This article is for directors and company secretaries of Irish public interest entities who need to understand audit committee requirements under the Companies Act 2014.
If you're wondering whether your company needs an audit committee, who should be on it, or what responsibilities it must fulfill, this guide covers the legal requirements, size thresholds, membership rules, and core oversight functions you need to know.
Key Takeaways
• Public interest entities including banks, insurers, and listed companies must establish audit committees with at least three non-executive directors. • Smaller PIEs can avoid a separate committee if they don't meet two of three thresholds: €20M balance sheet, €40M turnover, or 250 employees. • At least one audit committee member must be independent and have competence in accounting or auditing, identified in the annual report. • Audit committees must monitor financial reporting, internal controls, and statutory audits while reviewing and recommending auditor appointments to shareholders. • The committee serves as the primary contact with external auditors and must monitor their independence, particularly regarding non-audit service fees.
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 a public interest entity (PIE), which includes banks, insurance companies, and listed companies. If you're a smaller PIE that doesn't meet two of three size thresholds (€20m balance sheet, €40m turnover, or 250 employees) for two consecutive years, your board can perform audit committee functions instead of establishing a separate committee.
Can a small listed company avoid having an audit committee?
No, all companies with securities admitted to trading on regulated markets like Euronext Dublin must have audit committees regardless of size. Even small listed companies cannot use the size threshold exemption because they automatically qualify as public interest entities due to the nature of public markets.
How many people do I need on my audit committee?
You need at least three members, all of whom must be non-executive directors. At least one member must be independent and have competence in accounting or auditing, and you must identify this person in your annual report.
What does "independent" actually mean for audit committee members?
An independent director has no relationships or circumstances that could affect their objective judgment about your company. They cannot have been an executive director or employee within the previous three years, cannot have significant business relationships with the company, and close family relationships with other directors or senior management can also compromise independence.
What qualifies as "competence in accounting or auditing"?
Competence means knowledge and experience in financial reporting, accounting standards, and audit processes gained through education, training, or professional experience. Professional qualifications from recognised accountancy bodies typically demonstrate this, as can relevant experience as a CFO or financial director who understands financial statements, accounting standards, and internal control principles.
What are the main responsibilities my audit committee needs to handle?
Your audit committee must monitor the financial reporting process, internal controls and risk management systems, the internal audit function (if one exists), and the statutory audit of financial statements. The committee must also review and monitor auditor independence and recommend auditor appointments to shareholders, reporting regularly to the board on all these functions.
How does the audit committee work with our external auditors?
The committee serves as the primary contact point between your board and external auditors, meeting privately with them to discuss issues without management present. You should understand the audit scope and key risks, review the auditor's management letter identifying control weaknesses, and monitor auditor independence by reviewing non-audit services and comparing fees to ensure economic dependence doesn't compromise independence.
Can our board just handle everything instead of delegating to the audit committee?
No, while the board retains ultimate responsibility for financial statements and auditor appointments, it cannot delegate all audit matters to avoid the committee requirement if you're legally required to have one. The audit committee makes recommendations to the board, but the board makes final decisions, and shareholders vote on auditor appointments based on board recommendations following committee input.
Should we set up an audit committee even if we're not legally required to have one?
Many larger private companies voluntarily establish audit committees as good governance practice even when not mandatory. Voluntary committees can follow the same structure and responsibilities as mandatory committees, typically meeting quarterly and having clear terms of reference approved by the board setting out their role, responsibilities, and operating procedures.
