Press releases

Authority launches fourth Annual Report

‘A year dominated by the review of financial institutions’ financial reporting

and statutory Enquiry activity’

Thursday, 24^th June, 2010: The Irish Auditing & Accounting Supervisory Authority (‘IAASA’) has today published its Annual Report for 2009.

Marking the publication of the report, Chairperson, Ms. Karen Erwin, said:

‘The events and financial revelations of the last two years have had a profound effect not only on the economy but on Irish society as a whole. The scale of the losses sustained by our banks and building societies as a result of those institutions’ business practices has resulted in the Exchequer having to provide substantial financial support.

These events have resulted in a severe loss of confidence in our financial institutions, in those charged with their governance and in the system of financial regulation that prevailed over recent years. More widely, these events have resulted in publicly expressed concerns as to, amongst other things, the business models and governance regimes operated by the financial institutions concerned, the reliability of financial institutions’ statutory financial reporting, the financial reporting standard setting process and whether the audit profession has properly discharged its legal and professional responsibilities. In addition, by virtue of the fact that a number of individuals associated with these events are members of the accountancy profession, the profession’s capacity to regulate itself has, rightly, come under increased scrutiny.

The foregoing has occurred at a time of continuing severe economic adjustment, characterised by a marked deterioration in the public finances, the collapse of the property and construction industries, reduced consumer demand, increased unemployment, reduced access to credit and national, as well as international, economic uncertainty. These factors have added significantly to the challenges facing those charged with preparing and auditing financial statements and those promulgating associated standards.

It is against this backdrop that, during 2009, IAASA discharged its primary statutory responsibilities of monitoring certain listed entities’ statutory financial reporting and supervising the accountancy bodies’ regulation and monitoring of their members and member firms. Within those work streams, 2009 was a year that was very much dominated by the review of financial institutions’ financial reporting and statutory Enquiry activity.’

Commenting on IAASA’s financial reporting review activity, Chief Executive, Mr. Ian Drennan, said:

‘During 2009, whilst maintaining an overall level of review activity consistent with the preceding year, in accordance with our risk based approach we performed examinations of Anglo Irish Bank Corporation’s financial statements for the year ended 30 September, 2008 and six months ended 31 March, 2009 respectively. In addition, having examined and sought certain information and explanations from the bank’s directors in respect of the bank’s financial statements for the six months ended 31 March, 2008 during 2008, we revisited those financial statements and the directors’ associated responses during 2009 in light of certain information that subsequently came into the public domain.

Arising from those reviews, we engaged extensively with Anglo’s directors, seeking information and explanations in respect of a range of matters including the financial reporting issues arising from certain inter-institutional transactions with Irish Life & Permanent plc, the temporary refinancing of loans and certain loans secured on Anglo shares. On the issue of inter-institutional transactions, we also sought certain information and explanations from IL&P’s directors.

In conducting our analysis of these issues we liaised with other interested parties as necessary and, whilst our examination of certain of these issues was ongoing at year end, as a result of our examinations, we obtained undertakings from both Anglo’s and IL&P’s directors in respect of future financial reports. We also shared certain information with the Financial Regulator, the Director of Corporate Enforcement, An Garda Síochána and the Special Investigator appointed by the Institute of Chartered Accountants in Ireland to investigate the role that certain Institute members may have played in events at Anglo.

In the context of financial institutions’ and other financial services entities’ financial reporting more generally, in accordance with our risk based approach, we probed, and as considered necessary, challenged directors’ judgements on a range of issues including the impairment of financial assets, the valuation of financial assets in illiquid markets and the provision of disclosures in respect of transactions with related parties, including in respect of the impact of the State’s intervention in the banking system. These engagements similarly resulted in the provision of undertakings to effect improvements to future financial reports in a number of respects in users’ interests’. (Further details of matters in respect of which undertakings were secured are provided in Chapter 4 of the Report).

Speaking about IAASA’s statutory Enquiry activities, Mr. Drennan commented as follows:

‘Under the model of supervised self regulation provided for in legislation, primary responsibility for regulating and monitoring members of the accountancy profession, including the conduct of investigations into members’ conduct, resides with the accountancy bodies. IAASA’s statutory role is to approve the professional bodies’ procedures, including their investigation and disciplinary procedures and, as necessary, to conduct statutory Enquiries for the purpose of establishing whether non-compliance with those procedures has occurred. In circumstances where non-compliance is found to have occurred, the options available to IAASA include annulling decisions, requiring the conduct of fresh investigations and the imposition of monetary sanctions.

During 2009 one new Enquiry was initiated while a further Enquiry progressed from Preliminary to Full status on foot of a prima facie case having been established. A further Enquiry was completed during the year, with an adverse finding being made. IAASA’s decision in this instance was confirmed by the President of the High Court on 17 May, 2010. A fourth Enquiry, which had been ongoing at the beginning of the year, was substantially progressed during the year.’

Commenting on the current legislative model governing the accountancy and audit professions, Ms. Erwin said:

‘While a number of important actions have been taken to date that will serve to address certain of the concerns underlying the loss of confidence that has been sustained by the profession, there is further scope to allay public concern and to form a basis for restoring confidence. In that context, there is a clear opportunity for the accountancy bodies, in who responsibility resides under the prevailing model of supervised self regulation, to formulate appropriate responses.

Whilst the current model of supervised self regulation was deemed to be appropriate in 2003 when the legislation was enacted, IAASA’s assessment is that there is merit in this model now being reviewed in certain material respects. Our conclusion in this regard has been informed by a combination of the practical operation of the existing legislation and developments that have occurred since its enactment.

By requiring IAASA to focus on the activities of the professional bodies as opposed to on individual members and member firms, the current legislative model renders it difficult for us to gain any direct and meaningful insight into the then current operations of audit firms and, in particular, their approach towards audit quality, particularly in the case of those performing audits of listed entities.

In contrast, it is now widely accepted best practice, in both the EU and internationally, that, in the interests of strengthening and enhancing independence, oversight authorities should have a direct involvement in the quality assurance of audit firms that perform audits of listed entities. In the EU, this was reflected in a Recommendation issued by the European Commission in 2008 for the purpose of assisting Member States with their transposition of the Statutory Audit Directive.

Although this Recommendation was not followed in the recent transposition of the Directive in Ireland, IAASA continues to support implementation of the Recommendation’s provisions as an important means of strengthening the current regulatory arrangements.

Further, the current legislative emphasis on supervised self regulation, combined with the prevailing funding arrangements, render the initiation of investigations by IAASA into individual members of the profession to be problematic and costly both to the Exchequer and to those accountancy bodies whose members are not under investigation. These factors combine to give rise to unrealistic expectations as to what the Irish oversight system, as currently configured and resourced, can deliver.

There are clear differences between what an audit, as provided for by law and professional standards, is intended to deliver and certain stakeholders’ expectations as to what an audit should deliver. Against that backdrop questions are being asked both domestically and internationally as to the usefulness of the statutory audit, and indeed financial reporting, as currently configured.

However, given that the scope and nature of statutory audit is set at EU level and financial reporting and auditing standards are set internationally, Ireland’s response to this question will have to be formulated within that context. Indeed, European Internal Markets Commissioner, Mr. Barnier, has recently indicated his intention to publish a Green Paper on auditing in the autumn. It is clear, therefore, that this process will take some time. However, this, separate, debate should not, in our view, prevent an examination of those considerations set out above from taking place in the short term and, for our part, IAASA will be happy to continue to contribute our views and to engage with other stakeholders in an effort to ensure that the regulatory framework is capable of supporting and enhancing public confidence in the profession into the future.

Having regard to the resources available to it, IAASA must, when discharging its statutory responsibilities, adopt a risk based approach. Unfortunately, since its inception, for various reasons, IAASA has never had, and still does not have, a full complement of staff. At the same time the duties allocated to it have been substantially increased and, inevitably, this will adversely affect our capacity to discharge our statutory responsibilities in the coming years.

In relation to the composition of the IAASA Board, the legislation allows for three members to be nominated by the accountancy bodies coming within our supervisory remit. However, since

January 2009 there has only been one such Board member as a consequence of the accountancy bodies having been unable to agree on their other two nominees. Whilst this is a matter of ongoing concern to the Board, there is no provision in the current legislation to enable the Minister to make appointments, absent the profession’s agreement’.

Other highlights

Other highlights from the Report include:

• the examination of 48 financial reports, which resulted in:

o 229 financial reporting matters being raised with reviewed companies’ directors;

o the publication of amended financial reports in 8 instances; and

o the provision of undertakings to improve future financial reports in 33 instances;

• the ongoing supervision of the Institute of Chartered Accountants in Ireland’s investigation into the role that certain of its members may have played in events at Anglo, which included ongoing attendance at all meetings of the Institute’s Complaints Committee since December, 2008 and regular meetings with the Special Investigator;

• the attachment of Conditions to the audit recognition of the Institute of Chartered Accountants in Ireland and the Institute of Incorporated Public Accountants;

• the vetting of proposals by the Institute of Incorporated Public Accountants to issue new audit authorisations on foot of a previously attached Condition;

• the conducting of four statutory Enquiries under section 23 of the Act;

• the publication of observations on selected financial reporting matters for the benefit of listed entities’ Boards and Audit Committees; and

• the designation of IAASA as competent authority for the registration of third country (i.e. non EU) auditors.

ENDS/

[Click here for downloadable version & editors’ note]

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Authority launches third Annual Report

Thursday, 2^nd July, 2009: The Irish Auditing & Accounting Supervisory Authority (IAASA) has today published its third Annual Report, covering the year ended 31 December, 2008. Key aspects of the Report include:

• the appointment by the Board of a senior staff member to observe the Institute of Chartered Accountants in Ireland’s regulatory response to the role that any of its members may have had in events leading to the resignation of Messrs. Sean FitzPatrick and David Drumm as Chairman and Chief Executive respectively of Anglo Irish Bank Corporation;

• continued improvement in the standard of listed entities’ statutory financial reporting through:

o the completion of 51 reviews of listed entities’ financial reports;

o correspondence with 93% of reviewed entities’ directors;

o the voluntary publication of revised financial reports in 28 instances; and

o the provision, in 39 instances, of undertakings by listed entities’ directors to effect improvements in future financial reports;

• the establishment of two statutory Enquiries following findings of prima facie cases of breaches of the Institute of Chartered Accountants in Ireland’s approved investigation and disciplinary procedures; and

• the development during the year of authoritative guidance material:

o providing feedback on IAASA’s reviews of listed entities’ financial reports; and

o for the purpose of drawing directors’ attention to specific financial reporting issues arising as a consequence of the international credit crisis and the domestic and international economic downturns.

Other matters of note in the Report include the following:

• in addition to its ongoing supervisory activities, during the year IAASA took a specific interest in relevant prescribed accountancy bodies’ responses to:

o the Supreme Court judgement in the civil insider dealing case involving DCC plc and others and the subsequent appointment by the High Court of an Inspector to DCC plc;

o the public announcement by Greencore Group plc of a material misstatement of financial performance resulting from the alleged deliberate concealment of costs; and

o the US Securities & Exchange Commission’s proceedings against SmartForce plc, Ernst & Young and two SmartForce executives;

• the provision during the year of advice to the Minister for Trade & Commerce on topics including:

o auditors’ liability;

o the European Commission’s Recommendation on External Quality Assurance of Auditors of Public Interest Entities; and

o the revised EU Statutory Audit Directive;

• by the end of its first three year Work Programme cycle, IAASA had:

o performed detailed supervisory reviews of prescribed accountancy bodies whose combined membership equates to 97% of the prescribed accountancy bodies’ aggregate membership in Ireland;

o granted its approval in respect of the constitutional documents of prescribed accountancy bodies whose combined membership equates to 84% of the prescribed accountancy bodies’ aggregate membership in Ireland; and

o issued a total of 68 recommendations to the prescribed accountancy bodies for the purpose of effecting improvements and enhancements to their regulation and monitoring of members and member firms.

Marking the publication of the Report, Chief Executive, Mr. Ian Drennan, said:

‘2008 saw the onset of an international financial crisis, the effects of which have been further exacerbated by a rapid deterioration in domestic economic conditions. These factors have combined to significantly increase the risks associated with the preparation of statutory financial reports and, by extension, the risks associated with the audit of those reports. This has, in turn, led to a heightened risk of serious and lasting damage to public confidence in statutory financial reporting and in the accountancy profession.

From a financial reporting review perspective, IAASA’s responses included the development of feedback and guidance material for listed entities’ directors as well as the continued risk based selection of listed entities’ financial reports for review. A total of 51 financial reports were reviewed during 2008 and, through the voluntary publication of revised financial reports in 28 instances and directors’ undertakings to effect improvements in future reports in 39 instances, IAASA continued to contribute to the improvement of the standard of statutory financial reporting in Ireland during the period under review.

With regard to the audit profession, IAASA has liaised closely with the recognised accountancy bodies, whose responsibility it is to monitor the quality and standard of auditors’ work, with a view to ascertaining and assessing their regulatory responses to the challenges facing their member firms. To the extent possible under the current regulatory arrangements, IAASA has also engaged directly with the larger audit firms with a view to gaining an understanding of their responses to the heightened financial reporting and audit risks.’

IAASA Chairperson, Ms. Karen Erwin, said:

‘Recent events together with current economic conditions present an increased risk of serious and lasting damage to public confidence in statutory financial reporting and in the accountancy profession and it is the responsibility of all concerned to play their part, individually and collectively, in mitigating those risks and contributing to the provision and maintenance of a sound basis on which the public can have confidence in the profession of accountancy and its outputs. At such a crucial time, we need to ensure that Ireland’s regulatory arrangements are reflective of internationally accepted best practice. Specifically, the Board continues to advocate that the public interest would be best served by the early implementation of the EU Commission’s Recommendation on external quality assurance of auditors of public interest entities.’

Looking to 2009 and beyond, Ms. Erwin went on to say:

‘In addition to continuing with our regular and ongoing supervisory activities, 2009 will present the additional challenges associated with progressing a number of statutory Enquiries and continuing to respond to the heightened financial reporting and audit risks arising as a consequence of the domestic and international economic downturns. In addition, arrangements for how the profession is regulated and overseen will be further strengthened and enhanced with the implementation of the EU Statutory Audit Directive later this year and those revised arrangements are likely to see IAASA conferred with significant additional statutory functions and responsibilities, which will give rise to new challenges.

In that context, the Board looks forward to continuing to work with Minister Kelleher and his Department towards ensuring that IAASA is best placed to meet those challenges. The Board equally looks forward to continuing to work with those entities coming within our supervisory remit and with our other principal stakeholders towards ensuring that the Irish accountancy profession and Irish statutory financial reporting are held in high esteem and can command high levels of public trust and confidence.

In conclusion, I would also like to express the Board’s gratitude to former Minister for Trade & Commerce, Mr. John McGuinness, TD, for his interest in, and ongoing support for, the Board’s activities during the year’.

ENDS/

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Authority appoints Enquiry Committee

Friday, 13^th March, 2009: The Irish Auditing and Accounting Supervisory Authority (‘the Authority’) has appointed an Enquiry Committee to investigate allegations made against the Institute of Chartered Accountants in Ireland (‘the Institute’) in a newspaper article published on 7 January 2007.

In July 2008, a Preliminary Enquiry Committee of the Authority found on a prima facia basis that the Institute had failed to comply with its approved investigation and disciplinary procedures in relation to a complaint made against a member firm of the Institute, whereupon as required by the Companies (Auditing and Accounting) Act 2003 (Procedures governing the Conduct of Section 23 Enquiries) Regulations 2007, the Authority determined that an Enquiry Committee - comprising both directors of the Authority and an independent external appointee - should be established.

In December 2008, the Authority, having assessed expressions of interest from suitably qualified and experienced persons wishing to be considered for appointment to such Committees as external appointees, formally constituted the Enquiry Committee to investigate the matter. The Committee has been meeting in recent weeks to undertake some preliminary work in advance of formally commencing its enquiry. The Enquiry Committee is inviting submissions from the public by way of an advertisement in ‘Iris Oifigiúil’ tomorrow.

These submissions are required by 2 April 2009.

The work of Enquiry Committees (and Preliminary Enquiry Committees) is governed by the Companies (Auditing and Accounting) Act 2003 (Procedures governing the Conduct of Section 23 Enquiries) Regulations 2007 which were published in ‘Iris Oifigiúil’ on 5 October 2007.

ENDS/

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Press statement concerning recent developments at Anglo Irish Bank Corporation plc

Tuesday, 23^rd December, 2008: At its meeting of 23 December 2008, the Board of the Irish Auditing & Accounting Supervisory Authority (‘IAASA’) decided to appoint a senior staff member to observe the Institute of Chartered Accountants in Ireland’s response to recent developments at Anglo Irish Bank Corporation plc.

The Board’s decision, which was taken having regard to public interest considerations, follows the Press Statement of 19 December 2008 issued by the Institute’s Chartered Accountants’ Regulatory Board in which it was stated that the circumstances around the issue of inappropriate loans at the bank and the role played by any members of the Institute are to be examined.

ENDS/

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IAASA publishes commentary on the results of its financial reporting review activities

Friday, 13^th June, 2008: The enactment of the Transparency Regulations last June is reflective of the fact that the efficient functioning of financial markets depends on, amongst other things, investors’ ability to rely on the periodic financial information published by issuers whose securities have been admitted to trading on regulated capital markets.

Speaking about the results of IAASA’s financial reporting review activities to date, Chief Executive, Ian Drennan said:

‘Since the Regulations came into effect last June, in excess of 60 half-yearly financial reports have been published by issuers and IAASA has undertaken reviews of over half of those reports - across the three categories of equity, debt and closed ended funds. Based on those reviews, we have found the standard of compliance with issuers’ statutory financial reporting obligations to be varied. While some issuers’ reports have displayed a high standard of compliance, at the other end of the spectrum certain issuers’ reports have indicated significantly less awareness and knowledge of the requirements and, as a consequence, have been found to be non-compliant to varying degrees.

To date we have corresponded with the directors of approximately 90% of those issuers whose reports have been selected for examination - again across all three categories. In this regard our experience thus far has been that, relative to the other two categories, equity issuers are displaying a better level of knowledge of, and compliance with, their obligations.

We are pleased to have found issuers’ responses to our contacts to date to be both positive and constructive, with boards of directors being willing to actively engage in addressing issues arising with a view to reaching mutually satisfactory outcomes in investors’ and the wider public’s interest. As a result of our having initiated contact with issuers’ boards of directors, there have been nine instances in which issuers have agreed to publish revised half-yearly financial reports. Similarly, in other instances, matters arising have been addressed to our satisfaction by way of agreement with issuers - for example, through the provision of undertakings to make necessary improvements or other amendments in future periodic financial reports.’

Explaining the purpose of the Commentary which has been published today by IAASA, Mr Drennan said:

‘Due to the phased manner in which the Regulations have been introduced, the requirement to publish half-yearly financial reports will only apply for the first time for a significant number of issuers from the end of August. Having regard to the fact that the requirements introduced by the Regulations are still relatively new, and against the backdrop of the results of our reviews to date, we consider it appropriate at this time to take the initiative of publishing a summary of the more significant issues that have been identified. In so doing, our primary intention is to provide assistance to those preparing half-yearly financial reports for the first time under the Regulations and to assist issuers’ audit committees and boards of directors in discharging their associated functions and obligations respectively, thereby furthering the overall objective of contributing to the enhancement of public confidence in the quality of statutory financial reporting in Ireland.’

ENDS/

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Publication of the second Annual Report of IAASA

Thursday, 22^nd May, 2008: The Irish Auditing & Accounting Supervisory Authority (‘IAASA’) has today published its 2007 Annual Report. Conferred with statutory powers in early 2006, IAASA was established to supervise the manner in which the accountancy profession regulates itself, to monitor certain entities’ statutory financial reporting, to promote adherence to high professional standards in the auditing and accountancy profession and to act as a specialist source of advice to the Minister for Trade & Commerce on auditing and accounting matters.

IAASA has statutory responsibility for the supervision of:

• nine Prescribed Accountancy Bodies, who between them have approximately 43,700 members and students resident in the State; and

• in excess of 300 listed entities’ annual and half-yearly financial reporting, including funds, debt issuers and some of the State’s largest Equity issuers.

Marking the publication of the Report IAASA’s Chairperson, Ms Karen Erwin, said “Since its establishment a little over two years ago, IAASA has made substantial progress in delivering on its statutory mandate in the area of supervision of the accountancy profession. As a result of our risk based review activities, by year end we had obtained coverage of the disciplinary and quality assurance processes applying to approximately 99% of all registered firms of auditors located in the State. During the year, we also published Regulations governing the conduct of statutory enquiries under Section 23 of the Companies (Auditing and Accounting) Act, 2003 and, subsequent to publication of those Regulations, referred four matters to the Section 23 process.”

Commenting further Ms Erwin said “Based on our supervisory activities in respect of those prescribed accountancy bodies that had, by year end, been the subject of detailed review, we are broadly satisfied that most aspects of those bodies’ investigation, disciplinary and quality assurance processes have been appropriately designed with a view to serving and protecting the public interest. That being said, a range of design-related issues have been identified and, at this time, we have either addressed those matters to our satisfaction in conjunction with the affected parties or are in the process of doing so. Similarly, issues continue to be identified in the practical operation of the bodies’ investigation, disciplinary and quality assurance processes.

During the year, the Board devoted a considerable proportion of its time to giving detailed and careful consideration to the range of significant issues identified through our review activities. Issues considered to be significant were not confined to any one body nor were they confined to any one aspect of the bodies’ regulatory and monitoring activities. Rather, issues of significance were identified across a range of the bodies’ regulatory and monitoring activities, including in the areas of complaints handling and investigation, discipline, quality assurance and registration of members and member firms. The public interest dimension of certain of the issues arising during the year was such that the Board approved a range of appropriate responses, including, where considered necessary, the exercise of IAASA’s statutory powers.

Where issues are identified, our approach, where appropriate, is to seek to address those matters in a collaborative manner with the aim of further supporting and strengthening the profession’s regulation of its members and, by extension, the basis upon which members of the public can place trust and confidence in the bodies’ regulation of their members’.

With the commencement, in June, 2007, of the Transparency (Directive 2004/109/EC) Regulations, IAASA became the designated competent authority for the financial reporting supervision and enforcement aspects of the EU Transparency Directive. In that role IAASA has responsibility for monitoring the annual and half-yearly financial reports of in excess of 300 listed entities and, where necessary, for taking appropriate enforcement action where financial reports are not prepared in compliance with relevant reporting frameworks. IAASA’s review constituency comprises issuers of equity and debt as well as closed ended funds.

Speaking on this aspect of IAASA’s remit, Chief Executive, Mr Ian Drennan said “The transposition of the EU Transparency Directive into national law during the year represented an exciting development in the context of IAASA’s place in Ireland’s financial reporting regulatory framework. Shortly after the Regulations were enacted we published a detailed Guide to the financial reporting aspects of the Directive for the purposes of assisting issuers in meeting their obligations. Thereafter, in the period from September 2007 - when issuers’ reporting obligations effectively commenced - to year end, IAASA received 24 periodic financial reports. By year end, we had initiated reviews of some 46% of those reports. As a result of those reviews, a range of issues – pertaining to both the accounting standard and legal aspects of financial reporting – had been identified.

Where issues arise, it is our practice to communicate with those charged with affected issuers’ governance with a view to addressing matters arising in a manner that best serves the interests of the investor community and the wider public. Financial reporting supervision and enforcement is a new development for many of those issuers coming within our remit and, in that context, represents a challenge not only for IAASA but for those issuers also. Based on our contacts with issuers to date, I am pleased to be able to say that the reaction has been both positive and constructive. This year will see the majority of issuers being required to file their first periodic financial reports under the Regulations and we look forward to continuing to work constructively with preparers of financial reports in seeking to further enhance public confidence in the quality and reliability of statutory financial reporting.”

- ENDS -

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Publication of the first Annual Report of IAASA

Thursday, 21^st June, 2007: The Irish Auditing & Accounting Supervisory Authority (‘IAASA’) has today published its first Annual Report. Marking the publication of the Report, IAASA Chairperson, Ms. Karen Erwin said:

‘In the relatively short period since February 2006, when the majority of its statutory functions and powers were conferred, IAASA has made substantial progress in delivering on its statutory mandate. By the end of our first year of operations on a statutory footing, IAASA had initiated detailed reviews of four of the nine prescribed accountancy bodies coming within our supervisory remit - which includes the performance of detailed on-site reviews of selected aspects of the bodies’ regulatory and monitoring processes and practices - and had given detailed consideration to a number of proposed amendments to the prescribed accountancy bodies’ constitutions, bye-laws and regulations, which now require IAASA’s approval. IAASA will be undertaking similar reviews of the remaining prescribed accountancy bodies over the remainder of the Authority’s 2006/08 Work Programme.

Based on our supervisory activities to date, IAASA is satisfied that, in the main, the regulatory and monitoring processes of those bodies that have been reviewed are operating in a manner that provides a sound basis for the discharge of their public interest remits. That having been said, our work to date has identified a range of issues, including some of significance from a public interest perspective. In response to our findings, IAASA has taken a range of actions, including having required amendments to current practices where deemed necessary. In addition, certain of the issues identified in the course of the Authority’s review activity continue to be under active consideration.

The foregoing, in IAASA’s view, underscores the importance of, and benefits deriving from, having in place a regime of independent oversight of the profession. In addition to serving IAASA’s core objective of providing the public with an authoritative source of assurance regarding the operation of the prescribed accountancy bodies’ regulatory processes, the professional bodies and their members equally stand to benefit from the enhanced standing and reputation accruing to their profession by virtue of the existence of such a system of independent oversight.’

Looking to the challenges that lie ahead, IAASA Chief Executive, Mr. Ian Drennan commented:

‘In addition to our ongoing supervisory responsibilities, IAASA is facing major new challenges arising from two key pieces of EU legislation. In the area of financial reporting supervision, the Authority has recently been designated as a competent authority for the purposes of the financial reporting aspects of the EU Transparency Directive. This designation means that, with effect from 13 June, 2007, IAASA is responsible for monitoring the half-yearly and annual financial statements of listed issuers whose home Member State is Ireland, for compliance with relevant financial reporting frameworks. While IAASA does not underestimate the challenges that a task of this magnitude poses for a small organisation, we look forward to discharging this role and to continuing to contribute to EU-wide efforts to ensure the consistent application and enforcement of international accounting standards on an ongoing basis.

In the context of oversight of the auditing profession, the EU 8^th Company Law Directive on Statutory Audit, which must be transposed into Member States’ domestic legislation by June 2008, will introduce a range of provisions that will impact on the Authority’s operations. Key provisions of the Directive in that context include the requirements that Member States:

• establish systems of public oversight that have ultimate responsibility for the oversight of the approval of statutory auditors and audit firms, quality assurance and investigative and disciplinary systems;

• ensure the ability of oversight systems to co-operate effectively with each other;

• register 3^rd country auditors wishing to provide audit reports on the statutory financial statements of 3^rd country issuers listed in the EU; and

• submit 3^rd country auditors to their systems of oversight, quality assurance, investigations and penalties.

In addition to continuing to work with the EU Commission and other Member States’ oversight authorities in preparing for the EU-wide transposition of the Directive, given that the manner in which the Directive is transposed will, in large measure, shape how Ireland’s oversight and regulatory regime will be perceived by our EU and international counterparts into the future, IAASA looks forward to engaging with the Minister, the Department of Enterprise, Trade & Employment and the profession as the transposition process gathers momentum and to sharing its perspective on these important issues.’

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Statutory Board of IAASA Holds First Meeting

Tuesday, 3^rd January, 2006: The statutory Board of the Irish Auditing and Accounting Supervisory Authority (IAASA) held its first meeting today in Dublin. Speaking to mark the occasion, IAASA’s Chairperson, Ms. Karen Erwin, said:

I am delighted to see the coming to fruition of the statutory establishment of IAASA. Bringing the Authority to this point has been a complex exercise and has involved an enormous amount of preparatory work. In that context, special thanks is due both to Minister Ahern and to my colleagues on the Interim Board for their support, commitment and effort in bringing the Authority to this point.

The Authority’s statutory establishment comes at a time when the European Union has recently agreed legislation providing for, inter alia, the establishment of independent auditor oversight systems in all member States. While member States are not required to give effect to this legislation until early 2008, the establishment of the Authority on a statutory basis at this time means that Ireland is well placed from the outset to make its contribution to the EU wide objective of enhancing public confidence in financial reporting and in the audit process.

The Authority has now entered a new phase and I, and my Board colleagues, look forward to building on the considerable work that has already been done and to discharging our statutory mandate, thereby providing an independent source of assurance to the public that heretofore has not existed and to contributing to Ireland’s reputation as a low risk economy.

At its first meeting, the Board appointed Mr. Ian Drennan as the Authority’s Chief Executive. Mr. Drennan had previously been acting as the Interim Authority’s Chief Executive (Designate).

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