PAC group gets presentation of auditing report

The accountancy profession is braced for sweeping changes in its regulatory structure and tighter monitoring of auditing relationships following the publication today of the report of the Government-appointed Review Group on Auditors.

The report, which has already been approved by the Cabinet, will be presented to the Dail Committee of Public Accounts (PAC) today. The Tanaiste, Ms Harney, will attend the session with Senator Joe O'Toole, who chaired the group.

The lengthy report will recommend changes in the supervision of accountancy bodies and call for the imposition of stiff penalties where they fail to carry out the supervisory aspect of their role as auditors.

The report follows the failure of auditors to the State's financial institutions to uncover the wide-scale use of bogus non-resident bank accounts in the 1980s and 1990s, highlighted by the PAC Inquiry into DIRT tax evasion.

The accountancy profession is understood to be deeply unhappy with aspects of the report, in particular with the proposed new regulatory structure which it will be expected to part-fund.

Reporting to a previous PAC session, Senator O'Toole said a budget of £1.5 million was mentioned during its deliberations, which would imply that each accounting body would have to contribute around £90,000. The statutory oversight body proposed is similar to the structure which already operates in Britain. At present, the accountancy bodies regulate their own members.

Where auditors fail to report evidence of breaches of the law, such as tax evasion, the report recommends the statutory board would have the power to apply penalties of up to £100,000 in addition to costs.

Hearings into wrongdoing by members of the various accountancy bodies will also be held in public, something to which the major bodies have already taken to. Where there are auditors who are not members of these bodies they will be compelled to join. The review group has stopped short of recommending a ban on auditors providing other services to clients in addition to audit work but will demand greater transparency and a detailed breakdown of fees earned in such areas.

Areas such as tax and other corporate advice are highly lucrative and the potential for auditors to be compromised to safeguard the overall level of fees was mentioned during the DIRT hearings.

The report will insist that all fees paid to accountancy firms will have to be itemised in company reports for shareholders.

The PAC report found that serious defects in the auditing process had contributed to the continuance of bogus non-resident accounts in the 1980s and 1990s.