Niall Collins (Limerick County, Fianna Fail)
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582. To ask the Minister for Jobs, Enterprise and Innovation if section 363 of the Companies Act 2014 complies with the objectives of recital 43 in EU Directive 2013/34/EU (details supplied); if other EU member states have adapted domestic laws to meet the objectives of this recital; and if she will make a statement on the matter. [22671/17]

Mary Mitchell O'Connor (Dún Laoghaire, Fine Gael)
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Section 363 of the Companies Act 2014 Act provides that a small company loses its entitlement to the audit exemption if it does not file its annual return on time.

Recital 43 of the EU Accounting Directive (Directive 2013/34/EU) does state that the “annual financial statements of small undertakings should not be covered by the audit obligation, as audit can be a significant administrative burden for that category of undertaking”. This objective is met with the provisions of section 358, which provide that a small company is eligible for an exemption from audit.

Recital 43 strikes a balance between the requirements of small companies and the interests of third parties that rely on the financial transparency of those companies. Accordingly, Recital 43 goes on to say that “this Directive should not prevent Member States from imposing an audit on their small undertakings, taking into account the specific conditions and needs of small undertakings and the users of the financial statements.” Users of financial statements rely on those financial statements being accurate, meaningful and up to date. This is an important protection for third parties doing business with small companies, such as suppliers and other creditors. As a result, it is important that companies file their financial statements on time. Section 363 is intended to encourage small companies to file their annual returns and accompanying financial statements in a timely manner.

As small companies can have more than 9 months from the end of their financial year to prepare and file their financial statements, the obligation to file on time is not a significant administrative burden. As things stand, 90% of all Irish registered companies manage to file on time. The loss of the audit exemption for late filing is an appropriate and proportionate response given the importance of timely financial information for third parties.

The audit exemption is not a right for small companies under EU law. However, I understand that the audit exemption for small companies is provided for in most, if not all, other EU Member States. I am not aware of the conditions that apply to eligibility across the EU.