Paul Coghlan (Fine Gael)

Amendments Nos. 52 and 53 deal with the increase in audit exemption thresholds, which was an important matter we addressed on Second Stage. I put these amendments down to allow Irish companies to avail of audit exemption thresholds in line with those available in other EU member states.

In order to extend the audit exemption relief as contained in section 32 of the Companies (Amendment)(No. 2) Act 1999 to small companies, section 32 needs to be amended to extend the exemption threshold to the size criteria for small companies as specified in section 8(2) of the Companies (Amendment) Act 1986. The current turnover level is €3.8 million and balance sheet total of €1.9 million. However, under a recent EU decision, the size criteria for small companies have been raised to a turnover level of €7.3 million and a balance sheet total of €3.65 million. All EU member states may exempt from the statutory audit requirements companies with turnovers and balance sheets below these thresholds. There is an argument that to lighten further the regulatory burden on small companies and to allow these businesses to spend more time on creating wealth and less on administration, the threshold should be increased further. We would not be out of line with our nearest competitor, nor should we be. It is widely anticipated that our nearest competitor, the UK, will increase the turnover threshold to £4.8 million.

Under section 30 of the Companies (Amendment)(No. 2) Act 1999 a company is eligible for exemption from auditing its accounts where its turnover does not exceed €317 million, its balance sheet total does not exceed €1,904,607 and it has fewer than 50 employees. However, there are a number of exemptions under the Schedule to the 1986 Act such as banks, insurance companies and financial services companies including insurance brokers. It is that group I want to touch on.

The exemption was given to small businesses because the cost is out of proportion to the benefit to such companies. At present insurance brokers find themselves in exactly this position since regulation of insurance brokers was transferred to the Central Bank, and now the IFSRA, the cost of auditing insurance brokers' accounts has doubled. It is now running at an average of €2,500 for insurance brokers with a turnover of under €150,000 and one or two employees.

Insurance brokers whose turnovers range from €25,000 to €150,000, which are approximately 80% of this sector of small business, will continue to be excluded under section 33 of the Investment Intermediaries Act 1965. Authorised investment firms are required to audit their accounts regardless of the size of turnover and this was carried forward to the Insurance Act 2000, which transferred the regulation of brokers to the Central Bank.