101 UK Brexit Notes

Connemara Programme October 16 2018 pg. 172 Republic of Ireland uses audit qualifications granted by UK qualifying bodies. As is currently the case, those with EU qualifications will count towards the required majority of appropriately qualified owners or managers of a UK audit firm, but only during the transitional period. After the end of the transitional period, only owners or managers with qualifications recognised in the UK will count towards the majority of appropriately qualified owners or managers of a UK audit firm. However, EU qualified individuals who were recognised as part of the management body before exit will continue to be recognised. Audits of EU businesses seeking to raise capital by issuing shares or debt securities on a regulated market in the UK will need to be undertaken by an auditor registered with the Financial Reporting Council. The audits will need to be included in a cycle of inspections, in which the Financial Reporting Council will visit the registered auditor in the EU Member State where the business is incorporated until that Member State is recognised in the UK as having an equivalent audit regulatory framework. EU audit firms will not be recognised among the required majority of suitably qualified owners as from the end of December 2020. In a ‘no deal’ scenario an individual’s UK audit qualification may no longer be recognised in an EU Member State. There are exceptions such as Ireland where qualifications used are those offered by UK qualifying bodies and so they will continue to be recognised as professional qualifications. Similar arrangements may apply for some UK qualifications in some other Member States. Audits of UK businesses seeking to raise capital by issuing shares or debt securities on a regulated market in the EU will need to be undertaken by an auditor registered as a ‘third country auditor’ in the EU Member State in which the market operates. The audit will then be in scope of a cycle of inspections by the recognised authority for that market. A UK audit firm that wishes to own part of, or be part of the management body of, an EU firm will no longer be recognised among the required majority of EU qualified owners or managers. Actions for businesses and other stakeholders Accounting and corporate reporting Subsidiaries and parents of EU companies established in the UK will need to make themselves familiar with the exemptions in the Companies Act 2006 relating to accounting and reporting requirements that will no longer be extended to UK companies with parents or subsidiaries incorporated in the EU. Branches of EU companies established in the UK will become subject to additional requirements under the overseas companies regime, and after exit will be subject to the same accounting and reporting requirements as non-EU companies that have a branch here. The management of such branches should familiarise themselves with the additional reporting requirements that will be applicable to them. UK businesses may wish to make themselves aware of the specific accounting and reporting requirements of any Member State in which they operate. UK businesses listed on an EU market may wish to make themselves aware of EU third country requirements for listed entities. UK legal, accounting and company secretariat service providers to UK or EU businesses with operations and listings in both the UK and the EU will need to ensure that their clients are aware of the additional reporting requirements as well as the need to obtain additional agreements and assurances. Audit Individuals with EU qualifications who are not yet recognised by the UK will want to make themselves aware of further details on the transitional period for automatic recognition of audit qualifications and the continued availability of the aptitude test, as referenced above. The test is available from recognised supervisory bodies for auditors the Institute of Chartered Accountants in England and Wales, the Institute of Chartered Accountants of Scotland, the Association of Chartered Certified Accountants and Chartered Accountants Ireland. Individuals who are already recognised do not need to take any further action. EU businesses operating in the UK seeking to raise capital by issuing shares or debt securities on a regulated market in the UK may wish to consider securing the services of an auditor registered with the Financial Reporting Council. An EU audit firm wanting to be an auditor of an EU business with debt or equity traded on a UK market will need to register as a ‘third country auditor’ in the UK. Holders of a UK audit qualification who want to provide audit services in a Member State will need to understand how their qualifications will be recognised in that Member State. This will govern their ability to sign audit reports on behalf of an audit firm approved in that Member State, and their ability to be recognised as part of the required majority of EU qualified members of the ownership or management body of an audit firm. UK businesses who wish to raise capital by issuing shares or debt securities on a regulated market in the EU may wish to consider securing the services of a ‘third country auditor’ registered in the relevant Member State. An audit firm wanting to be an auditor of a UK business with debt or equity traded on an EU market will need to register as a third country auditor in the Member State in which the securities market is situated or operates.