Duties of company auditors

 

Madam, – Deputy Pat Rabbitte’s remarks in the Dáil in respect of the auditing profession, as reported in this newspaper (January 21st) under the headline “Auditors criticised over scandals since Beef Tribunal” cannot go unanswered. It is not possible to comment on the issues giving rise to the current controversy, but some general observations are appropriate.

Audits are conducted in accordance with company law requirements to enable the expression of an opinion by the auditor on whether financial statements give a true and fair view in accordance with a specified accounting framework and on the basis of information provided to them. Auditors also report on whether those statements have been properly prepared in accordance with companies legislation and whether, in their opinion, proper books of account have been maintained. Responsibility for the preparation of “true and fair” financial statements lies with the directors of a company. A statutory audit is neither a guarantee against business failure nor an endorsement of the strategy pursued by company directors.

Successful audits are dependent on the quality of information provided by the audited entities.

Indeed, section 197 of the Companies Act 1990 provides that it is an offence, in specific circumstances, for an officer of a company to make a statement to an auditor that is misleading, false or deceptive.

In his remarks to the Dáil, Deputy Rabbitte also suggests that the Dáil may not have taken the attitude it should to the auditing profession following the Dirt inquiry. It is unclear what Deputy Rabbitte means here but the impression should not be created that this is an area where there has been no change. Following the Dirt inquiry a Review Group on Auditing was established and its report led directly to the Companies (Auditing and Accounting) Act, 2003.

That Act established the Irish Auditing and Accounting Supervisory Authority (IAASA), to oversee the regulation of the accountancy profession, with the power to investigate directly into issues where it deems appropriate. Our oversight regime in this regard is one of the most advanced in Europe and will shortly be supplemented by the implementation in Ireland of the European Statutory Audit Directive. Irish auditors of listed entities apply the same standards as those applicable across Europe. The large audit firms are subject to scrutiny not just by the Irish and UK authorities but by those in the United States also.

Since 2004 the Office of the Director of Corporate Enforcement has reported that it has received in excess of 4,000 reports from auditors of suspected indictable offences committed by companies and company directors. Auditors take seriously their obligations under statute.

The relevant authorities, among them the Chartered Accountants’ Regulatory Board and IAASA, have issued statements regarding events at Anglo Irish Bank and the ensuing process will need to be allowed to take its course. Whatever form they take, they will have the full support of the Institute of Chartered Accountants in Ireland. – Yours, etc,

PAT COSTELLO,

Chief Executive,

Institute of Chartered

Accountants in Ireland,

Burlington Road,

Dublin 4.