority  is to publish the terms of the agreement where it results in a sanction being imposed.

The Authority  may publish information on its website regarding sanctions imposed after the appeal periods. It may publish information anonymously where the publication of full information would be disproportionate, might affect financial markets stability or affect an ongoing criminal investigation.

Sanctions  should not be such as make the person concerned bankrupt or insolvent. Only one monetary sanction may be imposed where more than one breach has occurred by reason of  the same conduct.

Where a monetary sanction has been imposed by the Authority  in relation to conduct which is also a criminal offence, no criminal proceedings should be bought for that conduct. Equally no monetary sanction should be applied where a person has been tried for a criminal offence in respect of the same subject matter.

Reporting Breaches

The Authority  and recognised accountancy bodies must establish mechanisms to facilitate the reporting of breaches of standards. Audit firms are under an obligation to report breaches relating to the statutory audit. They must have procedures for the receipt of reports of contraventions from its employees.

The Authority is to notify the Corporate Enforcement Authority of contraventions of statutory audit standards and agreements regarding a contravention which relates  to a public interest entity. A public interest entity is a company whose shares are traded on a stock exchange or a credit institution. It is to assist the investigation for the purpose of sanctioning a director that may be involved in the contravention

The Authority  must communicate certain matters to the Committee for European Auditing Oversight Bodies under the EU directive. This includes certain sanctions imposed on statutory auditors, audit firms or directors of public interest entities. The Authority  may rely on the recognised accountancy bodies for this purpose.

At the end of each year, it will provide information on all sanctions imposed by it on a specified person (auditor/audit firm) and those that are published. It will also provide information on all sanctions imposed by the Director of Corporate Enforcement and those that are published

Accountancy bodies must give the Authority  information annually in relation to sanctions and measures they have imposed. The Authority is to submit aggregate information annually on sanctions and measures imposed for publication in the CEAOB report

Recognised accountancy body must inform the Authority  immediately of any prohibition or restrictions imposed on an auditor from performing functions. There is an obligation on the Authority  to submit this to the CEAOB.

Public Interest Entities Directors

The 2018 Act gives additional powers to the Corporate Enforcement Authority  in investigating and sanctioning directors of a public interest entity. A public interest entity is a company whose shares are traded on a stock exchange or a credit or insurance institution.

The CEA is to investigate a director of a public interest entity on foot of information supplied by the Authority /recognised accountancy bodies. A sanction may be imposed by the Corporate Enforcement Authority. Appeals must be brought within three months.

Details of the sanction are supplied to the Authority, A director the subject of a sanction may also be subject to criminal or civil proceedings in relation to the matters concerned.

CEA Process

Where the Corporate Enforcement Authority  is of the view that the director of a public interest entity has engaged in conduct giving rise to a contravention of statutory audit standards it may direct the director to cease the relevant conduct. It  may prohibit the director from performing functions for a public interest entity and / or pay a fine of up to €100,000.

There is  a range of considerations to which the CEA is to have regard in applying a sanction. The Corporate Enforcement Authority  and the director concerned may resolve matters by way of a settlement agreement. The settlement agreement may be enforced by application to court.

Certain details must be published by the Corporate Enforcement Authority  where a sanction is imposed. Information may also be published anonymously where publication of full details would be disproportionate.

The level of monetary sanction is not to be such as makes the director likely to be bankrupt. Only one monetary sanction may be imposed for one breach. Where a monetary sanction has been applied by the CEA in respect of conduct which is a criminal offence no criminal proceedings are to be brought. Where criminal proceedings have been brought no monetary sanction is to be applied.

There is provision for application to court to confirm or appeal decisions of the Corporate Enforcement Authority.