Conal Kennedy, Head of Practice Consulting, writes: In Practice Consulting, we often take calls and emails from members about difficulties and challenges that arise in practice. One of the most common queries surrounds the rights and obligations of the various parties when there is a change of professional adviser. When a client decides to move from one accounting firm to another, both parties should cooperate to make the transition as smooth as possible. However, complications and difficulties can arise when one of the parties has a grievance. Sometimes, the relationship between the firm and the client may have lasted many years, and its ending can come as an unpleasant surprise to the existing accountant, the worse so if they have not been fully paid for all work done. On the other hand, the new accountant may be very pleased to gain a new client, and may be surprised in their turn by difficulties posed by the incumbent. In some rare instances, incoming accountants do not do all that is required of them under the Code of Ethics, particularly around professional enquiries. In Practice Consulting, we receive communications from members on both sides of the fence. We provide information and guidance to the member, bearing in mind of course that there are two sides to every issue. Let’s look at a typical scenario and discuss some of the issues and possible misconceptions, with the details anonymised but addressing problems that are common enough. As always, we need to concentrate on the key matters in a generalised way, so if you are faced with this scenario yourself, please go to the Sections 320 of the Code of Ethics for the full requirements and guidance. In our example, a firm has made contact with Practice Consulting, explaining that they have recently taken on a new client. The client is a limited company, who needs a non-audit accounts preparation assignment and tax compliance work carried out. The firm has sent the professional enquiry letter to the previous accountant. However, the outgoing accountant has written back to the firm and the client to say that they have not been paid for a certain piece of work, and are withholding clearance and keeping possession of all records until they have been paid in full. What are the rights and obligations of the parties? In the first instance, there is no such thing as “professional clearance” as such. No accounting firm can prevent another accounting firm from working for a client, and therefore no firm can give or withhold clearance. The incoming accountant is obliged to carry out professional enquiries to determine if there is any professional reason why they should not take up the appointment. This is the purpose of the “any professional reason” letter, to which the outgoing accountant should respond, with the approval of the client. The new agent should make their best efforts to obtain responses to the letter, including re-sending the letter by registered mail, if necessary. However, if they do not receive a response following reasonable efforts, and their other enquiries are sufficient to indicate that there is no valid reason not to take up the assignment, then they may proceed. In this instance, the existing accountant would appear to be attempting to take a lien, meaning a right to retain possession over certain documents that they have in their possession until they have been paid. Whilst this right still exists, it is really only applicable in quite narrow circumstances. Firstly, the outgoing accountant is obliged to co-operate with the successor to ensure that the client’s interests are not prejudiced, including the client’s obligation to comply with its legal obligations if there is no other means to do so. This may in effect mean the that the incumbent accountant is obliged to forward any missing information to ensure that tax compliance and filing obligations are met, or other interests are protected, and therefore the right of lien may be largely irrelevant in respect of the core accounting records of the entity. Secondly, in the case of an incorporated client, insofar as any of the documents held by the outgoing accountant constitute the accounting records of the company, then company law requires that these should be returned to the directors of the company. The fact that the outgoing accountant has not been paid does not affect either of the obligations mentioned above. Insofar as the accountant proposes to take a lien, this only applies to documents that have been worked on and for which the accountant has not been paid. In the case above, it would appear that the outgoing accountant is obliged to hand over the key accounting records that it holds, and to separately seek payment of the outstanding fees. The outgoing accountant should also respond to the professional enquiry letter. When we discuss the above rights and obligations with members who contact us, the members occasionally observe that the advantage appears to be with the incoming accountant. In fact, the Code of Ethics cannot override the obligation of the client to comply with legislation, or give the existing accountant rights that contradict company law. The message that members should draw is that their rights to refuse cooperation in the event of non-payment are quite limited, and they should organise their credit control policies accordingly. Many firms have a policy of limiting their exposure to large outstanding fees through direct debit and staged payment arrangements with clients. In the case of audit clients, the incoming auditor has certain rights to access information held by the outgoing auditor. The circumstances in which these rights apply differ slightly between ROI and UK, but are a legal right of the incoming auditor, and the application of them differs somewhat from the ethical obligations discussed above. If you have questions in connection with this issue or other practice related issues or dilemmas, please contact Practice Consulting and we will endeavour to give you the information and guidance that you need.

Members of Chartered Accountants Ireland are annually required to confirm that they are aware of their “obligations as set out in the Code of Ethics for members”. Accounting firms are required to indicate in their annual return whether they have “taken steps to ensure that all Principals, Employees and Subcontractors fully comply with the Institute’s Code of Ethics for Members”. A glance at the Regulation section of Accountancy Ireland reveals that non-compliance with the Code of Ethics is a frequent finding leading to disciplinary action against an individual member or firm. So how do you ensure you and all in the firm are familiar with the obligations as set out in the Code of Ethics? While reading the Code of Ethics is a good starting point, the current version is a long read at 202 pages, 261 if you include the obligations applying to insolvency practitioners. Recent research and engagement with accounting professionals on ethics has consistently identified training and illustrative case studies as the preferred supports for increasing familiarisation with the Code of Ethics. Professional accountants have expressed a preference for real-life examples and case studies which allow them to consider ethical dilemmas in a practical way, relevant to their own experience. The recent publication of five sets of ethical dilemmas case studies by the Consultative Committee of Accounting Bodies (CCAB), of which Chartered Accountants Ireland is a member, is a welcome response to this need. The case studies, which are applicable in both UK and Ireland, illustrate how the Code of Ethics can be applied by members working in business, not-for-profits, the public sector, public practice, and as non-executive directors. Each set contains several case studies tailored to reflect ethical dilemmas that can arise in the course of their professional work. They are designed to outline key principles and processes that can be considered when attempting to identify, evaluate and address ethical threats in line with the Code of Ethics. While more than one set of case studies may be relevant to an individual member, members in practice will appreciate the case studies exploring a range of ethical dilemmas tailored for professional accountants in public practice. This set explores the following ethical dilemmas: Case Study 1 explores the dilemma faced by a manager in relation to a very competent junior member of staff whose personal circumstances require her to take regular absences from work. This is having a negative impact on her colleagues, who are vocal about being overworked. Like other case studies in the set, it works through the dilemma in a structured manner, consistent with the conceptual framework outlined in the Code of Ethics, to: consider which of the five fundamental principles (integrity, confidentiality, professional behaviour, objectivity, professional competence and due care) are under threat; consider the relevant facts, which also involves seeking out information rather than solely relying on the information presented prima facie; identify affected parties, including considering the culture and reputation of the firm; determine who should be involved in the resolution and whether to consult with a colleague, external expert, or other trusted advisor; determine a possible course of action and implement, with the advice to document the steps taken in resolving the dilemma in case your ethical judgement is challenged in the future. Case Study 2 presents a dilemma faced by a partner in a three-partner firm. He discovers a client is not recording certain cash sales in their accounts. The case study examines the practical considerations including how to communicate the issue with the client and possible actions to take if the client is not receptive to the news. The commentary includes an outline of a thought process that prioritises the reputation of the firm, the five fundamental principles of the Code of Ethics, and relevant laws and regulations, to decide on the best advice for the client. This case also highlights the importance of considering legal reporting obligations, particularly in relation to anti-money laundering legislation and fraud. Case Study 3 tackles an ethical dilemma facing a sole practitioner who loses a local small business client (Company A) and is subsequently approached to help a local competitor of Company A (Company B) make an offer to buy their former client. This dilemma is compounded by the fact that Company A is struggling financially but this is not common knowledge. Also, the sole practitioner is acting as an alternate/continuity provider for another local sole practitioner, who is convalescing after a medical treatment. Company B is a client of the other practitioner. This case is a good example of how there can be several dimensions to an ethical dilemma, and the benefits of having a structured process in addressing such dilemmas. In Case Study 4, an accountant is advising a medium-sized group on a range of improvements to its operations and systems. After identifying a range of issues and preparing a report estimating the costs, the accountant becomes aware that the director with whom they are liaising has significantly understated these in a separate report to the board. The director does not share the accountant’s report with the board. This case requires consideration of to whom the accountant owes their fiduciary duty, and how they might discharge their duties and effectively manage their professional relationship with the client. Case Study 5 outlines a scenario in which a trainee accountant in a firm has been tasked with completing some complicated work within a very tight deadline in the lead-up to them taking study leave. While there are lessons to be learned for both parties, the case highlights that certain behaviour, which itself may be unethical, may give rise to further unethical behaviour directly impacting the quality of work for clients. In Case Study 6, a three-partner firm has a large audit client to whom it also provides non-audit services. There are substantial fees outstanding from the client and significant going-concern issues arise. Several issues are explored in this case, including that the audit planning section was not appropriately reviewed, that key information was missed, and that there is pressure to provide the bank with a clean audit opinion so it can extend the company’s overdraft facility. This is a situation in which more than one set of ethical obligations require consideration, in this case the Code of Ethics and the Ethical Standards for Auditors. Case Study 7 addresses suspected non-compliance with laws and regulations (NOCLAR), including bribery and cover-up of breaches of environmental laws and regulations, and considers any legal reporting obligations for the firm. The case highlights real issues that can arise, including dealing with pressure from clients to disregard any suspicions of noncompliance, desire to disassociate from illegal or unethical activity, deciding whether to override client confidentiality and report suspicions to the appropriate authorities, and balancing duties to the client with the public interest with safeguarding the reputation of the firm. CCAB’s Ethical Dilemma Case Studies provide an interesting and illuminating way to engage with the Code of Ethics while also increasing awareness of some threats to ethical conduct that can arise in an accountancy firm. Members are encouraged to use, read and apply them, and they can also be used by firms and/or training providers provided they are appropriately referenced. The case studies and other resources that can assist members in considering ethical dilemmas can be found on the Chartered Accountants Ireland Ethics Resource Centre. Níall Fitzgerald FCA Head of Ethics & Governance at Chartered Accountants Ireland

Dave Riordan ACA, Recruitment Specialist & Career Coach, Chartered Accountants Ireland Careers Team, writes: Recruitment into practices, large and small, is a challenge in the current climate. We know this. So what can we do to make our recruitment processes easier and more effective? Here are some tips that I deem essential to attracting and onboarding suitable additions to your team: The senior management team should incorporate into their Practice Strategy some core objectives and KPI’s on the firm’s candidate attraction (and retention) approach. This needs to be a permanent fixture in quarterly management meetings for the firm and constantly updated. Conduct one comprehensive, all encompassing, interview that allows you make a quick decision about the candidate – no second interview needed. This way you have a time advantage and first mover advantage versus competing practices. As well as traditional jobs boards, use social media channels to get the word out LinkedIn, Instagram, Facebook, Twitter etc. Align your message across each and post simultaneously to each platform for full reach to your audience on the same day. Develop your Practice Brand as an employer of choice in the practice-sphere. This will mean differentiating your firm to increase attractiveness. Train your own – take the longer term view and hire trainees to grow them in your culture. Hire Part-time/ flexible workers – the world is shifting towards the ‘gig-economy’ mindset, so why not employ FCAs who are seeking part-time roles? This way, you can benefit from the vast experience they can bring to the role, and they benefit too as they can balance their role with wider family needs. Many members are now very focused on work-life balance and, even if they are nearing retirement, they could be in a position to contribute some of their best years to your firm. Many FCA’s with 30 years+ experience would be delighted to contribute a wealth of experience to a role in practice for a few days a week, and it doesn’t necessarily need to be at a senior level. Flexible core hours or work to facilitate school drops and pickups are another obvious element in this. Consider ‘Returners’ (members who have been off work travelling or developing home life for a few years). They may often be a ‘little’ flexible on salary to get a foot back on the ladder that then enables them to restart their career. Returners not only have a wealth of experience to bring to a role, but they also have maturity and life experience that can be hugely beneficial. If it’s hard to find the Audit and Tax people you are seeking, why not start to build a branded presence on LinkedIn. Raise the profile of your firm so that ACA’s are aware of it and how good your practice is to work for from an early stage in their career. This will ensure you tap into a pool of passive candidates and attract interest over a period of time. Offer different elements in your remuneration package: e.g. gym membership, social Fridays each month, pension, commission structure, phone paid etc. Often a well run internal candidate-referral reward scheme can be a highly effective way of incentivising current employees to bring in ACA’s that they feel would be a fit for your firm. Done well, this can extend your reach into the market for candidates significantly and also help maintain a consistent culture. Use a highly regarded recruitment agency. Partnering with an agency closely can be very advantageous in the market if you do it right! Some tips on this: Meet the consultant you are working with; Have a regular scheduled update call (e.g. weekly); Accept speculative CVs from the agent; Be flexible on the fee rate. If you get an exceptional candidate they can be worth it and remember it’s contingency based, so no fee is applicable if the process is incomplete; Keep updating the agent about the news in your firm; Offer to work exclusively with the recruitment firm, but ask what steps they will go through to find/headhunt the right candidate for you; Make sure you have created an excellent job spec and offer to assist with the advert text; Recruiter fees can appear high on the face of it, but a good recruiter can allow you get on with the day job of billing clients while they streamline the candidate selection process saving you time and money; Make the partnership a positive one where you share background (but always confidential) information with the recruiter, ensuring you are on the same page & wavelength regarding the person and role; If you trust your recruiter to know what you are looking for and he/she recommends a candidate that does not look like an obvious fit on paper, give the recruiter the benefit and trust their judgement and meet them. I would also be generally open minded on applications. For example, if a candidate is not a right fit for your current active role, consider whether they might be suited to your firm in a different role where they will add value, or perhaps consider them as a short-term contract addition to the team if that could alleviate a work backlog for you. Candidates in the practice market in 2021/22 are savvy and have built shortlists of their preferred employers that match their career pathway. You need to be on their shortlists as an employer of choice. As an interviewer, be clear and well-practiced in the selling points and differentiators of your firm and communicate them warmly during the meeting. Refine your interview techniques and get honest feedback on them to ensure the interview experience for the candidate is a positive professional reflection of the organisation. As an additional guide I can highly recommend a Chartered Accountants publication by Mary E Collins – “Recruiting Talented People”if you are looking for additional detail. I always recommend looking for opportunities each quarter/year to stay close to the Institute, and so partnering with the Careers Team in Chartered Accountants Ireland for your recruitment needs is a good idea to ensure you are attuned to the market, and first in line for ACA candidates who prefer to tentatively explore a practice career move with the confidentiality and assurance of their own Institute. If you would like to speak to the Chartered Accountants Ireland Careers Team, please email us at careers@charteredaccountants.ie.  

Susan Rossney, Public Policy Officer, writes: It seems that everyone is talking about sustainability nowadays. Accountants in SMPs are watching the news and listening to the debate. You may well be asking questions like: “What can I do in the face of a global issue?” “How will this affect my practice and my clients’ businesses?” “What questions will my clients ask me next?” “ What expertise should I be developing now?” “How will sustainability work for me?” The sense of urgency to address climate change across the world is intensifying. Droughts, floods and wildfires are increasing, ecosystems are collapsing, and in response people are calling for change. But climate change is part of a broader sustainability challenge – one that can be summed up as ‘environment, social and governance’, or ESG. The responsibility to meet this challenge falls on all businesses and firms, including small ones. As ESG continues its rise up the political and corporate agenda, smaller businesses now more than ever need to meet certain ESG criteria so they can access finance, win contracts or be part of larger companies’ value chains. Clients and consumers also expect businesses to have a positive impact on the environment and to be doing their part to contribute to change. Companies that want to prosper in the future will have little choice but to become sustainable. Small businesses have a crucial role in the transition to more sustainable economies and societies. Accountants are key financial advisors for those businesses, but also need to understand and implement sustainability practices for their own businesses. This article discusses the opportunities for small businesses – and their advisors – in embracing sustainability. “Practices who want to engage particularly with the next generation of staff and clients need to be able to take sustainability seriously and need to be able to demonstrate that” Conal Kennedy, Head of Practice Consulting, Chartered Accountants Ireland Environmental, social and economic issues present huge risks for businesses. Examples include: losing out to competitors; having reduced access to capital; developing weaknesses in supply chains; developing succession risks; and failing to meet the requirements of stakeholders, including consumers, clients, banks, business partners, staff and regulators. Accountants can identify and quantify these risks for their own practices, and develop policies for themselves and their clients to address them. But managing risks against ESG factors can also benefit businesses directly. As this article will show, if properly addressed, it impacts employee welfare, improving employee experience and leading to greater output; it affects ability to access finance; it enhances an organisation’s reputation, helping to attract new business and staff; and it can help companies comply with supply chain requirements of their larger clients. Preparers and auditors of financial statements will also need to consider these issues going forward. Generating new business Many accountants are now adding “sustainability consulting” to their services to clients. As trusted advisors, they can play a key role in helping SME clients think about their potential sustainability risks, and leverage opportunities offered by the sustainable transition. For example - Accountants can help clients to: assess sustainability impact and risks improve efficiencies reduce costs avail of grants acquire finance identify opportunities to expand their range navigate the changes Sustainability is also an increasingly important factor in tendering for contracts with larger organisations which have stricter sustainability goals. Some of these large organisations perform assessments of potential suppliers. Others also carry out regular risk screenings of existing supply-chain suppliers, and/or conduct internal audits and onsite supplier audits to verify that their supply chain suppliers are conforming to their policies. Accountants have a huge role to play in helping companies prepare this information, and in doing so themselves if they are part of these supply chains or are tendering for contracts. Accessing Finance Embracing sustainability is working towards ensuring the financial future of accountants’ businesses or their clients’ businesses. Investors are actively looking to invest in sustainable projects, and are screening out certain sectors or companies (like those heavily reliant on fossil fuels, for example). Businesses seeking this investment benefit from being able to collect and report on their sustainability-related activities against a recognised standard. Many banks are also adopting sustainability criteria and may require proof of sustainable practices from companies looking to avail of finance. There are also business grants as well as support schemes and tax incentives available for organisations looking to transition to more sustainable practices. Again, accountants have a huge role to play in guiding clients through this. Savings Operating in a sustainable manner saves costs. While there may be short-term costs associated with transitioning to a sustainable business model, businesses can recoup the investment they make and can also reduce their business costs by introducing more sustainable ways of working. According to the Sustainable Energy Authority of Ireland (SEAI), the average SME can save up to 30% on its energy bill by becoming more energy efficient. A business with an engaged and motivated team is also less likely to experience high employee-turnover and associated costs. In a drive to decarbonise Ireland’s economy, the rate of carbon tax increased by €7.50 in October 2020 from €26 to €33.50 per tonne/CO2. Reducing your carbon emissions will reduce your cost. Ultimately, though, any costs associated must be reframed as the cost of compliance or risk management. The greater costs are the costs of not being sustainable. Reputation With social media increasing access to companies, there are very few places to hide for organisations which are falling short of sustainability-related expectations. Staff expect it, and customers demand it. Companies not being transparent about their sustainability achievements, or their goals, will be called out by their customers and staff. Likewise, there is little patience for companies that are ‘green-washing’, i.e. presenting a false or misleading green public image. “64 percent of customers are ‘belief-driven buyers’ who will choose, switch, avoid or boycott a brand based on its stand on societal issues.” 2019 Edelman Trust Barometer Special Report: In Brands We Trust? Mobile Survey Attracting clients On the flip side, though, organisations that do embrace sustainability are in a strong position to attract clients. They can do this by becoming more visible in their community. Supporting local literacy or numeracy projects, participating in local charities or sports clubs, or engaging in local-tree planting initiatives not only increases brand awareness of a firm or business: it builds trust with a community. Remember – not everyone may be doing this, so you will have a first-mover advantage if you do. As a greater number of large companies are either required to or decide to report on human rights, diversity and climate-related policies, a greater number of local businesses supplying those companies will also be obliged to disclose their own sustainability practices, and will need help from a financial advisor to do so. Accountants who are experienced in offering clients this support may attract more clients looking to comply with the sustainability requirements of large organisations. Attracting & retaining talent Candidates are actively seeking jobs in companies with strong ESG credentials and are rejecting jobs in those companies not aligned with their own values. What was identified by McKinsey in 1997 as the ‘war for talent’ is as fierce as ever within the professional services sector, and organisations are going to great lengths to recruit talent. These same companies are now including their commitment to ESG values as a competitive differentiation. This is a trend seen by Karin Lanigan, Head of Member Experience in Chartered Accountants Ireland: “I have worked in recruitment for more than 20 years and in recent years, I have noticed a growing trend whereby candidates have become more and more discerning about types of organisations they’ll work for. They are not just considering salary and package; they are looking at the sector, at the reputation of an organisation, and asking themselves ‘will I feel proud if I’m out with my friends on a Friday night to say that I work with whatever the organisation is or whatever the sector is that they are in?’ They want to have sense of pride in their place of work.” Remember: a commitment to ESG does not have to mean having a large sustainability department or running an eco-business. It can also mean being a firm or company that looks after its employees, provides good training and promotion opportunities, and is active in its local community. “With ‘measurements’ everyone thinks of ‘carbon footprint’. But it doesn’t have to be. You can measure staff satisfaction through surveys. You can measure employee-turnover and retention or absenteeism. Encourage staff to measure the number of hours they spend giving back to others in the community.” Teresa Campbell, PKF FKM Impact on Financial Statements Preparers and auditors of financial statements should consider the impact on sustainability and climate change on every entity. Quoted companies, and some categories of larger companies have defined obligations to report on the impact of environmental matters on the companies’ businesses. These specific reporting requirements do not apply to private limited companies reporting under FRS 102. However, climate change and sustainability are major and developing issues that cannot be ignored by anyone. Both IAASA and the FRC have recently commented on matters that they expect to see considered in financial statements. Whilst their comments were largely made in the context of the IFRS framework, much of what they have said is directly applicable to financial statements prepared under FRS 102. Accountants should consider and report on how climate change has impacted on the assets and liabilities of the company, what additional risks have emerged and whether new or increased provisions are necessary. How has climate change impacted on the estimates and judgements applied, and do these need to be disclosed? Consider such matters as the useful lives of property, plant and equipment. Consider also the impact on impairment assumptions. Does the entity have an obligation to remediate environmental damage caused by any of its activities? Have any of its contracts become onerous, or are they likely to? The financial statements, taken as a whole, should contain sufficient information to be useful to stakeholders, and preparers should avoid the use of non-specific boilerplate. See IAASA’s recent observations on published financial statements. The Institute will cover these areas in more detail in future issues of Practice Matters, broadcasts of Practice News, and CPD courses. Some member resources Find more on the Institute’s Sustainability Hub with resources from articles, podcasts and webinars to a glossary explaining the acronyms and terms. You can also find tips in the Institute’s guide on Sustainability for Accountants. This free guide for accountants describes what to do – and where to start – to operate sustainably, successfully and cost-effectively.  

Níall Fitzgerald, Head of Ethics and Governance, writes:  Over 59% of member firms with audit registration on the island of Ireland carry out audits of non-profit organisations, including charities. It is reasonable to expect that an even greater number provide non-audit services to this sector. Many members in practice, and their staff, are also involved in the sector as trustees, volunteers, or donors.  This level of involvement is not surprising given the size of the sector.   According to the Northern Ireland Council for Voluntary Action (NICVA), as of February 2020 there were approximately 6,122 non-profits with total income of £792m in Northern Ireland. In the Republic of Ireland, according to data available at the end of 2019 collated by Benefacts, there were approximately 32,841 non-profits. The total income determinable for 32% of these was €14.2bn (the remaining 68% being mostly smaller local non-profits for which relevant information was not publicly available). Impact of Covid-19 pandemic on the sector The financial impact of the Covid-19 pandemic on non-profits is not yet clear. Many non-profits entered 2020 with low reserves and some have been forced by the pandemic to pause operations, while others have experienced a surge in demand for their services. Accountants are playing an important role in supporting the recovery of this sector, such as assisting with obtaining grants and government supports. In a report published by Benefacts in May 2021, ‘Charities in Ireland 2021’, an uplift of over 10% in government funding was provided to charities in the Republic of Ireland. Some charities also benefited from increases in philanthropic donations. Five key considerations for accountants providing services to the non-profit sector Given the level of commitment of members in practice to the non-profit sector, the following considerations are a useful aide memoir for some of the common matters that can arise: 1. Determine if client is a charity or other non-profit All charities are non-profits but not all non-profits are charities. For example: an owners’ (or residents’) management company may establish as trading for the mutual benefit of its members, but it is not a charity, nor is it a non-profit established for a public benefit; and while a sporting organisation may be established as a non-profit, it may also be registered as a charity. If in doubt, confirm by reference to the registers of charities maintained by the Charities Regulator in the Republic of Ireland or the Charity Commission of Northern Ireland if the non-profit is a registered charity. When accepting a non-profit client, it is important to understand these nuances to determine the type of services you may be requested to undertake and also to understand its various governance structures that may impact on anti-money laundering vetting and other client acceptance procedures. 2. Avoid a principal-agent dilemma Many non-profit organisations are juggling various governance, secretarial, accounting, audit, and finance requirements, in the midst of delivering services. While some of the larger non-profits will have full time staff to manage these requirements, smaller organisations will have fewer resources (sometimes consisting of part time or volunteer staff). The board of trustees/directors bears the ultimate responsibility for the management and control of the organisation, but there is a level of reliance placed on the services of the accountant to fill any gaps in expertise. A principal-agent dilemma can arise in instances where the principal (the non-profit) can have different expectations to those understood by the agent (the accounting firm). This dilemma is more common in casual and informal business relationships, potentially exposing the fiduciary (the accountant) to greater risk. Where the accountant accepts appointment as auditor, they are a principal in their own right. Auditors need in the first instance to maintain their independence, and all additional services should be viewed in this context. Part of the solution is to ensure that a tailored engagement letter is put in place at the start of each business relationship, clearly stating services to be provided and each party’s responsibilities. The letter should be reviewed annually and updated when required. 3. Advising on governance requirements for charities Charities in the Republic of Ireland are required to apply the Charities Governance Code (the ‘Code’). In 2021, charities are required to report for the first time on compliance with the Code. The following key points address some common queries from charities: Charities are required to note in their annual return to the Charities Regulator whether they are compliant with the Code. If compliant with the Code, the charity should disclose this fact in its annual report, for example in the Trustees Report. The Code applies on a ‘comply or explain’ basis: if a Charity has not complied with any part of the Code, it is required to provide an explanation. Charities must annually complete a Charities Governance Code Compliance Record Form, available from the Charities Regulator website. The form is not required to be submitted to the Charities Regulator unless specifically requested as part of a monitoring exercise. The Charity Commission for Northern Ireland has produced guidance, factsheets, and other resources to support charities in maintaining good governance and meeting their statutory responsibilities. The Code of Good Governance, produced by the Developing Governance Group, while not a statutory code, has been widely endorsed as a practical resource for supporting charities in complying with governance best practice and their statutory obligations. Further information on governance requirements is available from the Charities Regulator (Republic of Ireland) and The Charity Commission for Northern Ireland. 4. Managing conflicts of interest If an accountant is asked to intervene in a dispute arising amongst trustees, staff, or volunteers of a non-profit, or between the non-profit and a third party (other than the accountant), it is important to determine whether there are any conflicts of interest to be managed. Given the often local nature of non-profits, and the level of community commitment and passionate support they receive, accountants should be particularly aware of disputes involving: other clients of the practice; any other partner or staff member in the practice; a close family member or friend of any of the above. In some cases, an accountant may be providing services to a non-profit that they support for personal reasons, e.g. a family member benefits from the service of the non-profit. In such cases, the accountant is encouraged to consider whether they can provide objective advice to resolve the dispute, or whether any preconception or bias may affect professional judgment to the extent they can no longer be objective. Section 310 of the Chartered Accountants Ireland Code of Ethics identifies certain measures that can be taken to safeguard threats caused by a conflict of interest. Some examples of measures include disclosing the conflict, obtaining consent, or resigning from the provision of services. Additionally, auditors have specific responsibilities under Ethical Standards applying to auditors. 5. Promoting transparency and filing full sets of financial statements Many non-profits rely on public funding and/or private donations. Many also rely on broad support networks, including volunteers and other voluntary services. In an era where scepticism is plenty and trust is guarded, accessibility of information and transparency can make a big difference in efforts to attract significant funds and other forms of support. To address this, non-profits who are incorporated should consider publishing and filing full statutory financial statements (e.g. FRS 102 or FRS 102 Charities SORP). Indeed, they may be obliged to do so. Unincorporated non-profits should consider a similar level of transparency regarding their annual accounts. The preparation of financial statements is ultimately the responsibility of the trustees/directors of the non-profit. They have statutory and fiduciary duties to act in the best interests of the organisation and to have regard to its stakeholders. However, they may seek the advice of the accountant who, as a fiduciary advisor, has a responsibility to advise and act in the client’s best interests. Current corporate governance codes and best practice reinforce the importance of accountability and transparency in the non-profit sector and encourage standards that are higher than minimum compliance with the law. It is important to ensure that these requirements are considered in making decisions or providing advice affecting the preparation of financial statements. The Chartered Accountants Ireland Governance Resource Centre contains useful resources for trustees or directors of non-profits, such as the ‘Concise Guide of Ethics and Governance for the Charity and Not-for-profit Sector’ and the recently published ‘Owners’ Management Companies – A Concise Guide for Directors’.  

Dee France, of CA Support, writes: CA Support is a registered charity that is funded by donations from members of the Institute, and exists solely for the purpose of providing emotional, practical, and financial support to Chartered Accountants, students, and their families, for life. Simply put, we are here to help if things go wrong. Through our mental health, wellbeing, and advisory services, we ensure that nobody encountering unexpected difficulties is left behind. During the COVID pandemic, we have seen those members and students contacting us for help increase by over 50%. During 2021, these numbers are rising further. From a member survey conducted in June 2020, we asked members if their mental health had been negatively impacted since the beginning of COVID. The response was that this was the case for at least 50%. In conversations we have had with members in practice, many have told us that they find the current circumstances extremely stressful and pressurised. Running a business can be isolating at the best of times, and that isolation has been exacerbated by the impact of the COVID crisis. There are intense pressures arising from meeting deadlines, managing staff and the impact on financial security. The good news is CA Support can provide tangible assistance to any member or student, or their families, who are experiencing any type of hardship at any stage of their career. We have members who have reached out to us due to bereavement, job loss, critical illness, or marital breakdown. Others have reached out because their mental health is suffering, and so need to avail of our professional counselling services. Thankfully, the majority of these members managed to turn a corner and benefit greatly from the help they received, as demonstrated in some of their feedback: “It is a shame more members and students do not avail of this amazing service. It has been such a positive experience for me. I have told so many about it and hope I can help to spread the word in 2021 on your behalf.” – Member who was made redundant. “It has been a source of great consolation to me and my wife to know that there was an organisation like CA Support in existence, funded by charitable members, who care about those who didn’t set the business world on fire and needed help.” – Retired member “I have gone back to work part-time. At long last I have my life in order. I wish to thank CA Support for their help and kindness over the last few years. You have made a great difference to my life.” - Member (separated) who received emergency financial assistance. It is heartening to see that these members with their own unique set of challenges have benefitted greatly from the assistance they received from CA Support. We know it is not always an easy decision to reach out for help, but rest assured all contact with our team is completely confidential. We understand that the stigma surrounding the issue of mental ill health still exists and some members may feel it is a step too far to admit that they, or someone close to them, has a problem. Please be assured that you will be treated with kindness and understanding, and will be offered all the support you need to get back on your feet. You may be interested in checking out our latest webinar, Ending the Stigma of Mental Health where we listened to mental health advocate, Barbara Louise Brennan from Ireland’s charity, See Change, address some of the misconceptions and misunderstandings that exist in our society today. She tells us that we all have mental health, just as we have physical health, but very often our perception of mental health is a negative one. She takes us through some practical ways to normalise conversations around mental health and take action to seek help for both ourselves, and for our loved ones. You can view the webinar here. You can find out about all our services and supports available from our CA Support pages. The CA Support team are here to help and are only a call or email away: CA Support team mobile: (353) 86 024 3294 or email: casupport@charteredaccountants.ie.

The Public Policy staff in the Chartered Accountants Ireland Advocacy and Voice Department write: On 24 December 2020, the EU and UK negotiating teams reached agreement in principle on a Trade and Cooperation Agreement (“the Agreement”), which provides for tariff-free, quota-free trade (where rules of origin criteria are met) and for sectoral cooperation in a number of important areas. The Agreement does not govern trade in goods between Northern Ireland (“NI”) and the EU where the Protocol on Ireland and Northern Ireland will apply. This means that no new procedures will apply to goods moving between NI and ROI (and the other Member States of the EU). We have assembled information on some key areas to help practitioners navigate the new trading environment. You can find further information on any of these areas in our Brexit hub. We continue to engage with UK and EU stakeholders on the changes that Brexit is bringing. For up-to-date information on Brexit developments and technical analysis, sign up for Brexit Digest. Recognition of your Chartered Accountancy qualification The UK’s departure from the EU results in some changes in the standing of the Irish ACA/FCA qualification. Students and Members in ROI who are EU citizens and who have qualified and gained the requisite experience in the EU prior to the end of the transition period, will experience no change in their rights and protections under the EU Qualifications Directive (Directive 2005/36/EU). Students gaining the Irish qualification in NI/UK post Brexit will be receiving a European qualification awarded in a third country. Members who are UK citizens (or other non-EU citizens), who qualified in NI/UK prior to the transition period and who have met the required EU-based experience requirements, will no longer be able to access the rights, among other things, to have their qualification recognised within the EU under the EU Qualifications Directive as they are not EU citizens under this Directive. The Irish ACA qualification continues to be recognised in Irish and UK law and members on both sides of the border continue to have mobility rights under the Common Travel Area (CTA) agreement. Additionally, members of this Institute will continue to have access to practice rights on both sides of the border. More information on the qualification’s standing in terms of Irish and UK law can be found here. VAT on services This section will be of immediate interest to practitioners with cross-border clients, and who need to raise fees for their services. From 1 January 2021, NI continues to follow the EU’s VAT rules for goods. However, as the UK-wide VAT rules for services will apply to NI, NI VAT-registered businesses are required to follow a dual VAT regime from 1 January 2021. The UK continues to levy VAT and the rules relating to UK domestic transactions continue to apply to businesses as before Brexit. VAT procedures for trade in services largely remain the same as those prior to 31 December 2020, but there are some changes to the VAT rules and procedures for transactions between the UK and EU member states. The VAT rules applying for supplying services between the UK and Ireland are now the same as the current rules for supplying services outside the EU. Broadly, the VAT treatment applicable to the supply of most business-to-business (B2B) services between Ireland and the UK will depend on the place of supply (i.e. the place of supply is the place where the business receiving the services is established). Using the example of an ROI business, if it receives services (including accounting services) from a business, including an accountancy firm, based in the UK after the transition period, in general Irish VAT will be due on the services. If an ROI practitioner provides services to a business based in the UK after the transition period, in general, UK VAT will be due on the services. See Revenue guidance and HMRC guidance. For business-to-customer (B2C) supplies of services from 1 January 2021, Irish VAT should not arise on the supply of certain services such as accounting, legal and consultancy work to non-business customers in GB or NI. If a UK business supplies accounting services to non-business consumers outside of the UK, the services are supplied where the customer belongs and are therefore outside the scope of UK VAT. See revenue.ie and gov.uk for more information. VAT on goods This Institute and the NI Tax Committee, chaired by Alan Gourley, have been engaging with HMRC on various Brexit matters, including customs changes and the NI VAT regime, throughout the course of 2020 and extensively on VAT in particular in recent months. We will continue to do so in 2021. For information on the VAT changes under the NI Protocol, VAT registration requirements in NI, VAT reporting obligations and key VAT system changes, distance selling rules and VAT on trade in goods between NI, ROI and GB, see our dedicated VAT information page on the Institute’s Brexit hub. VAT margin scheme on second-hand cars for Northern Ireland In mid-January, it was announced that the UK Government is seeking to reinstate the VAT margin scheme in NI on second-hand cars purchased from GB, in order to avoid a substantial increase in prices. This Institute has been lobbying HMRC to seek a derogation from the EU and reinstate the scheme for such goods and guidance has been released. We are in contact with Irish authorities seeking clarification on the position in ROI going forward and similarly whether the margin scheme can apply when second-hand cars are purchased in NI from GB and then onward sold to a car-dealer in ROI. We will keep members updated. Customs GB has left the EU’s Single Market and Customs Union meaning GB no longer benefits from the free movement of goods within the EU, and customs declarations are now required to move goods. NI remains in the EU’s Single Market and Customs Union for trade in goods only. This means that trade between the EU (and ROI) and NI remains largely unchanged. Members involved with importing/exporting particularly between GB and ROI are recommended to sign up to receive Revenue’s eCustoms notifications by contacting ecustoms@revenue.ie. For detailed information on the new customs rules visit our Brexit web centre. Data flows Cross-border data flows enable trade. We know that many businesses rely on the ability to transfer personal data about their customers or employees in order to offer goods and services. For example, an NI company’s payroll could be processed across the border in ROI. Any restriction on the ability of this data to flow freely would act as a trade barrier. Data protection did not form part of the Agreement but it has been agreed that an adequacy decision by the EU on the UK’s data protection regime will be made within six months i.e. by 30 June 2021. For now, data can continue to flow between the EU and UK as before which is good news in particular if you are outsourcing your IT or payroll function to a cross-border organisation. For more information see our website. Cross border workers The Common Travel Area arrangements will protect the rights of many of the estimated 23,000 to 30,000 cross border workers who live in one part of the island of Ireland and work in the other. While Irish nationals can continue to enter and work in the UK under the Common Travel Area agreement (and vice versa), this does not cover EU nationals living in Ireland and travelling across the border for example. Under the new UK immigration system that came into effect on 1 January 2021, both EU and non-EU nationals will be treated equally. Employers in Northern Ireland in particular should ensure that employees from other EU Member States are aware of, and encouraged to apply for, the EU Settlement Scheme which is open for applications until 30 June 2021. Employers should take action in light of new the post-Brexit immigration system, including verifying qualifications, considering the requirements under the new points-based system, and availing of any possible temporary transitional immigration schemes which may assist. Links to further information on employee mobility post Brexit can be found on our website. Online shopping Brexit was always going to bring new trading rules; and the costly impact of the UK’s departure from the EU has been felt by online shoppers since the start of the year. VAT and customs charges which until now might have earned a brief glance by online shoppers on payment screens, are now causing costs, confusion and even shipping delays. Most notably, consumers in ROI should be aware of the following changes when buying from GB (not NI): • If the good costs more than €22 (the customs value plus transport, insurance and handling charges), Irish VAT will apply. This VAT is generally payable by the buyer, unless like Amazon, the company picks up the bill. The €22 threshold will be abolished from 1 July 2021. • Orders with a value below €150 (including transport, insurance and handling charges) will not be liable to Irish customs charges regardless of where the goods are made. • The free trade agreement states that there will be no customs duties on goods coming to ROI from GB where those goods are made in the UK. However, if you purchase something online that costs more than €150 and it is not made in the UK, customs duties will apply for the buyer and the rate of the charge will depend on the type of product ordered. You can find all the rates in the TARIC database. • See Revenue.ie for more information. For consumers in GB, buying goods online from ROI/EU Goods with a value of STG£135 or less: • If the goods are outside the UK and sold through an online marketplace to customers in GB, the goods will have UK supply VAT charged at the point of sale. • If the goods are outside the UK and EU and sold through an online marketplace to customers in NI, the goods will have import VAT charged. Consignments valued at more than £135 Normal VAT and customs rules will apply on importation of the goods into GB from outside the UK or into NI from outside the UK and EU. This means that the customer will have to pay VAT to Royal Mail for example before the goods can be delivered. Customs The free trade agreement eliminates customs duties on goods coming to GB from ROI where those goods are made in the EU. If this isn’t the case, UK tariffs could apply and the rate will depend on the goods purchased. For more information see gov.uk.

Conal Kennedy, Head of Practice Consulting, writes: As the year draws to a close, many members in practice pause to reflect before starting their work in the New Year. Sometimes members will make plans to build their practices through organic growth, or to consolidate what they have in the New Year. In other cases, the turn of the year may lead them to conclude that more fundamental changes need to be made. Is it time to consider merging your practice with another, or selling it? You may have been generally interested in buying a practice or a block of fees, but is now a time to pursue this more vigorously? We in Practice Consulting are sometimes approached by firms to assist them with one of these ventures. If you are interested, feel free to contact us and we will endeavour to advise you and possibly to reach out to make contact with other firms on a confidential basis. We are particularly interested in hearing from members who would like to retire and sell all or part of their practice. We may also be able to help members who are currently sole practitioners but would be interested in joining a larger firm as a partner. We also need to hear from those people representing the opposite sides of these transactions, the potential purchasers or those larger firms. If you would like to discuss this further please contact us individually at the contact points below or email us at practicemembers@charteredaccountants.ie in confidence.

Conal Kennedy, Head of Practice Consulting, writes: As we start into October, the end of the year looms, and we begin to look back at 2020 and focus more on 2021. The COVID-19 crisis has been the overwhelming story of the year. Very few businesses or practices have done better out of the crisis but everyone has done something different. What has been brought home to firms is the value of being prepared. Those firms that had invested heavily in technology were the best placed to rebound. That said, what has struck me most is the resilience and resourcefulness of our members in practice. Members pivoted from business as usual, to remote working, and on to a blend of remote and socially distanced working. Members moved quickly at each stage to assess the situation, gather information and help their clients, first to secure cash flow, then to arrange state benefits, then to help with those structural changes that are necessary to meet the demands of the new normal. As this continued, the regular work of compliance continued. What turn is next from the crisis remains to be seen. As of going to print, governments on both sides of the border are contemplating reintroducing measures to control the resurgence of the virus. In the meantime, a hard Brexit is threatening. What is certain is that more change is coming and practitioners will have to respond again. In the weeks up to 8th July, we carried out the All-Member Survey 2020. We asked a range of questions, including members’ engagement with and attitude to the Institute, and their responses to the COVID-19 crisis. See Brendan O’Hora’s article in this month’s Accountancy Ireland, where he provides an overview of the results of the survey. Specific points relating to practice were that practitioners have been disproportionately impacted by the crisis, compared to members generally. 93% of members in practice considered their firms were stable or growing at the start of the year, but 63% changed their description post-COVID to being somewhat impacted or struggling. In the Republic of Ireland, 47% of practising members said that they could charge clients usually or always for work done to assist them in dealing with the crisis, and 35% said that they could charge for this work sometimes. In Northern Ireland, these percentages were lower at 39% and 33% respectively. Practitioners were generally pleased with the Institute’s response to the crisis, particularly the supports provided through the COVID Hub and the Webinars series. Compared with members in general, practising members are generally more engaged with the Institute and see it as more relevant to them. We were pleased to see a 7% drop in those members in practice who stated that they were dissatisfied with the Institute since the last survey in 2018. The Institute has already used the results of the survey to inform the issues that we should raise with government as a matter of priority, and it has also informed our continuing engagement with our members to determine what practical steps we should take to improve the experience of members in practice. At this stage, members in practice have told us that they are keen to generate and develop new work. As always, referrals are the best source of new work, and these are not particularly impacted by the crisis, in that if you do good work for clients, they will let their contacts know. However, practitioners have a natural desire to try to accelerate this process by forging and renewing personal contacts in their networks. As we go through lockdown and socially distancing measures, this is more difficult. Many members are most comfortable if they can visit a client or contact and meet personally with them in their own physical space, and they feel that conversation and ideas flow most readily in this environment. In this instance, it makes sense, so far as is safe and reasonable to create these opportunities for physical visits, even if this process needs to be more structured and is less spontaneous than before. Other members are now reaping the rewards of early efforts to digitalise their marketing efforts, especially in the social media space, that, if anything has taken on more importance in this crisis. If you have not developed a significant social media presence before now, it might be in order to do this now. One way or another, you should be planning ahead, and considering how you will finish out this year and what plans you should put in place for 2021. For our part, the Institute will take member feedback on board as we plan our services in the year ahead, so we continue to keep pace with the needs of members in practice.

Conal Kennedy, Head of Practice Consulting, writes: As we are going to print, both the Republic of Ireland and the UK are beginning the process of re-emergence from lockdown. The stages of the process have been published, and businesses are starting to plan for the first steps needed. The COVID-19 pandemic has struck hard at many sectors of business, north and south of the border, and Chartered Accountants in practice are in the forefront of helping business clients to plot a route through and out of the crisis. Some practitioners have found that most of their time since the lockdown in mid-March has been spent firefighting. Clients have needed their expertise in financial planning, accessing finance, restructuring businesses, and applying for state aid. Just as importantly, accountants have been a source of reassurance and trust in uncertain times. A priority for the Institute has been to put in place a range of information for accountants in practice, working with our Advocacy and Voice team to obtain clarifications and highlight inconsistencies on the government supports available. As always, we in Practice Consulting are at the end of the telephone for you and we have been in continuous contact with members since the start of the crisis. Most of the Institute’s online resources specific to the crisis are now to be found in the COVID-19 Hub. The resources range from guidance on taxation and technical issues to health and wellbeing, and most recently, sources of finance. There is a lot of information in the web pages, and more to be found in our webinars, both live and recorded. We are continuing an active programme of live webinars, many of which are free. All of these are recorded and are immediately made available in what is fast becoming an impressive array of COVID-19 related guidance. In our webinar programme, our range of speakers and experts speak with authority and candour, focused on your needs as a member. In Practice Consulting, we have run six webinars on the response of practices to the crisis and the auditing and accounting issues arising from it. The COVID-19 Hub can be found on the Institute’s website at https://www.charteredaccountants.ie/knowledge-centre/covid-19-hub. Most businesses will find a way through the crisis through a combination of perseverance, innovation, and ingenuity. However, most will need finance, and access and availability of adequate and timely finance will be crucial to the economic recovery going forward. Recognising this, we have recently introduced Government Supports pages in the Key Resources area of the COVID-19 Hub. Here, we explain the Temporary Wage Subsidy Scheme and the Corona Virus Job Retention Scheme in ROI and NI respectively. See further information regarding these in the taxation section below. We also provide a guide to the broad and growing range of capital supports available to businesses available to business in both jurisdictions. Of note are the recently introduced schemes whereby businesses can defer or warehouse tax debt, which are further discussed in the tax section. Other schemes offer working capital loans or grants. Some schemes are for industry sectors particularly hard hit by the crisis. Accountants will need to develop an expertise and a familiarity with these resources if they are to help their clients most effectively. A source of finance will effectively meet a client’s needs if the application process is not overly complex or fraught with delays, and it results in timely and targeted funding. What has been your experience of assisting your clients to accesses sources of government funding, or indeed, in accessing these on your own practice’s behalf? We need your feedback so that we can more effectively help you and, where necessary, to lobby on your behalf. Please participate in our surveys, and of course we welcome hearing from you directly. One aspect of many offers of finance is that the application process includes a request for an accountant to report on the financial affairs of the business or person. Confirmation requests often take the form of a standard form for the accountant to complete and sign. Accountants should approach such requests with caution. It may be necessary to obtain a separate engagement letter. The Institute advises members to avoid signing such forms where they incorporate a broad and open ended statement, including such matters as confirmations of the client’s ability to repay borrowings or confirming the impact of the COVID-19 crisis on the client’s business. Also avoid using language such as “we certify”, “correct”, “accurate” or “we have ensured” since it implies a level of certainty which cannot necessarily be given. See Helpsheet E19 Reporting to Third Parties in the Members in Practice area of the website at this link: https://www.charteredaccountants.ie/Members/In-Practice/Helpsheets. See also Technical Release 11/2016 Third Party Letters of Confirmation, available in Chariot, which contains a pro-forma wording for a letter to a third party in connection with a request for confirmation. And of course, sources of finance are of little use unless there are viable businesses to support. There is much that government can do to smooth the path of commerce and industry, and much that you as an adviser can do to guide and support, but the road ahead is still fraught with uncertainty. What is certain to be next for accountants is more change, further challenge, and spurs to innovation. It will be a different profession that emerges from this crisis.

Coronavirus (COVID-19) update At the time of going to print, the situation regarding the Coronavirus (COVID-19) was evolving rapidly. Members and firms that require assistance are advised to consult the Institute’s website, where a special page has been set up containing advice and contact information: https://www.charteredaccountants.ie/about-us/coronavirus-(covid-19)advice-and-information Practising Accountants are key advisers to the business community, which is struggling to respond, to this fast-changing situation. The challenge is to stay ahead of events and stay in a position to give the best advice to clients. In spite of the range of demands facing  you, you should look to your own practice first. Make a plan for your own practice and plan to change it. Run scenarios that assume a progressively more or less restrictive environment going forward. Plan for staff non-availability due to illness or quarantine. Many practitioners and their staff are working from home. You may find that your systems were not designed to cope with the strains now placed on them, but now is the time to formulate new solutions and workarounds. Concentrate on what can be done and do it. Certain tasks may be impossible right now, but development work that had been put off can now be prioritised. Auditing can prove problematic, as in practical terms, it is typically carried out at clients’ premises, but also due to the greater risks and uncertainties to be dealt with. The FRC has issued guidance on this which is on its website. You are focused on cash flow because that is what suffers first in times of uncertainty. Again, start with a plan. Bring your financial information and accounts up to date so that you know where you stand. You may be doing less chargeable work and bringing in less cash. Identify what you can change to improve your own cash flow. Identify what cost can be cut and what expenditure you can defer. Are there sources of cash that can be drawn on? Engage with your lenders.   Clients expect and demand your advice and support right now, and your relationship as trusted adviser has never been so important. Clients should rapidly take stock of their situations, make plans for how to address issues and scenarios, and concentrate on protecting cash flow. The crisis affects clients in different ways and with different levels of severity. Your expertise, experience and judgement are now invaluable to them as your clients take their unique journeys through the crisis.   We will continue to engage and communicate with members in practice, with further and more detailed advice, as the situation develops. In the meantime, remember that your Institute and the Practice Consulting Team are here to help you.

Shane McAleer writes: “That would be an ecumenical matter!” The Ethics Research Report, published by Chartered Accountants Ireland in January 2019, reported that “94% of respondents have ‘observed or encountered’ some level of unethical behaviour during their professional career”. Due to the nature of their business, members working in practice can be more exposed to certain ethical dilemmas. In my experience, the following are two typical dilemmas that can arise and, unless appropriately managed, may potentially lead to unethical behaviour. Business & professional client relationship vs close personal friendship Over time, practitioners can develop a good professional relationship with their client. On some occasions this can develop into a closer personal friendship which, in some circumstances, can expose the practitioner to a threat to their professional ethics. The level of threat can vary. For example: Acting for two clients, both friends of the practitioner, on opposite sides of the same transaction can present a greater threat to independence (breach of objectivity) than perhaps having two bookkeeping clients who happen to be competitors Casually discussing a client’s affairs over a drink with a mutual friend can present a breach of confidentiality. There are safeguards in the Code of Ethics, or the Ethical Standard for Auditors, to help manage these. The ultimate safeguard is resignation, but only insofar as the threat arises between the client and the practitioner. Where the misconduct arises through an action of the client, then this can lead to specific professional responsibilities, e.g. whistleblowing or reporting suspicious transactions under Anti-Money Laundering legislation. Such scenarios can present an ethical dilemma where the practitioner is torn between the value of friendship and their professional obligations. For some, the dilemma can deepen where the client pleads for discretion. This segues to another typical dilemma, below. Expectations to deliver vs Undue pressure/influence from the client or management Situations can arise where practitioners are put under undue pressure/influence from the client to “turn a blind eye” on certain matters. This pressure may also come from management within the practice. In my experience as an insolvency practitioner, I have come across scenarios in companies where a potential ethical threat existed for the practitioner previously advising or auditing the company. In one scenario, a sole practitioner provided audit and tax advice to a large family company for many years. There was a good relationship with the client, given that the client had followed from a firm where the practitioner had previously worked. Over time, the owner/director amassed a significant director’s loan. The practitioner was aware of the loan but for several years it was not disclosed correctly in the accounts. The relevant taxes associated with the loan were not submitted. In another scenario, a practitioner prepared management accounts, showing a solvent position, for the purposes of providing these accounts to a secured lender. The practitioner was aware that the accounts were materially different from the actual position, i.e. an insolvent one. The client was insistent that failure to present a solvent position would result in financial support being withdrawn, with the potential loss of the business and jobs. The facts of the cases in scenario one and scenario two suggested that the practitioner had, perhaps inappropriately, succumbed to pressure from the client to agree with the client’s rationalisation that it was in the best interests of the company to account for matters in this way, and even that the company’s survival may depend upon it. Perhaps, the decision to accommodate the client was influenced out of a sense of loyalty. Perhaps it was out of fear of losing a client. Or, perhaps it was out of a lack of awareness of the relevant requirements! In addition to the safeguards outlined in the ‘Code of Ethics’, there are a number of supports available to all Members and their staff from the Institute, including the Ethics Resource Centre which contains a number of articles and publications to assist members to reach a decision. The Practice Consulting team will always be willing to advise members in practice in dealing with ethical issues and, in addition, CA Support is open to all members to assist them in times of difficulty. Shane McAleer is a director in Somers Murphy & Earl Corporate Services Limited. He is a member of Council, the Institute’s Ethics and Governance Committee, and the Members in Practice Committee. He is also a member of the CCAB-I Insolvency Committee.

Akriti Gupta, Advocacy and Voice writes: There are less than eight weeks to go to the 31 October Brexit deadline. According to recent reports, 70 per cent of smaller businesses believe that Brexit will adversely impact their business, affecting not only on trade, but business sentiment and investment as well. Ireland is a small open economy, heavily reliant on the UK market as its trade-testing ground. Small businesses that trade with the UK will be affected by supply chain disruption, currency risk, trade tariffs and the requirement to operate within dual regulatory frameworks; the principal risk is the disruption of any continued trade post-Brexit. Practitioners need to liaise with their clients on Brexit-related issues now if they have not already done so. With Brexit timelines still not established and future business models remaining unclear, smaller businesses and their professional advisers are strongly advised to consider the following five points:  1. Assess and develop customs capacity We are encouraging businesses across Ireland and the UK which are currently trading with each other to ensure that they can continue to do so post-Brexit. To do this, they must understand the rules that will apply for importing and exporting. While some businesses have experience of the customs formalities required to import and export outside of the EU, for many, particularly the smaller business, it will be their first exposure to them. All business should first apply for a customs registration, i.e. an Economic Operator Registration and Identification Number (EORI). It takes between three and five minutes online to acquire this (see below). Statistics from Revenue and HMRC suggest that thousands of small businesses on the island of Ireland have not applied for one; such business should be encouraged to acquire this without delay. Regardless of whether customs duties apply to goods moving between Ireland and the UK and the UK and the EU, customs declarations must be submitted to Revenue and HMRC respectively. Businesses should also use the time between now and 31 October to improve their knowledge of customs procedures, and close off any gaps in their customs knowledge that could prevent them from completing customs returns and declarations necessary to keep goods moving. Businesses will need to have customs expertise and relevant software to file these declarations, or should hire an agent to do this on their behalf. It is important to remember that tax authority officials will check that the proper declarations are in place; goods will be detained at ports and borders if they are not. There are various government supports to help do all of this. 2. Review your supply chain and market Tariff barriers and border control will cause delayed investment and barriers to trade for small businesses. Businesses must conduct a SWOT analysis of their existing supply chain and consider alternative suppliers and markets outside the UK. We would also recommend speaking to all customs agents and goods transport services as there will also be changes to transportation and logistics between Ireland, the UK and other EU countries. Post-Brexit, businesses that use the “landbridge” will face new rules when using the customs transit procedure, causing delays that will especially impact goods with a short shelf-life. Businesses should consider applying to Revenue/HMRC to avail of customs supports which may allow goods to be moved in an easier manner.  3. Review all your certification, regulation and licencing It is essential that businesses check that their products or services are fully compliant with all relevant regulation for sale on the UK or EU market post-Brexit. Businesses in highly regulated sectors such as medical device manufacturing, construction and transportation must be particularly sure that their registrations, certifications and licensing are still valid. Where appropriate, they will need to ensure that their UK supplier has appointed an EU-based authorised regulator, as EU registrations issued to UK companies prior to Brexit may no longer be valid.  4. Manage currency and cash flow Volatility in currency markets, particularly around the euro/sterling exchange rate, will present a key challenge for businesses post-Brexit. It is imperative for both importers and exporters to assess their currency exposure. Both importers and exporters should hedge their future transactions to give themselves certainty and a concrete base from which to price their goods and services. Businesses should also be availing of government supports to help manage cash flow and mould their business plans accordingly. One such government support is the Brexit loan schemes; however, only ten per cent of these loan schemes have reportedly been accessed. The Irish Government is now communicating via emails, letters and customs workshops to smaller businesses to encourage them to avail of this facility in order to help them prepare. In the UK, HMRC has stated that it will issue EORI numbers to most VAT-registered businesses, while also making available additional funding to support businesses with the costs of making customs declarations. Businesses based in, or with a branch in, the UK can apply for this funding ahead of the UK leaving the EU. 5. Protect and inform staff The responsibility to check potential visa requirements for staff, and the recognition of professional qualifications and licences required to practice, remains with the employer. Where relevant, businesses must account for these requirements and keep their staff informed of any developments. With a talent shortage in many areas, businesses must invest in learning and development for staff as a priority. In addition to taking the above steps, smaller businesses and their professional advisers are strongly encouraged to attend all possible government events and working groups, and ensure that they are maximising government-run Brexit preparation programmes and supports. Read all our updates in our Brexit web centre at https://www.charteredaccountants.ie/brexit and our page dedicated to no-deal Brexit planning at https://www.charteredaccountants.ie/knowledge-centre/brexit/no-deal-Brexit-planning.

Gary McErlean of Quarter Chartered Accountants writes: The ancient saying that change is the only constant seems to be more true today than ever before. The pace of change in the accounting world, driven by continuous technological advances, has never been swifter, or more unforgiving. As a practice which has embraced and adopted the new technologies available, we at Quarter Chartered Accountants can confidently say that this has only been advantageous. There are various Cloud Accounting Software providers such as Xero, Surf, Quickbooks, Sage 1 etc. A few years ago, we decided to invest time with Xero, and I thought it would be useful to outline some of the areas where we have benefited from significant time (and ultimately cost) savings by utilising a Cloud Accounting System. Bank reconciliations still comprise a key component of the accounting process, with staff time requirements being quite significant with bank accounts comprising high numbers of transactions. Not any more – Cloud Accounting Systems have the ability to link directly to most banks, with all underlying transactions being posted within the accounting system automatically, and on a daily basis. Granted that, although such a system automatically records every single lodgement and payment going through the bank, it doesn’t necessarily know where to post the other side of the transaction. However, all the processer needs to do is click on each item and allocate it to the relevant nominal code etc. The time required to do this is a fraction of the time required to post the bank the old fashioned way. Furthermore, the system learns, or can be told, where certain recurring items should be posted and this can also be done automatically, saving even more time. Cloud Accounting Systems also link in with lots of different mobile phone/tablet apps. For example, there are apps that allow the user to take a photograph, on their mobile phone/tablet, of supplier invoices which are then automatically posted to the Cloud Accounting system, to which the app is linked. All you have to do is approve the transaction. Based on the above, it is therefore quite conceivable for all your bank transactions and your supplier invoices to be posted to your Cloud Accounting System before you have even opened it! Another prominent feature of Cloud Accounting Systems is that they can be accessed from anywhere with an internet connection. Gone are the days when all work was carried out in the office on a 9 to 5 basis. It is becoming increasingly common for people to work from home, or on the move, and with the ability to log in to their accounting system being as equally mobile, the business finances can be processed or monitored anywhere on a real time basis. Cloud Accounting Systems provide a platform for offering a more regular reporting service to clients, which is better for the firm as well as the clients. They allow practices to develop client relations and, in our experience, leads to additional revenue streams being generated. In summary, if I was to use one word to sum up the effects of these technological advances in Cloud Computing, it would be EFFICIENCY, and, in my opinion, those that want to survive and thrive in this ever changing world of technology need to embrace it. Gary McErlean is a Principal in Quarter Chartered Accountants, and is a member of the Members in Practice Committee of the Institute. The Members in Practice Committee represents the interests of smaller practices.

The Property Services Regulatory Authority (PSRA) writes: The Property Services Regulatory Authority (PSRA) licences and regulates Auctioneers, Estate Agents, Management Agents and Letting Agents (licensees). The PSRA works to protect the interests of the public by ensuring that high standards are maintained in the delivery of property services by licensees. The PSRA considers the opinion of the Reporting Accountant, and the work leading to that opinion, on whether client moneys are managed in accordance with PSRA Client Moneys Regulations by a licensee as paramount in their assessment of licence renewal applications. In this regard, a licence renewal application must be accompanied by a signed accountant’s report relevant to the licence(s) held. The PSRA acknowledges the vital work undertaken by accountants in completing these reports effectively.   Accountants are required to review the books of account and records of the licensee and give an opinion on whether the licence holder has complied with the PSRA Client Moneys Regulations and to report where breaches of the Regulations have occurred. While the vast majority of reports received do not require the PSRA to request additional information, in some instances the PSRA is required to query the licensee’s application, including the content of the accountant’s report. By way of information, common issues encountered by the PSRA while reviewing licensees’ applications and accountant’s reports include: The most recent updated specified accountant’s report is not completed. Specified accountants reports are available at http://www.psr.ie/en/psra/pages/accountant’s_report Accountants fail to complete Section 4 of Part I of the relevant renewal accountant’s report expressing an opinion as to whether the regulations have been complied with by the licensee. Incorrect calculation of the balance on the Balancing Statement. The name of the Client Account(s) does not match exactly with the name on the relevant bank statement. A client account must be in the name of the licensee and contain the word “client” in the title. Issues of greater concern to PSRA identified in 2018 include: Liabilities to clients reduced on the balancing statement (Appendix 3A of PSRA/S35 – Renewal ABC) by deducting moneys owed in, which were intended for clients, but had not yet been received or placed in the client account. An example includes: where a licensee pays money out of the client account to a landlord in advance of receipt of rent by the licensee from the tenant. In a small number of instances this transaction is not shown as a liability on the client account by the licensee when completing the balancing statement. Before giving an opinion, the accountant should be satisfied in respect of the statement in section 3.3 of the report, namely “I have obtained the client account balancing statement(s) prepared by the Licensee as set out in Appendix 3A and checked that the information therein is in agreement with the books of account and records of the Licensee”. Liabilities to clients are not reported on the balancing statement (Appendix 3A of PSRA/S35 – Renewal ABC). Before giving an opinion, the accountant should be satisfied in respect of the statement in section 3.3 of the report as noted above. Licensee using one account for all client and business transactions. This is a breach of the Client Moneys Regulations and is required to be included by the accountant at Appendix 2 of the accountant’s report. Instances where a deficit/surplus on the client account has been identified but not addressed by the licensee, despite confirmation in Appendix 3B that funds have been paid into/withdrawn from (as appropriate) the client account by the licensee and the signed accountant’s report being submitted as part of the licence renewal application. In these instances, the PSRA has by way of follow up confirmed that in such cases outstanding monies owed have not been repaid to the client account. The PSRA encourages that you consider whether there is evidence of any of the above issues arising when completing the accountant’s reports on behalf of licensees. The PSRA acknowledges the engagement of accountants with licensees and the cooperation extended to the PSRA in addressing queries. More information regarding accountant’s reports and the PSRA in general can be found on www.psr.ie. The PSRA may be contacted on 046 9033800 or by email at info@psr.ie in relation to any query you may have when completing PSRA Accountant’s Reports. Members should refer to Technical Release (TR) 03/2018 ‘Licence applications under the Property Services (Regulation) Act 2011 and the Property Services (Regulation) Act (Client Moneys) Regulations 2012’ issued in June 2018.  

Orla McGahan writes: 1. Join a network “If you want to go fast, go alone; if you want to go far, go together.” There are 1,730 Chartered firms in practice in Ireland. Of that, around 950 are sole practitioners; and yet, there are only 40 listed networks. Even with an average of ten members per network, there are a lot of people out there going it alone. Don’t isolate yourself. The benefits of being part of a network are copious: A case study group – for those times when a case needs to be talked out.  A forum to benchmark – to benchmark fees, charge out rates, overheads, staff salaries, and so on, can be invaluable. Consider joining a network outside your geographical or competitive area if necessary.  Knowledge sharing – share experiences on dealing with Revenue, CRO and other areas. For that moment when you are just having a blank, being able to run it by a trusted colleague. Referrals – often within a network various members specialise in varying fields, industries or disciplines. This can lead to additional work through referrals. CPD and training – organising training by network offers more flexibility to custom make the course, attendees, and location, while gaining cost reductions. 2. Don’t underestimate the value of your work I was lucky enough to be shown early in my practice life (by a client!) that the value of your work is not the time it took to put together the relevant documents and submit them to the appropriate authority. But rather, and more importantly, your fee should reflect the time, effort, knowledge and experience you have gained over the years which gives you the technical and practical knowhow. For a lot of practitioners, our work revolves around solving problems or doing work our clients do not have the time, knowledge, skill or experience to do. Make sure the price you put on your work adequately reflects value to both you and your client. 3. Stock control - record your time How often do we criticize clients for inadequate stock control and yet how many of us, particularly partners, do not record our time? We sell time. Fact. And yet quite often we have no control over it. There are many good CRM packages available to practitioners offering time recording systems with simple reporting facilities. Invest in one and use it. It will pay for itself, and then some. Find the discipline to record your time, every day. 4. Organise your time and stick to it! As the saying goes – “Failing to plan is planning to fail.” If I were to pick one thing that will make a difference, it’s time management. This is crucial to creating and maintaining an easy (easier) practice life. Plan, systemise where possible, and stay on top of The annual return and compliance review - do this when it comes in or as it falls due; Anti-money laundering compliance; Engagement letters; Practice housekeeping – A Chartered Accountant I know, who runs a very successful practice, has developed the habit of spending the first hour of his day, every day, without fail, to practice housekeeping. And his success is testament that it works; CPD and your CPD record; Staff mentoring records. 5. Embrace technology and update your software regularly Efficiencies leading to higher profitability and better cash-flow can be achieved with regular investment in software and technology. Incorporate this cost as an ongoing overhead. 6. Value your staff I’m sure this is not the first time you have been told this, but your staff are your most valuable asset. “We are only ever as good as the people around us”. Invest in your staff. The cost of losing an experienced staff member goes far beyond the financial cost. Added to that, a new staff member will take at least six months to become comfortable and familiar with the position. The cost of this should never be underestimated. Invest in training, talk to your staff openly and regularly (maybe over a nice lunch) about the things that make a difference to their enjoyment of the position, and it’s not always about salary. Particularly in the current environment, taking care of your staff should be a high priority. 7. Self-care In the words of Stephen Covey (The 7 habits of highly effective people) – “sharpen the saw”. Take care of yourself, your health, your mental health and your private life. As a practitioner, the pressure to develop, to stay up to date technically, meet deadlines, manage staff, and still live your life can sometimes be overwhelming, not to mention managing the expectations of clients. We carry a huge responsibility. So take time out regularly and routinely to take care of yourself. 8. Get involved in your Institute For some members “The Institute” may seem like an anonymous entity from which they can feel somewhat disconnected. But the Institute has many more facets than members realise and offers many valuable services. In addition to the staff, many member volunteers are lobbying and working away for the interests of its members. Volunteers are always required in many areas. The benefit of involvement and having an active role is that you can help shape and change the world in which you work, influence policy and changes in legislation, education, membership and many other areas. And as an added bonus, involvement gives you a sense of belonging to the Institute of which you are a member. 9. Agree fees upfront and in writing When you make this routine a habit, it is second only to time recording in revolutionising your practice, your fee recovery and your cash flow. It focuses your mind in identifying exactly what service is required, what the client is willing to pay for that service, and the timing of when you will get paid. It opens the doors for a discussion on what work the client wants done, and identify any work they are willing to do themselves. Make a list of the steps involved in the work and use this as a template to assist in the conversation. The benefit is that it saves a lot of stress and bad feeling when you think you’ve done a great job only to find that the client does not appreciate it and is unwilling to pay for it. Orla McGahan is the principal of McGahan and Co, and is a member of the Members in Practice Committee of Chartered Accountants Ireland.  

Jeremy Twomey writes: With autumn’s arrival, it is timely to look back at the key events thus far in 2018 that have impacted accountancy practitioners. As in previous years, regulatory and legislative change has continued apace, including: The General Data Protection Regulation (GDPR) came into force across Europe on 25 May, resulting in the largest change to the Irish & UK Data Privacy regimes in over a generation, with wide ranging effects on all businesses, including accountants; and The Companies (Statutory Audits) Act 2018 was signed into Irish law in late July, with its resulting principal changes for practitioners outlined in a dedicated article in Technical Signpost below. It is fair to say that achieving compliance with these new requirements presents a challenge for practitioners, especially so soon after the introduction of the Small and Micro Company regimes in ROI via the Companies (Accounting) Act 2017, as well as the new and separate Auditing Frameworks for Ireland and the UK early last year. 2018 has thus far also been a very busy year for the Institute’s Practice Consulting team, as we work to assist our members across the island in meeting the challenges they face. Our Training courses in the areas of Auditing, Financial Reporting and GDPR are proving particular popular. We have developed these three courses to address the practical needs of our members, providing clear examples of how to address the issues in each respective area that both you and your clients face each day. An example from our Financial Reporting course includes how to meet the various financial statements note disclosure requirements under the Small & Micro Company regimes. We use the experience that we have gained from numerous compliance assignments at practices over the years, together with the knowledge garnered from developing our practice aids such as Pro Forma Financial Statements, Procedures for Quality Audit (PQAs) and our recent comprehensive GDPR guidance and related templates. Marrying these with insights from the Institute’s Professional Standards Department on key regulatory compliance issues that they see at firms as part of their monitoring role, our courses help to ensure that both you, and your clients, stay ahead of emerging issues and meet your regulatory requirements. Feedback that we have received over recent months on these courses has been very positive and each carries a 3 hours CPD credit. Looking ahead, our upcoming courses during the autumn months include courses on Auditing and Financial Reporting in five regional centres across the island (Belfast, Cork, Galway, Limerick and Sligo), as well as Dublin. We typically provide both of these courses in one day at each centre, allowing participants to attend both courses, should they wish. Further details on the dates and times during November and December for each course/location, as well as booking details, are available on the Professional Development area of the Institute website. The option of availing of these three courses in-house at your firm also continues to be very much in demand. This option allows you to tailor a particular course to your firm/staff’s specific needs, while having one of our consultants provide a course at your practice is a particularly cost efficient way to meet CPD requirements for both you and your staff. One very popular example of such an in-house course over recent months is our half day GDPR consultation, where one of our team can visit your firm and offer practical advice and guidance on how to tailor your procedures, make progress on your GDPR journey, and meet key compliance milestones. Other courses that we are running during October and November at the Institute include two courses focused on regulated areas. The first in late October focuses on Accounting and Auditing for Charities and Not-for-Profit Entities, while the second in late November concentrates on other Regulated Entities such as Insurance Brokers, Auctioneers, Owners’ Management Companies, Occupational Pension Schemes and Solicitors. If you are providing accounting or audit services to any of these organisations, then these courses may be for you, as we provide practical updates on the recent key changes in the standards, regulations and legislation affecting these sectors. As you prepare for the remaining busy months of the year, and indeed for 2019, it may be worthwhile taking some time now to consider your current CPD requirements and how best to tackle these needs. As ever, my colleague Conal Kennedy and I are available to contact (see contact points below) on any of your practice related training needs over the coming months.

Jeremy Twomey writes: Meeting General Data Protection Regulation (GDPR) compliance requirements has become a top priority for Irish businesses over recent months and accountancy practices are no different. Recognising that GDPR implementation presents both specific challenges and opportunities for accountants in practice, the Practice Consulting team has also been busy both offering advice and providing practical guidance in this area for our members. This guidance can be found at  https://www.charteredaccountants.ie/knowledge-centre/guidance/gdpr/gdpr-resources and includes the following: GDPR 8 Step Guide; Explanation of GDPR terms; GDPR Template Outline Procedures to be tailored and used by an accountancy firm; and Example paragraphs for a client engagement letter addressing GDPR and a template privacy statement. From talking with our members in practice over recent weeks, it is evident that practitioners are at different stages on their journey to GDPR compliance. While it may appear a daunting exercise at the outset, the process of becoming GDPR ready can be broken down into a few key practical steps. With this in mind, in this article, I am going to outline the key points to achieve GDPR implementation from our 8 Step Guide: 1.  Raise GPPR awareness As a starting point on your GDPR journey, the partners and staff at your firm need to be fully aware of the Regulation, the work to be undertaken to ensure compliance, the likely problems that may arise and any budgetary implications. A basic step that can be undertaken in-house at your firm is a GDPR awareness presentation for all the staff. Your clients also have to comply with GDPR, so it is worthwhile checking that they are aware of these changes, to tell them of their GDPR obligations and how your processes may be changing. Such support may be an ‘added value’ opportunity for your firm to assist your clients. 2.  Appoint someone senior to oversee the process & resource this appropriately Your firm should appoint someone internally to take control of understanding GDPR and how it will affect your practice. It is essential that this a senior member of staff who will take responsibility for overseeing the GDPR compliance process at your firm. While it is expected that the majority of the work in relation to meeting the requirements of GDPR can be undertaken internally, a project team may be required, which may include external support and assistance on certain issues. Hence, it is vital that reasonable funding and resources are set aside to achieve your GDPR requirements. It is currently envisaged that most accountancy firms will not be required to appoint a Data Protection Officer (DPO). It is, however, recommended that you still appoint someone to be responsible for data protection within the firm going forward, but give them a title other than DPO (i.e. “Data Privacy Lead”). 3.  Review and update existing information and cyber security measures Having comprehensive levels of information and cyber security is a key step towards building a resilient organisation and ensuring GDPR compliance. It is therefore recommended that members should review their existing security measures and update as necessary. Both controllers and processors are required under the Regulation to implement “appropriate technical and organisational measures” to ensure a level of security appropriate to the risks that are presented by the processing of personal information. Such measures are described as including: Pseudonymisation and encryption of data (The use of secure portals to share documents is also of benefit); The ability to ensure ongoing confidentiality, integrity, availability and resilience of processing systems and services; The ability to restore the availability and access to personal data in a timely manner in the event of a physical or technical incident; and A process for regularly testing, accessing and evaluating the effectiveness of technical and organisational measures for ensuring the security of the processing. Detailed listings of examples of both practical physical and technical security measures to aid GDPR compliance at your firm are included in the full version of our 8 Step Guide as published on the Institute website. It is important to remember that managing cyber risk is not simply about managing data within your firm. Therefore, it becomes necessary to document the security risks from your supply chain (e.g. cloud service provider), as well as your own organisation. 4.  Map your data With the many potential pitfalls of non-compliance to GDPR, taking action to map any gaps in relation to the personal data your firm holds is critical. The first step is to get started by scoping the problem and mapping the data flows associated with your firm. It involves identifying, understanding and mapping out the data flows into and out of the organisation. As the data map evolves, you should be able to identify the flow of data, as well as gaps in required contracts and consents for processing data under the GDPR, and risks in security measures etc. that will need to be prioritised and resolved to ensure compliance. This requirement for data mapping is quite far reaching when you think about it. A typical accountancy practice possesses the following: accounting and tax software, audit software, payroll software, practice management systems, network drives and, of course, paper accounting, tax, company secretarial and audit files. This review will also need to extend to the many individual devices on which information is stored (e.g. laptops, desktops, tablets, phones and memory sticks). Finally, it is important to emphasise that, when completing your data mapping, GDPR compliance is only required for personal data that you hold. Company data is, for example, beyond the scope of the regulation, however your data mapping exercise may have an added benefit of identifying efficiencies that you can implement at your firm for non-personal data as well. 5.  Review your contracts with clients and suppliers As the GDPR imposes new obligations on data controllers and data processors, you will need to make sure you understand your status and your responsibilities with regard to both client data and firm data. At the very least, firm contracts will need to be updated to reflect the requirements of the GDPR. Accountancy firms should review their existing contracts with their clients, suppliers and sub-contractors to identify whether the accountancy firm is the data controller or data processor of any personal data it processes under the different contracts. This involves identifying which party ultimately determines the purpose and means of processing data. It is of vital importance that you satisfy yourself that your firm is correctly assigned the role of either data controller or processor (with matching appropriate requirements/liabilities) before signing any contract with your client or supplier. Remember that entering into a contract on the wrong basis may potentially open both you and your firm to unnecessary requirements/liabilities that may be difficult to overturn. More detailed guidance on each of these areas is included in the full 8 Step Guide, while Section 5 of our Outline Policies and Procedures provides advice on your firm’s likely status as either a Data Controller or Processor for a variety of possible assignments that you may undertake. Both of these documents can be found on the Institute website under GDPR resources. 6.  Employment contracts & information for your employees As with existing legislation in this area, under GDPR, certain information must be supplied to employees before their personal data is collected and processed by your firm. The information will typically be provided in the form of a notice to job candidates, and a further privacy policy will be supplied to successful job applicants as part of their on-boarding induction to the firm (typically included in an Employee Handbook along with other firm policies). It is also important to remember that, for the processing of employees’ personal data, where possible, the employer should rely on performance of the employment contract as the legal basis for processing, rather than consent. Consent is a weaker legal basis for such processing, as it can for example be easily withdrawn by the data subject Finally, do not forget to review (and redraft as necessary) employment contracts to update any data protection references or sections to comply with GDPR. 7.  Draft/update data protection policies and controls to meet the new requirements The GDPR introduces the principle of ‘accountability’. This means that all organisations must not only ensure they are compliant with the GDPR, but be in a position to prove this too. The best way to prove this is to document your data protection policies and procedures. We suggest that your firm’s GDPR policies and procedures should include, but not be limited to, the following (Outline policies in several of these areas are included in “Outline GDPR Policies and Procedures” on our website): Who is responsible for GDPR at your firm and what are the reporting lines? Data Processing Your policies in this area should detail the categories of personal data collected by your firm and the purpose for which it is collected. In addition, these policies should detail your firm’s role as a Data Controller and also instances when you act as a Data Processor, together with your responsibilities in fulfilling these roles. Data Subject Rights Your firm will need to have specific policies and procedures in place to ensure the rights of your data subjects are upheld under GDPR and that you have adequate processes and resources to meet the requirements of the Regulation. Specific subject rights areas requiring defined policies and procedures include: Data Subject Access Requests (DSARs); Right of erasure (Right to be forgotten); The right to restrict processing; The right to object to processing; and The right to data portability Some of these rights may not be enforceable by the data subject where data is held under legitimate purpose.   Data Governance Example areas of data governance to be considered for inclusion in your GDPR related policies and procedures include the following: Data Protection Impact Assessments (DPIAs), Privacy by Design and Privacy Notices, Document Retention, Security and Breaches. 8.  Staff training and ongoing compliance While not all staff will need to understand the GDPR in its entirety at your firm, each of your staff should at least be aware that data protection is an issue for everyone. For staff who do not deal with personal data, training can be limited to an annual (refresher) course on information and cyber security. On the other hand, for staff who regularly deal with personal data, training should focus on security over data, plus an awareness of the firm GDPR policies and procedures on a regular basis (at a minimum annually or more often if the need arises). Again this can be tailored to their particular role and responsibilities. Ongoing testing Testing in the areas of IT Security and other key aspects of GDPR compliance (e.g. audits of records held for constant compliance) should be formalised into a regular ongoing programme of work at your firm, as well as outsourced providers. Cyber security is a rapidly evolving area. Meeting best practice in May 2018 does not mean you will maintain compliance over the months and years ahead; you will need to keep this area under review. Conclusion At first glance, the process to ensuring GDPR compliance may appear to be a massive undertaking and a drain on resources for your firm. It is important to bear in mind that most accountancy firms and small businesses are in the same boat as you, and that by breaking down the required steps into clear manageable stages as above, you too can achieve GDPR Compliance in a timely manner. Should you need further assistance, Practice Consulting has also developed a half day consultation offering. One of our consultants can visit your firm and offer practical advice and guidance on how to tailor your procedures, make progress on your GDPR journey, and meet key compliance milestones. If you have any question in relation to GDPR, please feel free to contact either Conal Kennedy or myself in Practice Consulting.

Jeremy Twomey writes: Billed as the most important change in data privacy regulation in over 20 years, and with its enforcement deadline of 25 May 2018 fast approaching, ensuring General Data Protection Regulation (GDPR) compliance has become a top priority for the majority of Irish businesses. Over the last year, the Institute has been helping its members to prepare for GDPR in a number of ways. For example, we have provided guidance via articles in recent issues of Accountancy Ireland, while in the last few weeks we have run a series of half day roadshows and courses in a number of towns and cities across Ireland. In addition, the Practice Consulting team has been busy preparing detailed practical guidance in this area, explaining what the changes resulting from GDPR will mean for accountants and their clients. This guidance will be available under the Knowledge Centre section of the Institute website, and is designed to answer the GDPR-related questions that members have contacted us on over recent months. While preparing this guidance, it became evident that a number of “myths” have developed over the last couple of years surrounding the implementation of GDPR. In this article, I am going to address a few of these and try to help you ensure that you do not fall foul of these, as you prepare to achieve GDPR compliance at your firm. Myth 1 - GDPR Compliance is a once off project to be achieved by 25 May With so much hype surrounding the regulation, one should remember it is not a once off event or test for compliance. Unlike planning for the Y2K deadline in 1999, GDPR preparation doesn’t end on 25 May; it requires ongoing effort. It’s an evolutionary process for organisations; 25 May is the date that GDPR will be enforced but no business stands still. You will be expected to continue to identify and address emerging privacy and security risks in the weeks, months and years beyond May of this year. GDPR will require ongoing governance of data, as organisations migrate to new systems or apply their customer data to new markets and trends. Initial compliance is the first heavy lift, but ongoing governance is the long-term reality! All entities falling under GDPR should endeavour to be fully compliant by the implementation day, although this may not be possible in all instances. In such circumstances it is important that you address the essential elements of compliance at your firm as soon as possible, and can demonstrate your ongoing efforts in this regard in a comprehensive documented plan of work. Myth 2 - GDPR is only for large firms, a small accountancy practice or company is not expected to have the time or resources to achieve compliance You will have to comply with GDPR, regardless of your size, if you process personal data. Small accountancy practices do not escape the demands of compliance. GDPR needs to be prioritised by all firms, regardless of size. The vast majority of businesses across Ireland are small businesses and it is important to remember these firms often process a lot of personal data, and their data protection reputation and liability risks are just as real as for larger entities. Myth 3 - With Brexit, entities located in the UK, including Northern Ireland, will not have to comply with GDPR GDPR will apply to all EEA countries and any individual or organisations trading with them. As it comes into force on 25 May 2018 (before the UK is due to leave the EU), UK individuals & organisations must ensure compliance with the new regime by then. The British government has confirmed that the UK’s decision to leave the EU following Brexit will not affect the commencement of GDPR. Post Brexit, it is envisaged that if a UK organisation or individual processes personal data, then they will have to do this in accordance with GDPR. To ensure that the UK will be GDPR-compliant post Brexit, the new Data Protection Bill (currently going through Parliament in London) incorporates all of the GDPR. Myth 4 - GDPR is a completely new approach to Data Protection It is vital to remember that GDPR builds upon the existing legislation in this area. It is an update, not a wholesale revision, to meet the changes in technology and data use over the last twenty years or so. As a result of these changes, consumers’ privacy and data were not by now as well protected as they could be. GDPR rectifies this by increasing the responsibility on organisations to use personal data appropriately and to hold it securely. Although GDPR is not a completely new approach, it is more stringent in its application and the fines for non-compliance have been considerably increased. This means that doing nothing is not an option, although GDPR does allow organisations to take a risk based approach, based on your size and circumstances. Many organisations struggle to assess where they should start in preparing for GDPR. It is helpful to remember that we have had data protection legislation in both the UK and the Republic of Ireland for a number of decades and therefore, firms who have taken data protection compliance seriously are already in good shape for beginning to meet GDPR’s increased compliance standards. Myth 5 - GDPR is just more bureaucracy and work for small firms, with no potential  benefits When legislation of this nature is announced, one can take either a positive or negative view of the task at hand. If you take a negative view, you will see GDPR as more bureaucracy and cost to your firm. If you take a positive view, on the other hand, you will view GDPR as a necessary strengthening of the rights of individuals, and indeed a potential  opportunity. As accountants position themselves as strategic advisers to clients, GDPR is also an opportunity for firms to demonstrate to clients that they can securely hold and process information in accordance with data requirements, and that protection of client data is a priority for the practice. As a result, clients are likely to see their accountants as trusted professionals with whom they can partner to drive their business forward. Therefore, being a leader in this area may enhance your practice and its reputation. In addition, as trusted business advisors to your clients, you must have sufficient knowledge of this new legislation to be able to provide sound advice. SMEs need to be ready when the new law comes into force, but they may struggle to know where to start. Chartered Accountants in practice can help these small businesses bridge the gap to GDPR compliance and, in the process, win new business. Myth 6 - Outsourcing GDPR compliance will be a quick fix for me and my firm There is no quick fix to GDPR compliance. No one piece of software or outsourced service provider is going to provide everything you need to comply with GDPR. For accountancy practices, GDPR will impact on how you manage and store data across your entire firm (e.g. client, prospective client, contact, supplier and staff data). You cannot outsource your responsibility for this information, and compliance with GDPR will require considerable time and preparation from all levels within your practice. With the implementation date of 25 May approaching quickly, it is important to start sooner rather than later on this. Myth 7 - GDPR only applies to Digital Processing Under GDPR, data processing covers both automated personal data and manual filing systems. Manual/paper records are included if they are part of a ‘relevant filing system’. This means papers stored systematically, for example, in a filing cabinet are probably included, but ad hoc paper files may not be. Members should ensure that they apply the same levels of diligence to paper records as they do digital records and that any decisions made regarding the lawful basis for processing, adhering to data protection principles and upholding data subjects’ rights include paper records held. Myth 8 - Under GDPR, accountants will only be seen as Data Processors and hence avoid much of the responsibility that falls on Data Controllers in this new regulation The UK Information Commissioner’s Office (ICO) has previously advised that it considers that an accountancy firm providing accountancy services acts as a data controller. The firm’s status as a data controller in relation to clients arises because the firm has flexibility over the manner in which it provides services to its clients and will not be simply acting on their instructions. In addition to this, the firm has its own professional responsibilities regarding record-keeping and confidentiality. Therefore, because an accountant “determines what information to obtain and process in order to do the work”, firms act as “controllers in common” with clients. Under GDPR, member firms will also be data controllers with regard to their firm data (e.g. employee information). If there is any doubt regarding your status as a processor or controller in relation to your firm’s activities, you should take legal advice. Going forward, firms will need to ensure that client terms and conditions reflect this reality, potentially extending engagement terms as appropriate. No doubt, for many accounting practitioners, much work remains to be done to fully meet GDPR compliance requirements. Between now and the end of May, firms new  to the process will need to examine their existing data processing, review their data protection policies, procedures & controls, and identify any gaps that need to be addressed. Following on from this, firms will need to implement any changes required in a structured documented manner to meet the needs of GDPR and continue to show full compliance long after the implementation date. The Institute will continue to assist members on your GDPR compliance journey, with ongoing updates to our available guidance in this area and, should you have a specific query in this area, please feel free to contact the Practice Consulting Team.

Conal Kennedy writes: In the past few years, accountants in practice have had to deal with a wave of change that has washed over them, including the new accounting frameworks in the UK and Republic of Ireland. In both jurisdictions, small and micro company regimes have been introduced which are generally welcome, but like any change in standards, can present challenges in just getting it right first time. In Practice Consulting we have given assistance and support to a large number of members and firms as they applied the new frameworks. Most of the firms that we have encountered have been successful in the transition process. However, we thought that you would be interested in a list of some of the more common issues that we have encountered, with a view to avoiding them, of course! OK, so here’s what we have observed… Directors’ remuneration disclosures. In ROI, including the directors’ remuneration information on the face of the profit and loss account does not mean it can be omitted from the abridged financial statements.  Section 353 of the Companies (Accounting) Act (‘2017 Act’) specifically requires this information to be included in the abridged financial statements filed with the CRO. Mixing and matching. Care should be taken when early adopting the ‘specified provision’ of the 2017 Act. For instance, we came across some ROI companies preparing statutory financial statements under the small companies regime but using the old abridging rules. Departure from FRS 102 or Company Law. This is expected to be rare and only to arise in very unusual circumstances.  We have seen instances where preparers departed from legislation or standards to account for relatively straightforward transactions and balances. Non-disclosure of critical accounting judgements and estimates. FRS 102, when applied in full, requires these to be disclosed in the notes to the financial statements.  Section 1A of FRS 102 encourages entities applying the small companies regime to disclose critical accounting judgements (but not estimates).  We have seen cases where these disclosures were omitted altogether, or where standard boilerplate wording was used, not reflecting the circumstances of the preparing entity. Connected entity or connected person loans. Under FRS 102, loans which are interest free or are low interest may be required to be classified as financing transactions and valued at the present value of future payments discounted at a market rate of interest if they are due after more than one year. This is a difficult area and some preparers have struggled to apply the accounting standard correctly. In some instances, a loan whose terms were undocumented was mistakenly treated as being due after more than one year. A loan whose terms are undocumented may be considered to be repayable on demand, notwithstanding the intentions of the parties to repay it over a longer period. The solution: if the loan is repayable on demand, then, unless there is an impairment issue, it should be carried at the original transaction price with no adjustment, and as an amount due in less than one year. In ROI, reference may also need to be made to the Evidential Provisions in Sections 236 and 237 of the Companies Act. See also the new concession applying to small entities for loans from persons who are within a director’s group of close family members (including the director), when that group contains at least one shareholder in the entity - for details, please see the Amendments to FRS 102 publication issued by FRC in December 2017 (this publication is also mentioned later in Technical Signpost). We hope that this article will prove useful in identifying issues. Naturally, it is not a comprehensive list in part because we have concentrated on errors which are completely new and particular to the new frameworks. The article has been written in general terms, and should be viewed as a pointer towards issues that may have been overlooked and should not be relied upon.

Conal Kennedy writes: For many years we in Practice Consulting have assisted members to buy, sell and merge their practices. During the recession years, and for some time afterwards, there was very little activity, but in recent times we have been receiving more enquiries and helping more practices. A firm with a recurring fee base has a value based primarily on its goodwill. It is usually preferable to arrange succession from within a practice, but in the absence of this, a sole practitioner approaching retirement age might consider realising the value of the firm by selling the goodwill to a growing practice. There are other circumstances where a practitioner may be interested in selling their practice. On the other hand, many practices have informed us of their intent to purchase, if an opportunity arises. In other cases practices may come together by way of acquisition or merger in order to pool resources and leverage the benefits of increased size and more diverse skillsets. Many mid-sized practices would be interested in offering a senior position or partnership to a dynamic sole practitioner. This possibility might be of interest to a member who has set up on practice relatively recently. The member has found that he or she has the ability to run a business and acquire clients, but the pressures of being entirely alone are just too much. This profession is a people business and in any deal, the human element is always crucial. More important than top line valuations is the ability to trust your counterparty, to establish open communication and a good working relationship. The value of a practice still tends to be based on a multiple of its fee income and the classic 1:1 ratio of recurring fees to practice value is the starting point of many conversations. That said, buyers and sellers should be aware of the changes and pressures arising in recent years due to market forces. The general skill shortage in the profession means that the staff of the practice may be the most important element in judging the inherent value of the practice. Specific purchasers may be interested in purchasing a niche practice with clients that fit specific criteria. There is any number of ways to structure the deal. If a capital sum changes hands, then this may be based paid in stages over time. There may be a clawback based on clients who do not transfer. Separate arrangements need to be made to deal with WIP and debtors that are outstanding at the date of transfer. In general every aspect can be varied by either party to suit the circumstances of the deal. Practice Consulting assists practices to come together. We work in complete confidence. If you are interested discussing any of the matters in this article, please contact Conal Kennedy Tel: 00 353 1 6377396 or Jeremy Twomey  Tel: 00 353 1 6373972.