PWC Audit Seminar
CityWest Hotel
9 October 2002
Issues on the Audit Front
Initial Experiences of the ODCE
Paul Appleby
Director of Corporate Enforcement
Outline of Presentation
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Brief History Lesson
Goals of ODCE
Initial Experience of Caseload
Issues on the Audit
Concluding Comment
Brief History Lesson
• McCracken Tribunal Report (1997)
• Working Group Report on Company Law
Compliance and Enforcement (1998)
• DIRT Inquiry Report (1999)
• Review Group on Auditing (2000)
• Company Law Enforcement Act (2001)
• Standing Company Law Review Group
Goal 1 – Encourage Compliance
• Publish accessible company law information
• Promote compliance
• Contribute to company law developments
Goal 2 – Investigate Complaints
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Implement mandatory reporting of breaches
Develop information sources
Evaluate complaints/reports of malpractice
Support formal company investigations
Goal 3 – Prosecuting Offences
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Selecting the right enforcement option
Implement administrative penalties
Undertake summary prosecutions
Initiate and defend related proceedings
Goal 4 – Supervise Insolvency
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Implement the insolvency powers
Evaluate liquidator reports
Review the impact of the new provisions
Participate in Court proceedings
Goal 5 - Provide Quality Services
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Provide suitable and secure accommodation
Develop staff potential
Provide ICT Support
Develop the website
Manage our budget and administration
Develop customer services
Headline Progress To Date
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Most staff recruited/integrated
Move to permanent premises imminent
Website successfully launched
Four Consultation Papers/Decision Notices
Most powers now conferred
Indictable Offence Reports/Type
• Total of 110 up to third week of September
• 75% relate to filing defaults
10% involve improper books of account
7% relate to director/company transactions
3% deal with not having a resident director
Rest cover AGM, EGM, liquidator defaults
Indictable Offence Reports/Source
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Big Four Firm
Big Four Firm
Big Four Firm
Big Four Firm
Other Firm (> five reports)
Accountancy Bodies
Other Firms
31
25
9
1
11
2
31
Total Cases
• Overall, some 300 cases have been received
• About 65% came to attention via public, etc.
• Approx. 55% of cases have been dealt with, closed
or referred to the CRO
• Balance of about 135 cases under review
• Liquidator Reports will swell/re-balance these
figures
Issues on the Audit (1)
Need to ensure that auditors comply –
• Apparent Reporting Discrepancies
• Voluntary Disclosure by Companies – No Auditor
Report
• Delays in filing H4s in the CRO (up to two years)
• Enforcement Action will be considered
Issues on the Audit (2)
Contradictory Audit Opinions
“Basis of Opinion
…the evidence available to us was limited because the company’s
turnover comprises cash sales over which there was no system of
control on which we could rely for the purposes of our audit. There
were no other satisfactory audit procedures that we could adopt to
confirm cash sales were properly recorded.
Opinion
…In our opinion proper books of account have been kept by the
company…”
Issues on the Audit (3)
Inadequate Audit Reports
• Cases where the failure to ascertain the company’s title to
substantial investments attracted a qualified audit opinion
one year and no qualification the next
• Case of insolvent company with no opinion expressed on
its “going concern” prospects, notwithstanding a
substantial continuing deficit
Issues on the Audit (4)
Insolvency - Liquidator’s Report v Auditor’s Report
• 297/297A, 1963: fraudulent trading situations
• 40, 1983: failure to hold EGM to consider capital
• 194/202, 1990: failure to keep proper books
• ‘going concern’ opinion v date on which the company
was unable to trade out of its difficulties
Issues on the Audit (5)
Non-Resident Auditors
• Irish companies being audited by auditors
based in the Isle of Man, Channel Islands,
Cyprus, Malta, Israel, Gibraltar, etc.
• Many fail to deal with queries
Issues on the Audit (6)
Inadequacy of H4 Form and its Completion
• No statement of period to which the
statement relates;
• Nature of the difficulty not disclosed;
• Failure usually indicated as historical only,
despite option to indicate failure as current
Issues on the Audit (7)
Possible Legislative Change
• Dealing with Non-Resident Auditors
• 194(2), 1990 – is the exemption too wide?
• 194(3A), 1990 – is the scope for demanding
explanations too limited?
Issues on the Audit (8)
• Anxious to obtain as much cooperation as
possible from Auditors
• Enforcement action will be undertaken in
exceptional cases where necessary
• Greater engagement with accountancy
bodies planned by ODCE
Concluding Comment (1)
General obligations on Auditors
• Independence/professional integrity
• Report to members on the accounts, etc.
• Notice to the Registrar of resignation and
associated circumstances
• Notice to the Registrar of failure to keep proper
books of account
• Report to ODCE of suspected breaches of the
Companies Acts
Concluding Comment (2)
Future Outlook is Challenging
• Restoration of Confidence in the Profession
• IAASA
• New Fraud Offences Act
• IFSRA
• IAS
• etc., etc.