Mick Wallace (Wexford, Independent)
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24. To ask the Minister for Finance further to the recent announcement by NAMA of the appointment of a company (details supplied) as statutory auditor, the role played by his Department in this decision; the advice his Department and NAMA sought on this decision; if the Office of the Comptroller and Auditor General was consulted about the decision; if he has satisfied himself that the decision is not in breach of section 57(1) of the National Asset Management Act 2009 regarding the role of the Comptroller and Auditor General; and if he will make a statement on the matter. [31468/17]

Mick Wallace (Wexford, Independent)
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My question relates to the appointment of a second auditor to NAMA arising from the EU audit directive. I have some questions about the process involved. When did this matter first arise? Will the Minister outline the advice his Department and NAMA received on the decision? Was the Comptroller and Auditor General engaged at all times in decision-making? If legal advice was sought from the Attorney General, is the Minister satisfied that the decision is not in breach of section 57(1) of the National Asset Management Act 2009 regarding the role of the Comptroller and Auditor General?

Paschal Donohoe (Dublin Central, Fine Gael)
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The pending implementation of the 2014 revised EU audit directive and regulations which underpin the Deputy’s question was first brought to the attention of my officials in the Department of Finance in respect of the potential impact for NAMA in May 2016 by officials within the Department of Jobs, Enterprise and Innovation, who are responsible for transposing the directive into Irish law.  The Department of Jobs, Enterprise and Innovation made contact with my Department and the Office of the Comptroller and Auditor General regarding the implementation of statutory audit obligations in the 2014 revised EU audit directive and regulations prior to their transposition into Irish law via Statutory Instrument 312 of 2016 and the Companies Act 2014.

My Department engaged over a number of months with the Department of Jobs, Enterprise and Innovation, the Office of the Comptroller and Auditor General and NAMA on this matter.  My Department also sought legal advice from the Office of the Attorney General on the directive which requires that certain companies, including NAMA, be audited by a statutory auditor within the meaning of the directive.

This audit requirement is separate from and in addition to the audit requirements set out in the NAMA Act which remain in effect. It was also confirmed that the Comptroller and Auditor General was not a statutory auditor within the meaning of the directive. I understand both NAMA and the Office of the Comptroller and Auditor General obtained separate legal advice which concurred with this position. Hence, the Comptroller and Auditor General's audit of the statutory financial statements of the NAMA group of entities from the financial year ending on 31 December 2016 onwards does not fulfil the requirements of the directive. I am advised that the Comptroller and Auditor General believes that, at a minimum, a change in legislation will be required in order for him to become a statutory auditor. In that regard, cognisance would also need to be taken of the particular features of the Constitution which safeguard the independence of the role.

Mick Wallace (Wexford, Independent)
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According to the NAMA Act, the overall objective of NAMA was to bring stability to the banking system by removing impaired loans from bank balance sheets; it was never set up to make a profit. It would have to get back over €74 billion to make a profit. The Minister is saying the EU directive requires that certain companies, including NAMA, must be audited by a statutory auditor within the meaning of the directive. The NAMA Act states the Comptroller and Auditor General is the statutory auditor and I take it we are allowing the Act to be overruled by the directive. The directive's requirements relate to certain companies, including NAMA. Obviously, it does not explicitly name NAMA. I am assuming, therefore, that the Department believes NAMA falls under the public interest entity provisions of the directive. A public interest entity, essentially, is a listed company which must trade on the EU stock market and is deemed to have public importance by an EU member state. Will the Minister tell me the exact methodology used in interpreting that NAMA falls within the description of a public interest entity? I am aware that NAMA may have bonds trading, but it is stretching it in defining it as a listed company on the stock market.

Paschal Donohoe (Dublin Central, Fine Gael)
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I will come back to the Deputy on his question about NAMA being a public interest entity. To answer the main question he asked, it arises from a change to the audit requirements. Because the audit requirements emanated from an EU directive, we had to change how we were dealing with these matters. All of the bodies affected, including NAMA and the Comptroller and Auditor General, worked together to deal with the matter. We will now be in a situation where the Comptroller and Auditor General will continue to fulfil his role, but we will also have a statutory auditor in Mazars which will performing its own functions.

Mick Wallace (Wexford, Independent)
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Speaking of Mazars, this morning Professor Richard Murphy of University College London called for greater regulation of the big four accountancy firms because of their ongoing facilitation of tax avoidance. We all know the names of the four firms: Deloitte, PwC, Ernst & Young and KPMG. Mazars is probably No. 5. The goal of the European Union with the directive was to reinforce the independence of auditors and there is probably no one more independent than the Comptroller and Auditor General. I argue - I think the Minister would not disagree with me - the Comptroller and Auditor General is more independent than any of the big five, including Mazars. Article 14 of the EU directive which deals with statutory auditors states, "In exceptional circumstances, Member States may derogate from the requirements laid down in this Article ...". NAMA has always been an exception, dating back to 2009 when the European Commission gave it a special exemption to receive state aid. Will the Minister tell us whether his Department sought an exemption from the European Union because of exceptional circumstances and, if not, why not?

Paschal Donohoe (Dublin Central, Fine Gael)
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To answer the Deputy's question, I am not aware that my Department sought an exemption. If I am wrong in that understanding, I will respond to the Deputy with the information.

There has been no change in the recognition of the constitutional role of the Comptroller and Auditor General as auditor of the State. It has not been affected.

The Deputy asked my view on the role of the Comptroller and Auditor General. The work he does is of the highest quality. As a former member of the Committee of Public Accounts, I have seen him in action. He will continue with his work on NAMA or any other body with which he has a relationship, but because of a change in the EU directive, in the way I outlined to the Deputy, it was necessary to appoint a further body, in this case, Mazars, to meet our obligations under law in relation to NAMA. There is no conflict in the matter. All of the parties affected co-operated in the change. As I said, if my understanding is wrong in relation to the exemption, I will revert to the Deputy and inform him of such.