by John McCarthy Consulting Ltd. | Feb 18, 2024 | Blog, News
It’s extremely important that practitioners give the Anti-Money Laundering (AML) legislation the attention it deserves and ensure full compliance with the responsibilities placed upon them by the law.
A case that dates back to December 2016, illustrates the importance of remaining alert for the red flags that can indicate money laundering (ML) is taking place. An ICAEW member, based in Leeds, was fined £5,000 by Leeds Magistrates Court and also the ICAEW severely reprimanded him, ordering that he pay costs of over £3,000 and seek training in the operation of the AML legislation.
The AML offence related to the fact that the client ‘Ms A’, was advised by HMRC that they were enquiring into their Corporation Tax Return. Ms A in turn advised the accountant that she and her husband were moving to another accountant who was presumably more experienced in tax enquiry work. She also pointed out that the issue related to an over-claim on mileage expenses and filing false tax returns.
This very fact was enough to warrant that the accountant ought to have known that the client had falsified their claims and tax was understated, irrespective of the amount of tax involved and that a ML offence had occurred. Yet the accountant did not make the necessary notifications to the authorities. Unknown to the accountant, the client’s company was involved in a much more serious fraud on the NHS by supplying false invoices for training services provided by her husband, who worked within the NHS.
The Judge indicated his view that the defendant ought to have been aware of his professional obligations concerning disclosures of this type. The belief that those disclosures would be taken up by the newly instructed tax specialists for Ms ‘A’ was not a meaningful excuse.
Money Laundering legislation needs respected and reports must be made where the circumstances necessitate it, irrespective of the amounts involved, as materiality is zero. This accountant has paid dearly for failure to do so and it is a salutary lesson for us all.
To hear more about the latest AML developments and how to be on the alert for suspicions of money laundering and terrorist financing under the Criminal Justice (Money Laundering and Terrorist Financing) Acts 2010 to 2021, see our latest Anti-Money Laundering webinar here.
All our courses are listed here.
Please also go to our website to see our:
- Anti-Money Laundering Policies Controls & Procedures Manual (March 2022) – View the Table of Contents click here.
- AML Webinar (December 2023) available here, which accompanies the AML Manual. It explains the latest legal AML reporting position for accountancy firms and includes a quiz. Upon completion, you receive a CPD Certificate of attendance in your inbox.
- letters of engagement and similar templates. Please visit our site here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items if bought together.
- ISQM TOOLKIT or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard, please contact John McCarthy FCA by e-mail at john@jmcc.ie.
- We typically tailor ISQM training and brainstorming sessions to suit your firm’s unique requirements. The ISQM TOOLKIT 2022 is available to purchase here.
by John McCarthy Consulting Ltd. | Feb 14, 2024 | Blog, News
The Protected Disclosures (Amendment) Act 2022 (the Act) requires certain entities to have in place procedures to establish internal reporting channels and procedures to enable workers make protected disclosures (defined as a ‘relevant wrongdoing’).
From 17 December 2023 its scope will be expanded to employers with over 50 employees.
The Act already applies to entities employing over 250 employees from 1 January 2023 including certain financial services entities (regardless of employee numbers) like AIFMs, MiFID firms, Irish UCITS management companies and other Irish financial service providers, as well as Irish domiciled corporate funds.
The 2022 Act expands the scope of the Protected Disclosures Act, 2014 to include areas such as:
- public procurement;
- financial services;
- anti-money laundering (AML);
- product safety and compliance;
- transport safety;
- environmental protection;
- radiation and nuclear safety;
- food and animal health and welfare;
- public health;
- consumer protection; and
- the protection of privacy and personal data.
Its scope has been further widened from 17 December 2023 when employers with over 50 employees will need to have such a policy in place. The basic steps for employers are:
- the establishment, maintenance and operation of a secure and confidential internal reporting channel for workers who wish to make a protected disclosure, whether in writing, orally or both;
- the designation of an impartial and competent person who may be internal/external; and
- an obligation to provide workers with information on the internal/external protected disclosure reporting process.
The Act also creates a newly established Office of the Protected Disclosures Commissioner (www.opdc.ie) which will forward reports of work-related wrongdoing to the most appropriate body for initial assessment and follow-up.
Employees are given protection from dismissal from employment (among other protections) when they report a ‘relevant wrongdoing’ (defined which are defined to include:
- Where an offence has been or is likely to be committed;
- Non-compliance with a legal obligation – the 2014 Act excludes obligations arising under the worker’s contract of employment;
- A miscarriage of justice;
- Danger to the health and safety of any individual;
- Damage to the environment;
- An unlawful or otherwise improper use of funds or resources of a public body;
- Oppression, gross neglect or gross mismanagement by a public body; and
- Other breaches related to the financial interests of the EU the internal market, EU competition and state aid rules and internal market rules on corporate tax.
The legislation is complex and we cannot cover all its aspects in the space of a blog. We urge our readers to seek independent professional and legal advice where necessary.
IT Controls Assessment
Auditors are reminded that there are relatively significant changes in the requirements of ISA 315 Identifying and Assessing the Risks of Material Misstatement for accounting periods commencing 15 December 2021, which in practical terms means, accounting periods Ended 21 December 2022 and later.
Auditors dealing with the audits of entities with such accounting periods affected by these change will need, to adopt new audit programmes and, in additional to the normal audit tests, to also assess the entity’s IT controls (no matter what the size of that entity).
This is a significant new development for auditors of SMEs, in particular, and will be a game changer ion the type of audit documentation and evidence of assessment of such IT controls by the auditor on audit files.
For an easy to implement additional (two page) IT Controls Questionnaire to help document the above process, please click on this link to download immediately for only €60 + VAT.
Please also go to our website www.jmcc.ie/training to see our latest:
- Latest updated AML for Accountants webinar (December 2023) which explains the current legal AML reporting position for accountancy firms and includes a quiz. Upon completion, you receive a CPD Certificate of attendance in your inbox. A 20% discount is available for orders of five or more webinars/products, if bought together.
- There are other accounting/audit webinars on the site and more will follow throughout 2024.
- Anti-Money Laundering Policies Controls & Procedures Manual (March 2022) – View the Table of Contents click here.
- letters of engagement and similar templates. Please visit our site here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items if bought together.
- ISQM TOOLKIT – We can also tailor ISQM training and brainstorming sessions to suit your firm’s unique requirements. The ISQM TOOLKIT 2022 is available to purchase here.
by John McCarthy Consulting Ltd. | Jan 20, 2024 | Blog, News
Nearly a third of UK audits completed by small and mid-tier firms need ‘significant improvements’ after inspections by the Financial Reporting Council (FRC). The inspections were carried out for the year ended 31 March 2023 on 32 firms in total and reported by the Financial Reporting Council in late 2023.
These inspection results will be influential for Irish regulators like the Chartered Accountants Ireland, the CPA Ireland, the ACCA as well as the Irish Audit & Accounting Supervisory Authority when carrying out their inspections of Irish audit firms in 2024.
The Financial Reporting Council say that ‘disappointingly, many of our findings were in routine areas, such as
- the audit of journal entries;
- complying with archiving requirements;
- the audit of judgments and estimates (17% worse than in the previous report), and
- the audit of going concern.
Audit teams need to demonstrate a greater effort at robust professional scepticism when it comes to both the audit of judgments and estimates, and going concern.
The FRC also suggested audit teams refer to the FRC paper, What Makes a Good Audit.
We will continue with Part Two of this blog next week.
Please also go to our website www.jmcc.ie/training to see our latest:
- Latest updated AML for Accountants webinar (December 2023) which explains the current legal AML reporting position for accountancy firms and includes a quiz. Upon completion, you receive a CPD Certificate of attendance in your inbox. A 20% discount is available for orders of five or more webinars/products, if bought together.
- There are other accounting/audit webinars on the site and more will follow throughout 2024.
- Anti-Money Laundering Policies Controls & Procedures Manual (March 2022) – View the Table of Contents click here.
- letters of engagement and similar templates. Please visit our site here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items if bought together.
- ISQM TOOLKIT – We can also tailor ISQM training and brainstorming sessions to suit your firm’s unique requirements. The ISQM TOOLKIT 2022 is available to purchase here.
by John McCarthy Consulting Ltd. | Jan 20, 2024 | Blog, News
In last week’s blog ‘SME Audits Need to Improve’ we highlighted a recent report by the Financial Reporting Council (FRC) in the UK about their audit inspection findings for the year ended 31 March 2023. We continue with extracts from the report below.
Going concern was described as ‘an area of particular concern to audit firms’ by the FRC and it resulted in worse findings by 1% compared to the previous review.
Key findings of the review were:
- going concern included insufficient procedures to test cash flow forecasts;
- inadequate procedures to elevate the impact of loan covenants;
- insufficient procedures to assess the financing of debt; and
- There were ‘shortcomings in the reviews of audit work performed by engagement partners and/or engagement quality control reviewer’.
Other areas that led to such a high number of audits needing significant
improvement were:
- Revenue accuracy; and
- material accounting errors during an
Improvements recommended by the Financial Reporting Council include investment in:
- audit methodology;
- human resources,
- audit quality functions; and
- learning from mistakes made throughout their current auditing processes.
The FRC also suggested audit teams refer to the FRC paper, What Makes a Good Audit. See how to do this here.
Please also go to our website www.jmcc.ie/training to see our latest:
- Latest updated AML for Accountants webinar (December 2023) which explains the current legal AML reporting position for accountancy firms and includes a quiz. Upon completion, you receive a CPD Certificate of attendance in your inbox. A 20% discount is available for orders of five or more webinars/products, if bought together.
- There are other accounting/audit webinars on the site and more will follow throughout 2024.
- Anti-Money Laundering Policies Controls & Procedures Manual (March 2022) – View the Table of Contents click here.
- letters of engagement and similar templates. Please visit our site here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items if bought together.
- ISQM TOOLKIT – We can also tailor ISQM training and brainstorming sessions to suit your firm’s unique requirements. The ISQM TOOLKIT 2022 is available to purchase here.
by John McCarthy Consulting Ltd. | Jan 14, 2024 | Blog, News
The International Standards on Quality Management (ISQM) has been effective since December 2022.
It is applicable to all audit firms and is a step-change from the requirements of the, now defunct, ISQC 1. The ISQM introduced:
- a new risk-based quality management approach that requires audit firms to
- design and implement a System of Quality Management (SoQM); and
- operate that system of quality management for audits, reviews of financial statements or other assurance engagements.
Now that the standard has been in effect for just over 12 months, each firm must compulsorily carry out a documented review of their System of Quality Management to assess its effectiveness since coming into force in December 2022.
Part of this assessment before the 2024 audit season commences, will be:
- documenting the results of hot and cold file reviews that took place during 2023;
- analyse the root causes of these findings; and
- extract from these issues the reasons why the more significant/most frequent findings arose;
- decide as a firm how best to avoid repeating the same mistakes; and
- adjust the SoQM accordingly for a more effective audit approach in 2024.
Anyone who may like to migrate to a very user friendly version of the ISQM or use it as a benchmarking tool against which to measure the effectiveness of your current ISQM, may purchase our ISQM Toolkit for €250+VAT here.
Key features:
The Toolkit comprises three parts that are downloadable in Word format, with associated instructions in pdf format.
Part 1 – Setting Objectives and Risks.
Part 2 – Risk Assessment and Responses.
Part 3 – Monitoring and Remediation including Root Cause Analysis (RCA).
The toolkit comes with three additional optional questionnaires to help with documenting an assessment of the firm’s:
- Methodology and software providers;
- Training providers; and
- File review and Technical Queries consultants.
More information on the ISQM Toolkit is available here.
In addition, during 2023 we also published a very helpful IT Controls Assessment questionnaire tool for audit firms to help implement ISA 315.
IT Controls Assessment
Auditors are reminded that there are relatively significant changes in the requirements of ISA 315 Identifying and Assessing the Risks of Material Misstatement which was first applicable for accounting Periods Ended 21 December 2022 and of course Periods Ended 21 December 2023.
Auditors dealing with audits of affected entities will already have adopted new audit programmes in 2023, in additional to the normal audit tests, will also need to assess the entity’s IT controls (no matter what the size of that entity).
This is a significant new development for auditors of SMEs, in particular, and will be a game changer ion the type of audit documentation and evidence of assessment of such IT controls by the auditor on audit files.
For an easy to implement additional (two page) IT Controls Questionnaire to help document the above process, please click on this link to download immediately for only €60 + VAT.
Please also go to our website www.jmcc.ie/training to see our latest:
- Latest updated AML for Accountants webinar (December 2023) which explains the current legal AML reporting position for accountancy firms and includes a quiz. Upon completion, you receive a CPD Certificate of attendance in your inbox. A 20% discount is available for orders of five or more webinars/products, if bought together.
- There are other accounting/audit webinars on the site and more will follow throughout 2024.
- Anti-Money Laundering Policies Controls & Procedures Manual (March 2022) – View the Table of Contents click here.
- letters of engagement and similar templates. Please visit our site here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items if bought together.
- ISQM TOOLKIT – We can also tailor ISQM training and brainstorming sessions to suit your firm’s unique requirements. The ISQM TOOLKIT 2022 is available to purchase here.
