The company’s accounts must adequately record and explain all of its transactions. They must be sufficient to allow the company’s assets, liabilities and financial position to be determined at any time. They must record purchases and sales, record assets and liabilities, and keep an ongoing account of monies spent and received.
Accounting records must be maintained an ongoing and timely basis. They may be kept in permanent books or by online entries.
The accounting records must be kept at the registered office or in certain other places. If the company is wound up and is unable to pay its debts, the court on application by a liquidator or creditor, may declare that one or more of its officers be personally liable for the failure to maintain adequate accounting records, if it contributed to the inability to pay the debts.
The books of accounts must be such as enable the company’s directors to prepare the statutory financial accounts. The financial accounts must be prepared in accordance with standards which are almost identical to those in the United Kingdom. Accounting standards and the accounting professions in Ireland and the United Kingdom are very closely linked.
Financial statements must be prepared annually. They are prepared on the basis of the underlying accounting records. The must be such as give a true and fair view of the company’s activities. They are prepared in accordance with accounting standards which are almost identical in Ireland and the United Kingdom.
Generally they comprise the following
- a profit and loss account showing the company’s trading performance including revenue expenses, gains and losses, earned or incurred in the relevant period
- a balance sheet being a statement of assets and liabilities as on the relevant date
- a cash flow statement showing cash flows in and out over the relevant period in accordance with accounting practice. This is not a legal requirement and is a requirement in accordance with accounting standards for medium and larger size companies.
The company must disclose its accounting policy in its financial statements. Notes to the financial statements must contain certain prescribed information. A directors’ report is required for each financial year to deal with general matters concerning the company, a business review, information on acquisitions and disposals of shares and other relevant information
The directors are obliged to have the financial statements audited, unless the company qualifies for and claims an audit exemption. It must be undertaken by a qualified auditor. The auditor is required to examine the records and accounts and form an opinion as to whether they give a true and fair view of the underlying accounting records and affairs of the company.
Small companies and micro companies may take advantage of an audit exemption if they comply with the relevant conditions. Small companies are those who satisfy two of the following criteria
- turnover, not more than €12 million
- balance sheet total not for than €6 million
- the average number of employees not more than 50
There are exemptions for small groups whihc are broadly in the same terms, save that the figures for turnover and balance sheet size are net figures with maximum gross figures of €14.4 million gross and €7.2 million gross respectively
Micro companies have been recently provided for in both Ireland and the UK, under EU directives. There are wider exemptions from full accounts and audit requirements. Micro companies are those with
- turnover, not more than €700,000
- balance sheet, not more than €350,000
- the average number of employees not more than 10.
Certain companies do not qualify for audit exemption by reason of the nature of their business. Companies may lose the benefit of the audit exemption if they fail to file their annual returns and annual accounts when due.
There is a special audit exemption for dormant companies.
Notwithstanding that small and micro companies have reduced obligations in respect of the filing of financial accounts and the preparation of an audit, the obligation to maintain full accounting records and lay them before the members apply.
Public limited companies must establish an audit committee. The Board of Directors of certain larger companies, generally those with a balance-sheet figure over €25 million or turnover over €50 million in the previous two financial years, must decide whether or not to establish an audit committee. The decision must be reported in the financial statements. If they decide not to establish a committee, they must justify that decision.
The committee is to include at least one independent non-executive director and a director with competence in accounting and auditing. The function of the audit committee is to include
- monitoring of the financial accounting process,
- monitoring of company systems of internal control,
- internal audit and risk management,
- monitoring of the statutory auditors of the company and statutory financial statements
- reviewing and monitoring the independence of the statutory auditors, and
- the provision of other services by the audit firm to the company.