Medium-sized and large companies must have their annual accounts audited. This concerns Corporations (GmbH, Stock Corporations), General Partnerships, and Limited Partnerships in which no natural person is a personally liable partner. A company is considered medium-sized if you assign two of the following three characteristics to two successive balance sheet dates:
Balance sheet total: € 6 million
Turnover: € 12 million
Annual average number of employees: 50
A company is considered large if you assign two of the following three characteristics to two successive balance sheet dates:
Balance sheet total: € 20 million
Revenues: € 40 million
Annual average number of employees: 250
Auditors can be certified public accountants and auditing companies. The auditor is appointed by the general meeting of shareholders.
Particularly for companies that are just below the threshold, and for strongly growing companies, it is very important that management is aware of threshold values. If an annual financial statement is not audited despite of the obligation to do so, there is a threat of serious consequences. An unaudited financial statement cannot be legally effective and is void. As a result, legal transactions that are based on financial statements, are null and void. This applies, for example, to distributions or profit-related Royalties. The distributions and bonus payments might be reversed in the event of invalidity of annual financial statements and must be reclaimed.
Since annual financial statements are published in the electronic Federal Gazette Authorities will automatically receive information which annual accounts may be subject to an audit, and follow up on these indications. The auditor’s report or refusal to issue a report has also to be published.
Get advice before the end of the year if you might exceed 2 thresholds but still want to avoid the audit requirement. You can legally influence the balance sheet total to a certain extent through accounting options and factual measures. But do not consider the final examination as just a needless duty. Especially when an Auditor audits your annual accounts for the first time, he can help you by providing valuable data and information for your corporate management.