This article is for company directors and business owners in Ireland who need to understand if their company requires an audit committee and how to set one up properly.
If you're wondering whether your company meets the public interest entity thresholds, who can serve on the committee, or what your legal obligations are, this guide covers the requirements, member qualifications, and step-by-step setup process.
Key Takeaways
• Public interest entities including listed companies, banks, and insurance firms must establish audit committees under EU regulations. • Audit committees require at least one member with accounting or auditing expertise, and all members must be non-executive directors. • Companies meeting two of three thresholds (€20M balance sheet, €40M turnover, 250 employees) for two consecutive years qualify as PIEs. • Audit committees should meet at least quarterly, aligning meetings with financial reporting cycles and external audit schedules. • Failure to establish a required audit committee can result in IAASA sanctions, audit qualifications, and potential director liability.
Laura Ryan is a practising Barrister at the Bar of Ireland. She graduated from the Honourable Society of King’s Inns in 2024, having previously qualified and practised as a Chartered Accountant in a big four accounting firm.
Your company needs an audit committee only if it's classified as a Public Interest Entity (PIE) under EU regulations. PIEs include listed companies, credit institutions, insurance undertakings, and large entities exceeding specific thresholds. Private companies that aren't PIEs generally don't need audit committees under Irish law.
What are the size thresholds that trigger audit committee requirements?
Companies must meet at least two of three conditions for two consecutive years: balance sheet total exceeding €20 million, net turnover exceeding €40 million, or average employee count exceeding 250. However, these thresholds primarily determine PIE status rather than audit committee requirements alone. Small companies with balance sheets under €6 million, turnover under €12 million, and fewer than 50 employees are generally exempt.
Can our executive directors serve on the audit committee?
No, executive directors cannot serve on audit committees due to independence requirements. Committee members must be non-executive directors who aren't involved in day-to-day management. At least one member must have competence in accounting or auditing.
How many people should we have on our audit committee?
While Irish law doesn't specify minimum committee size for all PIEs, credit institutions must have at least three members. The optimal size is four to five members to provide diverse expertise and maintain quorum flexibility. Avoid committees larger than six members as they become less effective.
Can we use our full board instead of creating a separate audit committee?
Yes, small PIEs can use the board of directors as a whole instead of establishing a separate committee under Section 167 of the Companies Act 2014. The board must then fulfill all audit committee functions collectively. This alternative arrangement is only available to qualifying entities.
How often does our audit committee need to meet?
Your committee should meet at least quarterly to fulfill oversight responsibilities effectively. Many committees schedule meetings around key financial reporting dates, including before year-end audits, when finalizing accounts, and when external auditors present audit plans. Additional meetings may be necessary when significant issues arise.
What happens if we don't establish a required audit committee?
Failure to establish a mandatory audit committee constitutes non-compliance with EU regulations, and the Irish Auditing and Accounting Supervisory Authority (IAASA) can investigate and impose sanctions. Non-compliance may result in audit qualification, investor concern, potential listing issues, and possible director liability for governance breaches.
Can one person serve on audit committees for multiple companies?
Yes, qualified individuals can serve on audit committees of different companies, but time commitments must be manageable and conflicts of interest avoided. Ensure you have sufficient time for each committee's needs and avoid competing or conflicting business relationships. Excessive commitments may compromise effectiveness and raise independence concerns.
