Seán Sherlock (Cork East, Labour) | Oireachtas source

I wish to reiterate the wording of the amendment in order that from my perspective I can stay focused on the amendment itself. Amendment No. 11 seeks to insert the following:

The Recognised Accountancy Bodies remain the oversight bodies for the external quality assurance of audits until the enactment of this Act and shall retain the duties and obligations of such oversight up to and including that date.

Under Chapter 2, Part 8 of the European Communities (Statutory Audits) (Directive 2006/43/EC) Regulations 2010, SI No. 220 of 2010, the recognised accountancy bodies have the power and do carry out quality assurance of their members' activities as statutory auditors and audit firms. This will remain the position until the power is formally transferred to the Irish Auditing and Accounting Supervisory Authority, the IAASA. Section 6 of the Bill provides for a levy, this speaks to the points made by Senator Sean D. Barrett, on statutory auditors and audit firms of public interest entities in order to defray the costs to the IAASA for carrying out the functions of external quality assurance in respect of these public interest entities.

The amendment is unnecessary. Additional functions in regard to the EU recommendation on external quality assurance are proposed to be conferred on the IAASA in the Companies Bill 2012 while the balance of the related functions would be conferred on IAASA by amendment to existing regulations. The commencement of section 6 will not occur until all the relevant functions have been transferred.

I believe amendment No. 13 is unnecessary and I do not propose to accept it. The Irish Auditing and Accounting Supervisory Authority produces an annual report of its activities each year, which is laid before the Houses of the Oireachtas. The IAASA can also be called to appear before any Oireachtas committee and it has appeared before the Joint Committee on Jobs, Enterprise and Innovation in December 2012. The provision in regard to quality assurance in this Bill is strictly confined to empowering the Irish Auditing and Accounting Supervisory Authority to impose a levy again on statutory auditors and audit firms of public interest entities to defray the costs to it for carrying out the functions of external quality assurance in respect of those public interest entities. Currently the recognised accountancy bodies, RABs who carry out the quality assurance function have the power to sanction their members, including by withdrawal of the authorisation to audit certificate. It is intended that the Irish Auditing and Accounting Supervisory Authority, IAASA will have equivalent powers of sanctions when the functions are transferred and these powers again will be contained in the Companies Bill 2012 or the regulations, as appropriate.

First, let me speak on the amendment before us and be clear about the Government's position on it. Other points have been made by Senator Barrett and we could have a very long debate on the morass in society. I do not think it was only the accountants who were part of the morass. Many others were part of it as well.

For the purposes of dealing with some of the points the Senator raised, it is important to address the issue in relation to investigations and proceedings against particular members of those accountancy bodies. Investigations and proceedings against members of accountancy bodies in relation to events at the former Anglo Irish Bank were suspended at the request of the Director of Public Prosecutions in order that such moves would not prejudice forthcoming criminal trials. It is important to state that in response to quite a large component of the Senator's contribution.

The Senator critiqued section 6 in its entirety, but that section gives effect to a European Commission recommendation on external quality assurance for statutory auditors and audit firms. The Minister of State, Deputy Lynch may have addressed this issue during the Second Stage debate, but I want to state again that if we are talking about quality assurance in relation to section 6, it is important we note that quality assurance is the regular inspection of statutory auditors and audit firms to ensure systems are in place that will allow for consistently high quality audits. The transfer of the important quality assurance function to an independent oversight body such as IAASA will strengthen oversight of the audit process in Ireland as regards these public interest entities. This should help to restore confidence in audit in Ireland, which has been dented as a result of the so-called clean audit opinions given to the financial statements of systemically important credit institutions, which as the Senator rightly pointed out, later proved to be near or actually insolvent.

The transfer of the function to IAASA is to be fully funded by the relevant statutory auditors and audit firms with no cost to the Exchequer, apart from once-off start-up costs such as office equipment and so on. This is in line with existing practice where statutory auditors and audit firms pay for this function. The only difference is that this payment will be to IAASA and not the recognised accountancy body of which they are a member. The cost of such reviews under the proposed system is likely to be greater because the quality assurance process will be more thoroughgoing than heretofore. This is understood not to be a difficulty for the statutory audit firms concerned and they do not have a problem with it.

If IAASA is to undertake these additional quality assurance functions, significant additional resources will be required by that entity. Again in June of last year, the Secretary General of the Department of Jobs, Enterprise and Innovation wrote to his counterpart in the Department of Public Expenditure and Reform seeking sanction for IAASA to recruit 11 additional staff. This has been proceeded by meetings between officials of both Departments. Again, Senator Barrett referred to that issue.

I hope this addresses the substantive wording of the amendment as proposed by Senator Barrett.