Throwing the baby out with the bath water? : A critical appraisal of the Companies (Auditing and Accounting) Act 2003

AuthorCarol Fitzgerald and Leonard Durac
Throwing the baby out with the bath water? : A critical appraisal of
the Companies (Auditing and Accounting) Act 2003
By Carol Fitzgerald and Leonard Durac
The Companies (Auditing and Accounting) Act 2003 represents the Irish legislature’s
most significant company law initiative of a generation. Introduced in the wake of a
series of both domestic and international accounting scandals, it is, in many ways, the
domestic equivalent of the US Sarbanes-Oxley legislation, which was rushed through
as a response to the Enron and WorldCom debacles.1
Introducing the proposals before the Dáil, the Minister of State for Enterprise, Mr
Michael Ahern, described the legislation as “a road map to ensure the highest
commercial standards.”2 Whether this proves to be true, however, will only become
apparent over time.
The Act is without precedent in its imposition of a number of crucial new duties on
many Irish companies and their directors personally, related to their financial
statements, their compliance with laws and their relations with auditors.3
However, in keeping with many similar laws, that have either been passed or are
being prepared for enactment in other jurisdictions, the Act has been roundly
criticised during the legislative process for what were perceived to be excessively
rigorous and harsh governance and compliance provisions as part of a newly
inflexible regulatory regime.
Legislators were placed in the invidious position of trying to introduce sufficient
reforms to placate angry investors and restore a modicum of trust to the auditing and
1 For a thought-provoking analysis of the Sarbanes-Oxley legislation, see James Tac kett, ‘Sarbanes-
Oxley and audit failure’. (2004) Vol. 19, No. 3, Managerial Auditing Journal, p p. 340-350
2 See Marie O’Halloran, ‘Minister praises law to regulate auditors’, Irish Times, 17 October 2003
3 See ‘Regulators get tough on Irish accountants’, May 2003, Vol. 131, Issue 1 317, Accountancy, p. 14

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