Services

Background

The Companies (Amendment) (No. 2) Act, 1999 became law on 15 December 1999. This legislation deals with the exemption from audit for smaller companies.

The audit exemption provisions are contained in Sections 31 to 39 of the above Act. Most of these sections come into force from 21 February 2000. For accounting periods ending on or after 24th February 2007, where a company within the meaning of the 1986 Act has: (Applies to a private limited company which is not part of a group)

• turnover not exceeding €7.3 million for accounting periods ending on or after 24th February 2007 - prior to this the turnover threshold was €1.5 million.
• Balance sheet total not exceeding €3.65 million (gross assets, ignore liabilities) and
• average employee numbers of 50 or less and
• the company's annual returns are up to date (under new rules included elsewhere in the Act) and
• the company satisfied these requirements in the immediately preceding financial year (ignore this point if it is the company's first accounting period)

it is exempt from the requirement to have its accounts audited. It is not automatically exempt. A decision to avail of the exemption is one to be taken by the directors and it is important that this decision is formally minuted.

Effects of the Legislation - Points to Watch

• The directors of exempt companies are still obliged to prepare accounts which comply with the Companies Acts 1963 to 2006 and show a true and fair view i.e. comply with the Companies (Amendment) Act, 1986 (layout of accounts) and with accounting and financial reporting standards.
• The Articles of Association of existing companies may require the company to appoint auditors. Therefore to take advantage of the audit exemption legislation a special resolution amending the articles may be necessary.

It is impossible to summarise all aspects of the legislation here and therefore clients should read a copy of the Act in order to gain a full knowledge of the law or give us a call for further information.