Maurice Quinlivan (Limerick City, Sinn Fein) | Oireachtas source

As this is my first recent exchange with her in the House, I would like to congratulate the Minister for Business, Enterprise and Innovation, Deputy Humphreys, on her appointment before Christmas. I wish her well in her new role and look forward to working constructively with her on several issues under her remit over the remainder of the term. I thank the staff of the Oireachtas Library and Research Service for their work, assistance and briefing on this complex and lengthy Bill. As usual, their assistance was excellent and made our job far easier. Unfortunately, I was unable to attend a presentation on the Bill in the AV room but a very informative and helpful video was produced, which I watched.

The Bill stems from a European-wide reform of auditing practices, introduced in response to the financial crisis that crippled Europe and bankrupted this country almost a decade ago now. Although the financial crisis across Europe was severe, it was catastrophic in Ireland, primarily due to the mismanagement of our finances by Fianna Fáil and its totally laissez faireapproach to regulation, to the benefit of its friends in the banks. The European reforms culminated in the EU audit package, which consists of regulation 537/2014 and directive 2014/56/EU, which amended a previous 2006 directive. The mandatory aspects of the directive and regulation were introduced into Irish law via Sl 312/2016. This Bill aims to enshrine the provisions of the statutory instrument into primary legislation, in addition to implementing the optional provisions of the audit directive and regulation, and to consolidate it all into one piece of legislation. The key aims of these reforms will place new obligations on statutory auditors designed to enhance their independence and the quality of their audits, place new and more stringent obligations on companies known as public interest entities and designate the Irish Auditing and Accounting Supervisory Authority, IAASA, as the competent authority with ultimate responsibility for the oversight of statutory auditors.

As all Members know, audits are incredibly important tools for determining through an examination of information such as bank balances, bookkeeping records and financial transactions whether an organisation is providing a fair and accurate representation of its financial position. That information is critical for investors, creditors and stakeholders of undertakings and it is crucial that it is accurate and reliable. Reform and changes are needed as a number of deficiencies in audit practices were identified in the aftermath of the financial crisis. The collapse of Anglo Irish Bank and the nationalisation of other Irish banks are clear and expensive reminders of how old auditing rules failed in financial institutions here. Problems were also identified in this area on a pan-European basis. An excessive familiarity between the management of a company and its audit firm was identified as risking conflicts of interest and posing a threat to the independence of statutory auditors and their ability to exert thorough professional scepticism. A lack of choice of audit firms due to the dominance of certain global players was also identified as a concern.

The majority of changes under these reforms will affect public interest entities, PIEs. These include companies such as banks, insurers and companies that are listed on the main market. The Bill will introduce the option of the State having the ability to designate an undertaking as a PIE if the undertaking is of significant public relevance due to its size, business or number of employees. It also seeks to strengthen the audit committee for public interest entities. These committees are established to provide a link between the board of a company and their auditors, serving as an intermediary to maintain a level of separation and independence between a client and its auditors. Another change is the ability of an auditor to provide other services such as tax, bookkeeping, payroll, valuation and management services to the client company. By restricting the other services an auditor can provide to a client company, conflicts of interest are reduced. I note that Ireland is to avail of an exemption in regard to certain tax and valuation services.

The audit regulation also introduces enhanced cooperation between competent authorities across EU member states, in addition to the establishment of an EU body, the Committee of European Auditing Oversight Bodies. It is intended that the option to add to the requirements of an audit report is to be exercised in the Bill by giving the lASSA the power to lay down additional requirements to the contents of the audit report in the future should it see the need to so do. That is important as more detailed information provided under increased requirements will result in more transparent and informative audit reports.

Prior to the introduction of SI 312/2016, a number of competent authorities were designated for the purpose of public oversight, including the IAASA, the Registrar of Companies and recognised accountancy bodies. Article 23 of the directive now sets out that a member state will designate only one competent authority, which in Ireland will be the Irish Auditing and Accounting and Supervisory Authority. The Bill will allow the IAASA to delegate tasks under the directive to other authorities or bodies, although the IAASA retains ultimate responsibility.

The former Minister for Business, Enterprise and Innovation, Deputy Fitzgerald, cited the Bill as one aspect of the recently announced measures to enhance Ireland’s corporate, economic and regulatory framework. All measures that aim to govern and police the corporate environment are welcome as Ireland has a shameful history of allowing companies and individuals in some institutions to flout the law, bring the country to ruin and face no repercussions. The Minister, Deputy Humphreys, may be aware that I have raised serious concerns about the way in which white collar crime is currently investigated in this country. To say that it is done poorly would be an accurate understatement. My concerns centre on the performance and functioning of the Office of the Director of Corporate Enforcement, ODCE. I recently highlighted that it has brought no prosecutions nor achieved any convictions in the past two years; in 2017 only had 35 staff and five gardaí to police all white collar crime in Ireland; has surrendered almost €6 million of its designated funding back to the State in the past three years; and has only brought 43 prosecutions in the past decade, which is a shockingly low number over that period of time. I have also previously raised concerns about the number of director restrictions that the previous Minister, Deputy Fitzgerald, cited as being work done by the ODCE. Figures provided to me in a previous exchange indicate that some 886 restrictions were carried out by the ODCE, which is very questionable. The Bill will not give the ODCE more responsibility. However, the problems in that organisation are a discussion for another day.

This Bill will designate another body, the Irish Auditing and Accounting Supervisory Authority, IAASA, as the competent authority for oversight of statutory audits. IAASA will be responsible for ensuring the new standards and regulations concerning auditing in Ireland are met and it is imperative that the IAASA has the resources, personnel and oversight required to effectively monitor and police the new rules. This is something on which I will be following up.

The Minister will notice in our future exchanges that I am strongly in favour of holding criminals who sit in boardrooms to account in the same way other criminals are held to account. I note with concern that in the recently published legislative programme for the spring-summer Dáil session, the companies (enforcement) Bill, which aims to overhaul the Office of the Director of Corporate Enforcement, ODCE, is listed under the section for all other legislation and not under priority legislation. Having witnessed the collapse last May of Seán FitzPatrick’s trial due to the botched investigation by the Office of the Director of Corporate Enforcement investigation, I thought this would have made reform of the agency all the more urgent.

The numerous problems and failings I have highlighted to the Minister regarding the functioning of the ODCE provide more evidence for the imperative to restructure the agency. The Oireachtas Joint Committee on Business, Enterprise and Innovation has sent an invitation to the ODCE to appear before it and, subject to legal approval, hopefully will get a chance to probe these problems further. I urge the prioritisation of the companies (enforcement) Bill to ensure white collar crime begins to be investigated and prosecuted effectively.

I want to highlight an issue of concern with section 9 of the Companies (Statutory Audits) Bill 2017. This section deals with the issue of audit exemptions and in particular the proposed significant change that where a company fails to file its annual return on time in the Companies Registration Office, the current option of applying to the District Court for an exemption would be removed. The Companies Act 2014 introduced the option, under section 343(7), for a company to apply to the District Court for an extension of time to file its annual return and, if obtained, it retained its audit exemption. Section 9 of the Companies (Statutory Audits) Bill 2017 repeals this section 343(7) of the Companies Act 2014. I recognise the importance of companies complying with their legal obligations with regard to the publication of financial information and I consider that in most circumstances, the ten-month period allowed for preparing and filing this information should be sufficient. Some SMEs, however, will find themselves in this situation for a range of reasons and will be impacted by this change. Businesses have contacted Members to express their concern over this aspect of the Bill, and I have previously highlighted this matter in parliamentary questions to the Minister. At this stage of the legislative process, I wish to highlight the strong concerns SMEs have raised about this aspect of the Bill and to flag that I may propose some amendments to this section on Committee Stage.

I have a concern about the effect Brexit will have on the Bill. The EU audit package was developed only a few years ago, but at that time it was assumed that Britain would be in the EU for the foreseeable future. Many audit firms in Ireland have major operations in Britain and work on an all-island basis. Has the Minister received assurances that Britain will maintain these new standards that are to be introduced after the UK leaves the EU, to ensure undertakings find it easier to implement changes and to maintain a harmonisation of high standards?

As for the optional provisions relating to the sanctioning powers and disclosure to the public, is the Minister satisfied that the powers to be implemented under this legislation are sufficient to act as an adequate deterrent?

The briefing paper on this Bill, helpfully put together by the Oireachtas Library and Research Service, indicates that of the six options in the investigations and sanctions section, the State is to implement two of these and will leave aside four. In particular, the publication of sanctions under Article 30c.3 is not to be exercised.

I welcome the Bill brought before the Dáil with the intention of strengthening auditing practices in line with our European colleagues. Sinn Féin will support the Bill, despite the EU audit package reforms being diluted as they progressed through the European legislative process. These reforms, however, aim to have more oversight and higher standards for the auditing process, which is welcome.

If Fianna Fáil had focused on such measures when it was in power, the total economic collapse of the State could have been avoided. I hope this legislation will prevent a repeat of the Fianna Fáil failures in this area that compounded the financial crisis in 2008, which resulted in the emigration of hundreds of thousands of our citizens and a decade of hardship for many of our citizens. I commend the Bill to the Dáil.

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