Auditors told they must 'officially sign off' on accounts
Published 08/12/2010 | 05:00
The country's auditors have been warned that they must officially sign company reports if they are to be submitted to the Irish companies office.
The Companies Registration Office has told auditors that from the new year onwards, it will be "strictly enforcing the statutory requirement that all auditors' reports must be signed and dated''.
An auditor's report that is not signed from then on will be returned for correction under strict rules laid down in the 1990 Companies Act.
It is unclear whether some auditors are simply being sloppy or are trying to avoid signing reports for other reasons.
An auditor's report, which forms part of a company's financial statements, is essentially a seal of approval for the company involved.
All financial statements produced before May of this year must come with an auditor's report, signed and dated. The signature must either come from an individual or an audit firm, with a date and address also supplied.
Since May, European regulations have come into place governing audit reports, with the rules again stipulating that the name of the auditor, the date and a signature must be supplied.
Even if the audit is done by a team, one individual must sign on behalf of the team to indicate that that person is "primarily responsible'' for carrying out the statutory audit. Auditors have a range of responsibilities and are often the only outsiders who get to see the balance sheet, profit-and-loss account and director's report before it is published or sent to the Companies Registration Office.
They also submit their own report to say that the company's financial statements are in accordance with regulations, laws and accounting rules.
The job of auditors has become increasingly complex in the recession, with many auditors having to make crucial decisions over whether the valuations of certain assets are acceptable or not. The failure to spot large writedowns at the banks and hidden loans at Anglo Irish Bank has also drawn negative publicity on the Irish profession.
The biggest challenge for the profession has been banks writing down the value of their property assets.
Many auditors believe the old model, where loans could only be impaired when the loan actually starts to turn sour, was a key reason for failure to spot trends at the banks earlier.
There is now significant support for switching to earlier recognition of losses, under a so-called "expected loss'' model.
Also in the current environment, directors of companies have to be concerned they don't end up trading while insolvent.
If it is proven directors knew they were insolvent and knew creditors were going to be damaged by such trade, they can find themselves personally liable for the company's debts in the event of a liquidation.