Question: What impact does the updated Statutory Audit regime have on Irish Funds?
Answer: The European Union (Statutory Audits) (Directive 2006/43/EC, as amended by Directive 2014/56/EU, and Regulation (EU) No 537/2014) Regulations 2016, SI 312 of 2016 became effective on 17 June 2016 and give effect to new rules in relation to audits carried out in Europe. All audits undertaken in Ireland (from the first financial year commencing after 17 June 2016) will be impacted by the new rules. In particular, some specific rule changes concern individual audit relationships with Public Interest Entities (PIEs) which include listed funds.
Mandatory Rotation: For all PIEs it will be mandatory to rotate the audit firm after 10 years and within that cycle, an audit partner can only serve for a maximum of five years. The transition arrangements depend on the length of the existing relationship as relationships that have been established for longer than 11 and 20 years as of June 2014 have more time to transition. The rules also set out requirements in respect of the procedures for the selection and appointment of a new auditor.
Non-Audit Services are also impacted; for a PIE, the non-audit services which the statutory auditor (and its network) may provide within the EU are restricted.
Audit reports are also impacted by way of additional information requirements.
Fortunately, the onerous requirements set out in these regulations in respect of audit committees are dis-applied in respect of UCITS* and AIFS.
*UCITS PLCs are required to comply with Companies Act, 2014 audit committee requirements (which are not as onerous).