By law every company is required to keep proper books of account. During 2010, the Office of the Director of Corporate Enforcement received 36 reports from auditors of companies that had failed to maintain proper books of account. There was 1 conviction and 60 cautions for failure to do so. It is important therefore for companies to comply with this legal obligation.

The books of account must:

• Correctly record and explain the transactions of the company
• Enable the financial position of the company to be determined with reasonable accuracy at any time
• Enable the directors to ensure that the annual accounts comply with the requirements of the Companies Acts and relevant accounting standards
• Enable the annual accounts of the company to be readily and properly audited
• Be kept on a continuous and consistent basis and entries should be made in a timely manner and should be consistent from one year to the next
• Give a true and fair view of the state of affairs of the company and explain its transactions
• Be kept in written form or in other form that may be readily accessible and convertible into written form

The books of account must contain:

• Entries of all monies received and expended by the company and the matters in respect of which the receipts and expenditure takes place
• A record of all assets and liabilities of the company
• Further specific information depending on whether the company’s business involves dealing with goods or the provision of services

The books of account must be kept at the registered office of the company or at such other place as the directors think fit.  However, if they are kept outside Ireland, appropriate accounts and returns must be sent to and kept at a location in Ireland at intervals not exceeding six months.  The books of account must also be open to inspection by the directors at all reasonable times without charge.

Where a company is being wound up and is insolvent and it has failed to keep proper books of account in accordance with company law, the court may impose personal liability on every officer or former officer of the company who is in default for all or part of the debts of the company. In addition, the court may impose a criminal sanction on every officer of the company who is found to be in default which may be a fine or a prison sentence of up to six months or both. 

Contributed by Ruairi Bourke.

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