Audit Exemption for Irish Private Companies
Private companies which meet certain criteria may avail of an exemption from the requirement to have their accounts audited.
No public company is eligible for the audit exemption. Any company which is not a private company is by default a public company. A private company is a company by its articles of association:
- Restricts the right to transfer its shares
- Limits the number of its members to ninety nine
- Prohibits any invitation to the public to subscribe for any shares or debentures of the company
All companies, including audit exempt companies, are required to maintain books of account in which are accurately recorded, on a day-to-day basis, the finances of the company. In addition, the audit exemption does not grant a company any exemption from the requirement to prepare a full statutory set of accounts which give a “true and fair” view of the state of affairs of the company, and to lay those accounts before the AGM of the company, or from the requirement to annex accounts in the format laid down by the Companies Act 2014 to its annual return which is filed in the CRO.
Irish Company – Audit Exemption
In order to avail of the audit exemption, the company must satisfy all of the following conditions, both for the current financial year and the preceding financial year, unless the year in respect of which the exemption is being claimed is the company’s first financial year:
- The company is a company to which the Companies (Amendment) Act 1986 applies
- The company has turnover of less than €8.8m
- The assets of the company are less than €4.4m at the end of its financial year
- The average number of employees must not exceed 50
- The company must not be a parent company or subsidiary company
A company must satisfy each of the foregoing conditions in order to qualify for the exemption and the annual return and accounts be submitted within 28 days of the ARD.
Filing Annual Return and Audit Exemption
Even if a company meets each of the above four conditions in respect of its current financial year (and where the company had a previous financial year, the company also met those conditions in respect of that year), it should be noted that the company will be unable to file unaudited accounts with its annual return unless it files that return on time and the return to which the company’s accounts for its preceding financial year were attached was also filed on time, being within 28 days of the designated annual return filing date.
Filing Annual Return
A company’s annual return is required to be made up to a date which is no later than the company’s Annual Return Date. The annual return filing deadline is 28 days after the ARD or the effective date of the return, if same pre-dates the company’s ARD, whichever is the earlier. A late return disqualifies the company from claiming the audit exemption in respect of the accounts attached to the current year’s return as well as the following year’s annual return, even if the company meets other qualifying criteria for the audit exemption in respect of the financial years covered by the accounts attached to both returns. Annual returns which are late filed will also incur a late filing penalty.
If a number of the company’s shareholders request that the company not avail itself of the exemption and serve notice to this effect on the company in the financial year preceding the financial year concerned, but not later than one month before the end of that preceding year, the company must have an audit.
Where the exemption is being availed of, the following statements must be included in the company’s balance sheet by the directors of the company:
- That the company is availing itself of the exemption provided for by Part III of the Companies Act 1999 (Amendment No. 2)
- That the company satisfies the conditions specified in section 32 of the 1999 Act (as amended by section 53 of the Companies (Auditing and Accounting) Act 2003
- That the shareholders of the company have not served a notice on the company in accordance with section 33(1) and (2) of the 1999 Act
- An acknowledgment by the directors of the company’s obligations under the Companies Acts 1963-2012, to keep proper books of account and prepare accounts which give a true and fair view of the state of affairs 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 those Acts relating to accounts so far as they are applicable to the company
The above statements must appear in the balance sheet immediately above the signatures of the directors.
When the auditor receives the company’s notification of termination of his appointment, he must within 21 days, notify the company in writing that there are no circumstances connected with the decision of the company to terminate his/her appointment that he/she considers should be brought to the notice of the members or creditors of the company. If, however, there are such circumstances, the auditor must detail them in the notice to the company. The auditor must also send to the Registrar of Companies within 14 days a copy of the notice that he/she has sent to the company.
Statutory Accounts and Abridged Accounts
An audit exempt company pursuant to the Companies (Amendment)(No.2) Act 1999 is also a small company within the meaning of the Companies (Amendment) Act 1986. A small company must prepare statutory accounts and then may abridge those accounts for filing purposes.
When filing its annual return a small private company may annex an abridged balance sheet to the return, subject to the requirement that the balance sheet must give a true and fair view of the company’s state of affairs as at the end of its financial year. The directors must certify in the balance sheet that they “have relied on the specific exemptions contained in sections 10 and 12 of the Companies (Amendment) Act 1986 on the grounds that the company is entitled to the benefits of those exemptions as a small company”. The balance sheet must be signed on behalf of the company directors by two directors. A sample format abbreviated balance sheet is set out in Appendix 1. A small company is not required to annex to its annual return a copy of its profit and loss account or the report of the directors accompanying the balance sheet of the company.
Accounts required for a Small Company
The notes which are required by the Companies Acts to be included in the accounts of a small company, are set out in Appendix 2, section (d). In addition to those specific statutory disclosure requirements, there is also a requirement that abridged accounts give a true and fair view of the state of the company’s affairs. Any additional note disclosures necessary to meet this requirement should also be included in the abridged accounts.