by John McCarthy Consulting Ltd. | Apr 10, 2022 | Blog, News
Auditors in Ireland would be forgiven for thinking that, apart from rising fuel costs, the war in Ukraine is far away and has few audit implications. This blog is attempting to highlight the requirement in recent changes to the audit standards for auditors to ‘stand back’, frequently mentioned by the Financial Reporting Council in recent publications.
In this case, while your audit clients may not have direct connections with Ukraine or with sanctions against Russia, there may be relationships through clients’ supply chains, clients’ customer base and clients’ overseas subcontractors that leave the business exposed to a potential negative impact – even as simple as the shortage of raw materials (E.G. VW group) and its wider implications for the European economy.
The war in Ukraine is evolving rapidly, as is the reaction by the Irish government and its international counterparts with sanctions against Russia. In this blog we take a look at some of the key implications that may impact on the work of auditors.
Auditor’s Risk Assessment (ISA 315) – the ISAs (Ireland) still apply. The risk assessment will need to reflect changes within the audited entity’s business and operating environment and whether there are any new risks, significant or otherwise such as business interruption that may impact the entity’s ability to continue as a going concern. This may drive additional disclosures about the impact of the war, changes to forecasts, future plans, or even the entity’s business model or strategy.
Groups – The situation may also impact on group audits and collecting audit evidence (ISA 500).
Sanctions and AML – accountants are urged to look hard at any connections with Russia among their client base and perform updated due diligence, thinking more about the spirit of the law and not just the letter of the law. Accountants are re-screening clients, looking at sanction lists beyond the EU, and considering clients with Russian connections where they do not appear on sanctions lists.
We will take a look at further audit implications of the war in the Ukraine, in next week’s blog.
Are your AML Policies Controls & Procedures up to date?
We have just released our latest Anti-Money Laundering Policies Controls & Procedures Manual (March 2022) – View the Table of Contents click here.
We have also just released an updated AML webinar (March 2022) available here, which accompanies the AML Manual. It explains the current legal AML reporting position for accountancy firms.
To ensure your letters of engagement and similar templates are up to date 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.
For our latest Audit Quality Control Manual (October 2021) (implementing the latest Irish Audit & Accounting Supervisory Authority standards including ISQC1 on audit quality control) click here. View the Table of Contents here.
by John McCarthy Consulting Ltd. | Mar 21, 2022 | Blog, News
Following the recent CCAB-I Joint Statement to the Profession about sanctions, accountants must carry out checks on their clients’ potential exposure to sanctions, as part of AML processes and procedures. An important part of this process will be to check whether the accountant holds or controls any funds/economic resources for people or institutions affected by the sanctions.
The CCAB-I is the umbrella group for the accountancy bodies in Ireland and its latest pronouncement (only 5 pages long) emphasises that that these measures are directly relevant to both members in business and practice and the public sector as well as the charity and not for profit sectors. The Guidance contains links to the relevant sanctions lists and websites where further guidance is available.
Many of the sanctions will affect PEPs (Politically Exposed Persons) and people closely connected to them (including family members and business associates). Accountants need to have appropriate training and AML procedures for staff so that prior to approval of the business relationship they obtain senior management sign-off and then take sufficient measures to establish the source of wealth and funds; and perform enhanced ongoing monitoring (called Enhanced Due Diligence of EDD) of the relationship.
If funds connected to sanctioned institutions or individuals are held (e.g. in a clients’ money account), accountants are legally obliged to freeze such funds and any funds owned/controlled by such persons and must refrain from dealing with these assets or making them available (directly or indirectly) to persons/institutions on the sanctions list.
There is also an increased potential risk of money laundering among every client on an accountants’ client base, as individuals and businesses (directly or indirectly connected to such sanctions) try to evade the sanctions regimes and perhaps disperse funds/assets to other persons/institutions not currently on the sanction lists.
Another important matter in the Guidance is the potential impact the sanctions may have on the operation of exclusion clauses (if any) in professional indemnity arrangements. CCAB-I recommends that accountants check the current position with their providers.
The Joint Statement is available here.
The latest EU Sanctions list as of 15 March 202 is available here. Because this is a fast evolving situation, readers are advised to check the websites of your appropriate professional body and the European Union for further sanctions updates.
We have an up to date Anti-Money Laundering Procedures Manual (September 2021) – View the Table of Contents click here.
To ensure your letters of engagement and similar templates are up to date 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.
For our latest Audit Quality Control Manual (October 2021) (implementing the latest Irish Audit & Accounting Supervisory Authority standards including ISQC1 on audit quality control) click here. View the Table of Contents here.
