UK auditors with Irish clients have been told to prepare for a no-deal Brexit by Ireland’s accounting watchdog, as they will soon be frozen out of the market unless a last-minute deal is struck.
The Irish Auditing and Accounting Supervisory Authority has written to UK firms currently auditing companies listed on the Irish Stock Exchange, informing them they will have to register to continue doing so should Britain leave the EU on March 29 with no agreement on cross-border services.
British auditors are currently authorised to operate inside Ireland under European Union common market rules, but under a no-deal or so-called ‘hard Brexit’ scenario, these will cease to apply.
UK auditors would then have to apply for third-country status in order to continue serving Irish companies and British companies with Irish subsidiaries that are listed in Ireland.
The Catch-22 scenario is that firms are unable to gain such status until the UK officially leaves and will not have approval until it does.
Given the current political instability, the general uncertainty surrounding the UK’s access rights and the lengthy paperwork process, the IAASA is warning firms to prepare now.
“IAASA has invited the firms to submit the necessary documentation in draft form this month, and the authority will review and engage where necessary to ensure paperwork is complete and accurate, and ready for consideration once the UK leaves," a spokesman for the IAASA said in a statement to AccountingWEB.
The regulator issued guidance in May 2018 on the ramifications of Brexit on the accounting and audit sector, outlining how close the UK and Irish audit sectors have been since the 19th century, to the extent the pair exist almost as one.
“We are not aware of any other jurisdiction where the recognition is as broad,” the IAASA said. “This unique situation was possible in the context of our mutual existence within the EU, but if Brexit results in the UK becoming a ‘third country’ then this may have significant implications for UK auditors wishing to audit Irish entities (and vice versa).”
It said key impacts for audit firms included the portability of the audit qualification and the transfer of people with particular skills and experience across borders.
This would include the ability to transfer audit staff from Ireland to the UK and vice versa on secondment, as well as transferring from the UK to other EU countries and vice versa.
“If reciprocal rights are not in place, then members of the profession who until now could freely practice throughout these islands, and across the island of Ireland in particular, may now find that considerably more difficult,” the IAASA said. “If it transpires that notwithstanding the mutual recognition across the islands that currently prevails, a hard border for the provision of these services becomes a reality, then those auditors who operate across the jurisdictions would have to adjust.”
The IAASA also pointed to the loss of the Financial Reporting Council as a regulator with oversight of Irish firms,
KPMG confirmed it had received a letter but would not be commenting, instead preferring to direct queries to its own guidance on the ramifications for Irish firms, as did EY.
An EY spokesman said: “no-deal can still happen. We are advising businesses should continue to mitigate against a no-deal Brexit in business-critical areas until a majority of MPs vote in favour of a legally binding alternative or a no-deal Brexit is procedurally ruled out.”
Deloitte, PricewaterhouseCoopers and Grant Thornton also confirmed they have received letters, but would not be commenting on the matter.
Concern over the lack of clarity from the government is flowing through the accountancy sector as the March 29 deadline approaches. Not until September 2018 did HMRC offer any kind of solid guidance on what may happen in the case of no-deal, more than two years after the referendum vote.
In December 2018 it published another missive telling firms to prepare, without giving much clarity on what they should actually be preparing for.
The likelihood of Britain leaving the EU without an agreement increased last week following Prime Minister Theresa May’s crushing defeat in Parliament.
May’s Brexit deal was rejected by 230 votes, the largest for a government in UK history, forcing the Conservative leader to turn to opposition parties in order to find a compromise agreement this week.