As reported previously, it is expected that Directive 2006/43/EC on statutory audits of annual and consolidated accounts (also known as the 8th Company Law Directive) will be implemented in Ireland in a matter of weeks. The Department of Enterprise, Trade and Employment have estimated that domestic legislation will be introduced around 31 May 2009.
The Directive requires "Public Interest Entities", such as listed companies, credit institutions, insurance and insurance undertakings to establish an audit committee. Listed companies in Ireland follow, on a "comply or explain" basis, the Combined Code on Corporate Governance which already provides for the establishment of an audit committee. In practice, therefore, the likely main consequence of the audit committee provisions of the Statutory Audit Directive for listed companies is merely to put this requirement on a statutory footing.
The Statutory Audit Directive requires that at least one member of the audit committee be independent and have "competence in accounting and/or auditing".
It is expected that Ireland will include most or all the requirements of Section 42 of the Companies (Auditing and Accounting) Act 2003 ("the 2003 Act"), which was never commenced. To this end, it is expected that there will be a requirement for large private companies to establish an audit committee on a "comply or explain" basis. Under the 2003 Act, "large private companies" are:
- Companies with a balance sheet total exceeding €25 million and turnover exceeding €50 million in both the most recent financial year and the immediately preceding financial year; or
- Irish-registered private companies limited by shares if the company and all its subsidiary undertakings together meet the above balance sheet and turnover requirements.