Michael McGrath (Cork South Central, Fianna Fail)
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257. To ask the Minister for Jobs, Enterprise and Innovation the exemptions which exist from the requirement for an annual audit for small firms and incorporated entities; if this will change with the implementation of the new Companies Act; and if he will make a statement on the matter. [5566/15]

Richard Bruton (Dublin North Central, Fine Gael)
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Audit exemption applies to small companies formed under the Companies Acts. Member States' entitlement to provide for audit exemption for small companies derives from EU legislation prescribing the maximum thresholds capable of being employed by Member States to determine small company size. These thresholds relate to net turnover and balance sheet total and number of employees.Under the Fourth Company Law Directive (78/660/EC) Member States can provide for small companies to avail of an exemption from the requirement to have their individual accounts audited. This exemption applies to the accounts prepared for the members.

Currently, to be eligible for audit exemption, Ireland requires, among other things, that a private limited company meet all three of the size criteria (balance sheet total, turnover and average number of employees). The company must not be either a parent or a subsidiary. In Ireland, companies engaged in certain activities, essentially those in the nature of financial services, cannot avail of the exemption.

The audit exemption thresholds applicable in Ireland were raised to the maxima permitted by the European Union, under Directive 2006/46/EC, as implemented by S.I. 308 of August 2012. These current thresholds, which are also set out in the Companies Act 2014, are balance sheet total of €4.4m, net turnover of €8.8m and average number of employees during the financial year of 50.

In addition, the Companies Act 2014 extends the scope of the application of the audit exemption to a company limited by guarantee, a company that is either a parent or a subsidiary or a dormant company. Also, to be eligible for audit exemption, the Act includes a provision that an eligible company need only meet two of the three size criteria.

The Accounting Directive (2013/34/EU) replaces the Fourth Company Law Directive (78/660/EC). Work on the transposition of the Accounting Directive is currently being progressed by my Department and is required under the Directive to be transposed by 20 July 2015. This Directive increases the current permissible maximum thresholds which Member States may establish for net turnover and balance sheet total to €12m. and €6m. respectively - the maximum permissible threshold for number of employees remains unchanged. Consideration is being given, in the context of the Department’s transposition of the Accounting Directive, as to whether to maintain these thresholds at their current levels or to provide for increases and, if the latter, what levels it might be appropriate to establish.

If the decision is to provide for increased thresholds, this will be done by way of an appropriate amendment to the Companies Act 2014.