A fall in the number of auditors in Ireland risks dramatically increasing the costs of audits, CPA Ireland has warned. The accountancy body, whose members support over 100,000 SMEs each day, has warned that this will disproportionately impact both SMEs & Small to Medium size accountancy Practices (SMPs). CPA Ireland is urging accounting regulator IAASA to review the audit standards which must be applied to a required number of SMEs.
Addressing these concerns CPA Ireland President Mark Gargan said “The growing shortage of accountants, rising costs, and the increasing regulatory requirements of audits have all resulted in a significant drop in the number of audit firms in Ireland in recent years. This scarcity can only result in one thing, a jump in costs for businesses, which many may struggle to bear.”
Analysis by CPA found that there has been a 31% drop in the number of firms licensed to audit in Ireland since 2014. There are now 1,059 compared with 1,542 in 2014. In the last five years alone the number of audit firms has dropped by 201 or 16%. While the number of auditors has fallen by a similar number from 1,956 in 2018 to 1,725 last year.
The decline in the number of audit licenses being renewed is more pronounced in SMPs according to Gargan. “Large businesses are all obliged to have an annual audit so the well-known large accountancy firms will continue to offer this service. Where the pressure is becoming particularly acute is in smaller firms as they deal with the pressures imposed by the shortage of accountants. By the end of this decade, it is plausible that there will be no sole practitioners offering statutory audits anymore.”
“SMEs who are required to have a statutory audit or who opt to as part of their governance strategy will be hit by these costs. It is entirely possible that costs will double or more for many businesses over the next few years.”
Mr. Gargan is calling on IAASA to adopt an international standard that is more relevant to and proportionate for the audit of smaller entities. The nature of the statutory audit process which is driven by European law and international standards & guidance are more viable to be completed by larger firms. SMPs are unable to keep up with the resource requirements.
“The International Auditing and Assurance Standards Board (IAASB) has developed a new framework for the auditing of Less Complex Entities. It is essential that IAASA adopt this new standard as a priority. Doing so will help address the shortage, reduce business costs and also increase the number of SMPs who conduct audits which can only have a positive impact.”