Ms Helen Hall:

I will return to a couple of questions which Deputy Tóibín asked. The first related to the expectation gap and what the proposals contain that might improve things. It is important to clarify the role of auditors so that everyone is clear on it but also to put it formally in the public domain. There is talk of expanding the audit report, of which we are supportive, and giving the reader of the audit report information about certain judgments made by the auditor because up to now it is a binary report. It is a case of either pass or fail, whereas what is being proposed in the recommendations is that more information would be included such as on materiality and the level of testing which would force an auditor to make comments about a going concern. It will never be an auditor’s job to give a guarantee on viability. That is just the way commerce works but there is a recognition in the proposals before the committee that something needs to change and that there must be an expansion, in terms of communication at least. Again, we are very supportive of that. With public companies we must also be careful about the information that gets out in the public domain from the point of view of competition and the secrecy of the company’s business. One of the other good proposals that we see which should help shareholders and directors is the expanded communication that will be demanded of auditors. They will have to give detailed information to the audit committee.

Mr. O’Toole alluded to the difference with direct regulation. We have been advocating that for some time. The current situation in this country is that eight firms audit the current definition of listed companies - public interest entities. The direct regulation of those is done by the Institute of Chartered Accountants. Like Mr. Houlihan, I am fully supportive of that. It is under IAASA supervision and we take the role seriously. However, the firms the institute regulates are its members. Our European counterparts have moved on from that and they have audit regulators such as IAASA doing the role directly. It would be a case of enhanced independence as we do not have a relationship with any firm. It would also enhance public perception. I do not say by any means that the Institute of Chartered Accountants is not doing a good job. I am just saying that if one removes the supervisory role to an independent authority it would have a significant benefit as it would add credibility to the process.

Deputy Tóibín also inquired about the expanded role of public interest entities. Currently, we are talking about listed entities on the regulated market plus banks and insurance companies. What is involved in the reform proposals before the committee today is a much wider definition. Mr. Houlihan and I have teased that out on a number of occasions. A wider definition would have significant implications for this country. It is not necessarily that we are afraid of it but it would bring in many investment firms, investment funds and payment institutions and there are concerns that this may impact on the likes of this country more than other countries in that one might be introducing a regulatory process that might not be proportionate in size. We do not have the answer to that question but it is one Mr. Houlihan has raised with the Commission and on which we await a reply.