Establishing an Audit Committee

Sec 42 of Companies (Auditing & Accounting) Act 2003 & Article 41 of 8th EU Directive sets out the requirements for certain company types to establish an audit committee. These provisions have not yet been signed into law, however the Department of Enterprise Trade & Employment have indicated that draft regulations adopting the provisions of both the 2003 Act and 8th Directive, with some amendments, will be published by the end of July 2009 and signed into law before the end of 2009.

What companies are required to establish an Audit Committee?

The requirement to establish an audit committee applies to all public limited companies, qualifying large private companies, relevant undertakings and public interest entities.

Section 42 requires that all public limited companies whether listed or not, establish and adequately resource an Audit Committee with certain responsibilities as defined in the Act unless it is a wholly owned subsidiary undertaking of another public limited company.

In addition, qualifying large private limited companies and relevant undertakings must either establish an Audit Committee with all or some of the defined responsibilities, or decide not to do so.

A "qualifying large private company" is defined as either:

A private company limited by shares whose balance sheet total exceeds €25 million and whose amount of turnover exceeds €50 million in both the most recent financial year and the immediately preceding financial year,
or
A private company limited by shares if the company and all of its subsidiary undertakings together meet the above balance sheet and turnover criteria.
A "qualifying relevant undertaking" is defined as either:
An unlimited company or partnership whose balance sheet total exceeds €25 million and whose amount of turnover exceeds €50 million in both the most recent financial year and the immediately preceding financial year, where all the members who do not have a limit on their liability are:
Companies limited by shares or by guarantee, or equivalent bodies not governed by Irish Law or a combination of both there categories of body or
Bodies of a type referred to in subparagraph (i) that are governed by the laws of an EU Member State or are equivalent bodies with a comparable legal form that are governed by the laws of a Member State or
A combination of the categories of body mentioned in the preceding subparagraphs (i) and (ii)
Or
an unlimited company or partnership of the type described in paragraph (c ) if the company or partnership and all of its subsidiary undertakings together meet the above balance sheet and turnover criteria.
Article 2.13 of the Directive defines 'public interest entities' as including:
Entities which have issued transferable securities admitted to trading on a regulated market governed by a Member State (4),
Credit institutions (5) (i.e. banks and building societies) and
Insurance undertakings (6).
What companies are not required to have an Audit Committee?
Every private company limited by shares whose balance sheet and turnover totals are below the aforementioned limits

Every unlimited company or partnership of the type described above whose balance sheet and turnover totals are less than the aforementioned limits.

All other forms of corporate body not included i.e. companies limited by guarantee and non-EU Member State and branches.

Audit Committee Requirements

The Audit Committee must consist of at least 2 members.

The 8th Directive requires that at least one member of the Audit Committee must be independent and must be qualified in accounting or auditing.

A Director qualifies for appointment to the committee if he or she:

Is or has not been an employee of the company or subsidiary in the last 3 years
Is not the chairperson of the Board of Directors.
The Audit Committee requires appropriate term of reference that
Have been prepared and approved by the Board of Directors
Are submitted to the shareholders at the AGM
Are reviewed annually by the board
Specify how the committee will discharge its duties & responsibilities
Provide for the a programme of meetings with the management, auditor and internal auditor
Functions & Responsibilities of the Audit Committee
The main functions of an Audit Committee include:

Overseeing financial reporting
Overseeing the process related to the company's financial risks and internal control & audit
Overseeing the internal and external audit processes.
Review and monitor the independence of the auditor & audit firm

Why Do You Need an Auditing Company, Cost Reduction Consultants and Overhead Cost Decrement?

An organization's financial basis is strengthened on inclusion of expert auditing services in the marketing plans. Though it is obvious for clients to doubt the credibility of existing audit firms, some key points can be examined to find the apt auditing company for your business requisites. The characteristic feature of a professional audit firm is supervised analysis of the following records of an organization:

1. Financial data.

2. Bank statements.

3. Statistical information of the organization's accounts.

4. Surplus sources of financial information.

The scrutiny of these documents creates probabilities of superior financial management. The financial proceedings of the organization must be in accordance with existing bank laws and legal regulations. The auditing procedure of a business firm is considered at par with yearly health checkup of people in terms of necessity.

Efficient audit services are found in company audit services. Skilled auditors of these companies ensure proper incorporation of apt accounting principles to validate the economic statistics of the organization. They ensure precision in the enterprise's financial data and legal certainty of company procedures. A profitable organization is liable to quite a few individuals such as revenue officials and the firm's shareholders. The latter must be imparted appropriate statistical documents and declarations regarding the financial actions of the organization.

A cost reduction company emphasizes on reasonable reductions in various costs accompanying your business. Reduction in costs at the primary stages can earn considerable revenue in the later phases of your business. Investments are directed towards fruitful sectors of the business. Reaping maximum incentives from minimal investments is a major utilization of cost reduction. Many enticing prospects of investing in latent sources of profit are eliminated. The budget of a company plays the pivotal role in the profitability of the same. More the planning of your budget more are the probabilities of your enterprise's viability. Business firm owners would never risk capital investments on reprehensible aspects of their business. Cost reduction consultants are trained effectively to achieve desired results at such instances. Their job is to provide your organization with the benefits of cost reduction. Escalation of the organization's income after implication of cost diminution methods is evident. However, a prominent side benefit of cost reduction is elevated cash influx. Minimizing all costs corresponding to the firm's business dealings brings in considerable capital.

At the least, overhead costs keep adding to the financial ailments of entrepreneurs. Expenses on factors which are essential for the organization yet contributing zero profits to it are major concern for every cost reduction analyst. Nobody would ever invest in something which does not yield anticipated outcome. Superfluous outflow of capital investments on trivial aspects like wages and electricity diminish probabilities of maximized profits in the future endeavors of the organization. The solution to this affliction of business firm owners is handled by cost reduction professionals who reduce overhead costs. Decline in overhead expenditures encourages entrepreneurs and business owners to infer convenient financial plans and capital management systems. Opting for ace audit professionals and cost reduction experts can levitate your business to cloud nine.

How to Survive a Financial Audit

How to Survive a Financial Audit

Most people would count a tax audit among the scariest things you can face in your financial life. Often, they feel as if they're being accused of doing something wrong or criminal, which can lend an atmosphere of panic to the audit.

In reality, many audits are the result of an error, often made by the IRS. The purpose of the audit is simply to rectify the mistake. Nevertheless, it can be a daunting prospect, so here are some tips to surviving with your nerves, and your tax bill, intact.

Be Nice

People who are being audited may often feel resentful towards the auditor, as if they are being picked on or singled out. This can make them lash out at the auditor, complaining about the wasted tax dollars or excessive paperwork involved in filing your tax return.

Unsurprisingly, this is likely to make the auditor dislike you from the very beginning and inevitably, if they don't like you, they're less likely to be lenient about any discrepancies they might find. So keep your opinions to yourself, and treat them like any other person, in a polite and courteous manner.

Keep To The Point Of The Audit

When you are called for an audit, the auditor will have questions about certain specific areas of your tax return, rather than the entire thing. This means that you need only discuss those parts - do not bring up other, unrelated areas, as you may find that you end up inadvertently uncovering other discrepancies that the auditor hadn't originally spotted.

Of course, once you mention them, he or she will be obliged to investigate them, so you may end up causing yourself even more trouble.

Don't Argue

If your auditor makes a point that you don't agree with, state your case clearly and calmly to see if you can persuade them round to your way of thinking. If they still do not agree with you, don't get into a fight with them. Their word is final, so bite your tongue and accept their decision. If you really feel very strongly that they've made the wrong decision, you can take your complaint to more senior staff, or even to court, but be aware that this can be a long, drawn-out process.

Don't Be Afraid

Although it is easy to see a tax auditor as some kind of superbeing when it comes to financial law, this is often not actually the case. Because of the stresses of the job, not to mention the difficulties of having to visit people who already don't like you before you even step through the door, staff turnover can be quite high. As a result, many auditors are newly-qualified students whose knowledge of the intricacies of the tax system leaves something to be desired.

In such a case, you may in fact know more than them, so don't be afraid to point out areas that you feel are incorrect. Just remember to be polite when you do so - most people don't like having their expertise called into question, so doing so in an aggressive manner is unlikely to help your cause.

By following the steps above you will hopefully find that your tax audit isn't as scary as you'd first hoped. Do your best to work with the auditor rather than against him, and you should be able to come to a conclusion that leaves you both satisfied.

Top 3 Reasons to Include Data Analytics in a Financial Audit

Data analytics has become indispensable to many industries. It is firmly embedded in the way a lot of companies to do business. Most companies use the power of data analytics to study customer behavior and manage progress of most business process. This provides opportunities for firms to offer services in this domain. One such service is the financial audit. Audit firms can really benefit from this opportunity as the technology evolves and advances in the coming times. However, listed below are the key reasons why the audit services providers should gravitate towards data analytics.

1. Volume of data - Traditionally firms offering services to review the financial data, traditionally used to just test data entries based on certain as it is not possible to go through all the data manually. This left a huge gap in the analysis that was done, even if performed by CPA certified professionals. The data analytics approach allows such teams to be able to test all the data extracted from their clients ERP systems and provide much more conclusive analysis in a much shorter turn-around time.

2. Sensitive Nature of the data - Recent times have shown how important it is to have proper checks and balances on the financial industries. Even small discrepancies over time can affect lives of numerous people just like it did during the financial crisis of 2008. Even at the level of public companies, it is important to ensure that the firms to do not engage in illegal financial activities in order to mislead the shareholders and stakeholders.

3. Additional Revenue Stream - Most firms are able to generate new revenue streams by promising much more comprehensive audit reviews for their clients. The inclusion of data analytics to support the audit approach allows for firms to offer a wide array of services to their clients. It serves both the firms and the clients well. It allows the firms to increase the scope of the audit and the clients can be informed by timely to take corrective actions.

Audit firms sit at a very advantageous position to benefit from all the advancements in the field of data analytics. Not only can they vastly improve their existing processes to provide much more conclusive analysis but also drive innovation to offer a variety of new services to their clients. It is a win-win for everyone involved in this game. It is just a matter of lining up the ducks.