Deferred tax issue among those raised by auditors

Problems with how companies are recognising deferred tax assets as well as the quality of credit risk disclosures are among the issues highlighted by the Irish Auditing & Accounting Supervisory Authority (IAASA) in its annual report.

The IAASA regulates the nine accounting bodies in the State which between them have 32,641 members and 1,603 statutory audit firms.

As it stands, individual complaints over auditing standards are handled by the relevant accounting body.

The IAASA will review how these accounting bodies deal with these complaints.

The IAASA will directly examine financial reports of public companies to ensure that they comply with accounting standards.

These companies are selected on a rotational basis.

Even though the companies that have been reviewed are made public, the IAASA legally cannot disclose individual findings against companies.

However, this will change when the full measures of the Companies Act 2012 are introduced.

Over 2013, the IAASA completed 32 examinations of financial statements and raised 131 issues with these accounts.

Apart from problems arising from the recognition of deferred tax assets and credit risk disclosures, there were also issues in relation to the treatment of foreborne loans and the classification of certain shares as liabilities rather than equities.

Under new rules being introduced for the auditors, the IAASA will be responsible for the direct oversight of the auditing of public interest entities such as banks from 2016 onwards. Under current arrangements, individual accounting bodies review the audit work of their individual members.

This means that the IAASA will almost double in size. It has 13 staff members at present and is awaiting authorisation from the Department of Public Expenditure to add another 11 members over the next year or so.

The IAASA received 18 complaints over the course of the year.

Most of these related to the perceived lack of auditor independence; provision of false information under the Companies Acts; lack of qualifications to audit; and queries relating to the duty of auditors to report to the Office of the Director of Corporate Enforcement.