Scrutinizing Companies’ Corporate Governance Report in Financial Statements

Jack Humphrey, Regulatory journalist
May 10, 2011 /

The Auditing Practices Board (APB) has issued a Bulletin that outlines the developments in corporate governance affecting auditors of Irish companies.

“This new guidance illustrates how the APB’s illustrative auditor’s reports set out in Bulletin 2006/1 are required to be amended when a Corporate Governance Statement is required to be issued,” said Richard Fleck, APB Chairman.

Fleck noted that auditors have been required to report on the consistency of a company’s corporate governance statement with its audited financial statements following amendments made to the Irish Company Law.

The ‘‘Developments in Corporate Governance Affecting the Responsibilities of Auditors of Companies Incorporated in Ireland’’ describes the Irish legislative requirements in respect of the Corporate Governance Statement that certain companies must make.

These companies whose securities are admitted to trading on a regulated market are required to include a Corporate Governance Statement in their annual reports under the Directive 2006/46/EC of the European Parliament and the Council on company reporting.

The requirements, including the responsibilities of the auditors with respect to the corporate governance, have been implemented in Ireland through Statutory Instrument No. 450 of 2009 ‘‘European Communities Regulations 2009’’ as amended by Statutory Instrument No. 83 of 2010 ‘‘European Communities.

“The auditor is not specifically obliged to report on the consistency of an Entity Corporate Governance Statement where such Statement is included in the Directors’ Report. Therefore, no modification is required to the standard auditor’s report on the entity’s financial statements,” the APB said.

But auditors must take into account whether the data in the Director’s Report is consistent with the financial statements prepared by the company as provided by section 15 of the Companies (Amendment) Act 1986, the APB added.

 

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