IAASA Bill
Author:
Brian Walsh
[Fulltext] The Companies (Auditing & Accounting) Bill 2003, otherwise known as the IAASA Bill, is arguably the most important piece of legislation affecting the accountancy profession to be introduced since the foundation of the State. It was appropriate, therefore, that the Institute went to some lengths to consult with its members in business and in practice before making a submission of 50 pages, which has been acknowledged by the Department as one of the most comprehensive it has received. (The executive summary of that submission is included in our Technical Supplement on page 52.)
Major Provisions
The most significant provision of the Bill is that it establishes the Irish Auditing & Accounting Supervisory Authority (IAASA), which will supervise the regulation of the accountancy profession by the professional bodies. In addition to its supervisory function, however, the IAASA Board has also been given powers to intervene in the investigation / disciplinary procedures of the accountancy bodies, and to act, through a sub-committee, as a financial reporting review panel (FRRP).
While the Institute recommended the establishment of a Supervisory Authority in its submission to the Review Group on Auditing (RGA), our submission on the Bill points to a number of difficulties with the legislation, as drafted. We believe it is unfair that an "Accountant", who is not a member of one of the prescribed bodies, should be allowed to carry on acting as an "Accountant" while avoiding all the regulation which members of prescribed bodies will be subject to. In this regard, we have put forward in our submission draft legislation which would recognise the term "Accountant" in law.
The intervention powers which have been given to the Authority in the Bill are out of line with the recommendations of the RGA and, in our view, has the potential to undermine the investigation/disciplinary processes of the prescribed bodies. Again, we have put forward proposals to correct this, and we hope they will be acted upon.
The issue which has, perhaps, received most attention has been our campaign for greater accountant representation on the Supervisory Authority Board. We accept fully that non-accountants must be in the majority, but we believe that to allow only two accountants on a Board of thirteen will deny the Board the expertise it requires, and is, frankly, an insult to the accountancy profession.
Other Provisions
The other major provisions in the Bill are the requirement for directors to sign a Compliance Statement, specifying the company's policies in relation to compliance with its obligations under the Companies Acts, tax law and other "relevant" law which could materially affect the company's Financial Statements. The auditors, in turn, are required to review the Compliance Statement "to determine whether, in the auditors' opinion, each Statement is fair and reasonable, having regard to information obtained by the auditorâ?¦. in the course of, and by virtue of having carried out audit-related work or non-audit work for the company."
Our research has shown that no other country in the developed world requires directors to sign a Statement such as this. The Sarbanes-Oxley legislation, enacted in the United States following the collapse of Enron and other corporate scandals, was regarded by corporate America as being draconian, but it is significantly less onerous than the Compliance Statement required by the IAASA Bill. This, together with the zero tolerance approach now being adopted by the ODCE, is in danger of giving Ireland a reputation of being over regulated and unattractive to business.
The Bill also requires all Plcs to have an Audit Committee. Private companies, over a certain size, must explain why they do not have an Audit Committee if, in fact, they do not have one. The role of the Audit Committee has been established in law. We believe that the role would be better enshrined in a Code, which would be easier to amend, as corporate governance practices change, as they surely will over the coming years.
Next Steps
Representatives of the Institute have been meeting, and will continue to meet, other bodies with an interest in the legislation, Government Ministers, Opposition T.D.s and Officials in the Department, as the Bill progresses through the Dail. We will do all we can to ensure that the legislation is workable at the end of the day, but it is incumbent on each member, as well, to make their own representations to local T.D.s, where appropriate.
As I said at the outset of this column, this is a very significant piece of legislation for the accountancy profession, so it is in everybody's interests to get it right.
Accountancy Ireland Vol 35 No 3 June 2003