If you are a company incorporated in the Isle of Man, you may wonder whether you need to appoint an auditor and have your financial statements audited. The answer depends on several factors, such as the type of company, the size of the company, the nature of the business and whether the company is listed on a regulated market.
In this blog post, we will explain the general auditor requirements for Isle of Man companies, as well as some exceptions and exemptions that may apply.
General Auditor Requirements
Auditors must meet the qualification requirements contained in Isle of Man company law in order to be eligible for appointment as auditor of any company incorporated in the Isle of Man. The main requirements are listed in sections 14 to 14H of the Companies Act 1982 (‘the Act’).
According to section 14 of the Act, an auditor must be a member of one of the six ‘recognised accountancy bodies’ specified in section 14F. These are:
- The Institute of Chartered Accountants in England and Wales
- The Institute of Chartered Accountants of Scotland
- The Institute of Chartered Accountants in Ireland
- The Association of Chartered Certified Accountants
- The Chartered Institute of Management Accountants
- The Chartered Institute of Public Finance and Accountancy
In addition, an auditor must not be disqualified from acting as an auditor under section 14A of the Act. This includes situations where the auditor is an officer or employee of the company, or has a direct or indirect interest in the company.
The qualification requirements apply to ALL companies incorporated under either the Companies Act 1931 or the Companies Act 2006, irrespective of where they are located, where they conduct business, what business they conduct or whether they are public or private companies.
Regulated Market Requirements
In addition to the above, any Isle of Man-incorporated company that is admitted to trade on a European Union ‘regulated market’ (including FTSE main market) must be audited by a firm that is listed on the Register of Recognised Auditors. This is a register maintained by the Isle of Man Financial Services Authority (‘the Authority’) that contains firms that have been approved by the Authority to audit companies that are subject to EU audit regulation.
The Register of Recognised Auditors can be accessed on the Authority’s website: https://www.iomfsa.im/auditors/register-of-recognised-auditors/
Audit Exemption
Some Isle of Man companies may be eligible for audit exemption if they meet certain criteria. Audit exemption means that the company does not need to appoint an auditor or have its financial statements audited.
The criteria for audit exemption vary depending on whether the company is incorporated under the Companies Act 1931 or the Companies Act 2006.
For companies incorporated under the Companies Act 1931, audit exemption is available if:
- The company is not a public company
- The company is not a banking or insurance company
- The company is not a member of a group that is required to prepare consolidated group accounts (or would be so required save for any applicable exemption)
- The company satisfies two out of three conditions relating to its turnover, balance sheet total and number of employees
- Turnover: The company’s turnover in that year does not exceed £5.6 million.
- Balance Sheet Total: The company’s balance sheet total does not exceed £2.8 million at any time during that year.
- Number of Employees: The company employs no more than 50 persons at any time during that year.
Companies incorporated under the Companies Act 2006 do not require an audit under company law, however there may be other reasons they require an audit such as:
- The company is licensed and regulated by the Isle of Man FSA
- The company is licensed regulated by the Isle of Man GSC
- The company has financing and the lenders require an audits
- The company shareholders or group request that the company is audited
Conclusion
In summary, whether an Isle of Man company needs to have their accounts audited depends on various factors. It is important for companies to understand their legal obligations and seek professional advice if they are unsure. Failing to comply with auditor requirements may result in penalties and sanctions from the Authority or other regulators.