Comment: This weekend, Irish chartered accountants will gather in Galway to assess the hectic pace of change affecting corporate Ireland in recent years.
Since 2001, we have seen two significant pieces of company law establishing hard-hitting enforcement and compliance regimes for companies through the establishment of the Office of the Director of Corporate Enforcement (ODCE) and the Irish Auditing and Accounting Supervisory Authority (IAASA).
The financial services industry has not been left out of this, with the establishment of the Irish Financial Services Regulatory Authority (Ifsra) and the recent granting to it of significant new powers.
These initiatives were the result of perceptions of shoddy corporate behaviour and poor levels of compliance in the Republic. Some of these perceptions were justified, many were not.
Many of the issues being aired in public reflect the sins of the past rather than the present. We cry "crisis" too early and too often. We cannot legislate for absolute honesty or absolutely efficiency and, in attempting to do so, we could cause considerable harm.
Undoubtedly, corporate behaviour has changed. Working with firms, accountants have ensured that Companies' Registration Office and Revenue compliance have significantly improved. The ODCE is presiding over a tougher and perhaps excessively aggressive enforcement regime - business success and failure go hand in hand in successful economies.
The Republic has not been alone in putting in place initiatives aimed at punishing corporate malfeasance and restoring investor confidence. In the US, the Sarbanes Oxley Act has imposed stringent new requirements on company directors and their auditors. Indeed, many Irish firms are affected directly by these measures.
In Europe, new requirements on the use by some companies of international financial reporting standards and for auditors the use of international standards on auditing are aimed at improving competitiveness, growth and transparency of financial reporting. Such initiatives are to be applauded; effective and appropriate frameworks for financial reporting and auditing are vital for the proper operation of capital markets.
Further European initiatives aimed at improving corporate behaviour include proposals for a common corporate governance framework across Europe, developing a common approach to the oversight and monitoring of audit firms and other professionals across the EU.
It is little wonder that we hear daily cries of "stop" from many businesses and their representative bodies. A case in point is the proposed requirement for directors' compliance statements contained in the Companies (Auditing and Accounting) Act 2003.
While it is important for the Republic to meet the best international standards of corporate practice, any initiatives that put at risk the State's competitive position in the international arena have the potential to jeopardise the successes we have enjoyed over the past 10 years. This is particularly the case as we contemplate the liberalisation of the European services directive.
The achievements of the Celtic Tiger have been built on our competitive advantages of a supportive environment for business growth, a benign corporate tax regime, an educated and adept workforce, and a willingness of government, business and trade unions to put aside traditional differences and work together. We have done well; so, do we need more laws and regulations, thereby running the risk of stifling our continuing success?
It's now time to draw breath; sentiments echoed last week by Charlie McCreevy, European Commissioner in charge of the Internal Market and Services, when addressing a conference of chartered accountants in Brussels. "I intend to ensure that, in moving forward, the EU does so without stifling the economy and that only regulatory initiatives with real added value are undertaken. There should be no unnecessary red tape which will hinder entrepreneurship," he said.
Noble and apt sentiments, and ones that can just as easily apply to our situation as we embark on an era of EU expansion, with new member states hungry to attract international business and envious of the Republic's recent successes.
In fairness to Taoiseach Bertie Ahern, he has at least recognised that there is a problem. In launching the White Paper Better Regulation, he referred to the "regulatory impulse" that we all suffer from.
The State has little to fear from the reforms being progressed in Europe. The danger lies in layering unnecessary domestic legislation on top of European reforms, thereby threatening the Republic's competitive position. And, while we are at it, let's take the opportunity to examine the legislative framework we already have.
Our nearest neighbour has an audit exemption threshold of €7.5 million; our threshold is €1.5 million. Our nearest neighbour has introduced limited liability partnerships, which provide a more flexible framework for conducting business; we have not. Our nearest neighbour allows listed companies to produce summary financial statements for shareholders; we do not. Our nearest neighbour has announced proposals to review the issue of auditor liability; there is no such initiative in the Republic.
It's time to take stock. The merit of what we have done in the past decade should only be assessed on the basis of how it prepares us for the future.
There is no issue, no matter how fundamental it seemed at the time, that should not be kept under review.
Our regulatory environment will increasingly be a key factor in our corporate success or failure.Appropriate and balanced legislation - yes; proper enforcement - yes; but let's not make it any more difficult than it already is to do business in the State.
Terence O'Rourke is president of the Institute of Chartered Accountants in Ireland
