Failure to comply can have serious consequences.
Medium-sized and large companies must have their annual financial statements audited. This applies to corporations (GmbH, Aktiengesellschaften) as well as to general partnerships (offene Handelsgesellschaften) and limited partnerships (Kommanditgesellschaften) in which no natural person is a personally liable partner.
A company is classified as medium-sized if it exceeds two of the following three criteria at two consecutive balance sheet dates:
- Balance sheet total: €6 million
- Turnover: €12 million
- Average number of employees during the year: 50
A company is classified as large if it exceeds two of the following three criteria at two consecutive balance sheet dates:
- Balance sheet total: €20 million
- Turnover: €40 million
- Average number of employees during the year: 250
Auditors may be certified public accountants (Wirtschaftsprüfer) or audit firms (Wirtschaftsprüfungsgesellschaften). A medium-sized GmbH and a medium-sized partnership subject to audit may also be audited by sworn-in bookkeepers (vereidigte Buchprüfer) and bookkeeping audit firms (Buchprüfungsgesellschaften).
The auditor is elected by the general meeting in the case of a public limited company (Aktiengesellschaft), and otherwise as a rule by the shareholders' meeting.
It is particularly important for companies that are just below the threshold values, and for rapidly growing companies, that management keeps track of these thresholds. If annual financial statements are not audited despite an obligation to have them audited, serious consequences can follow. An unaudited set of annual financial statements cannot be legally adopted and is void. As a result, legal transactions based on those financial statements are also void - for example distributions (Ausschüttungen) or profit-related bonuses (Tantiemen). Distributions and bonus payments may be reclaimed if the annual financial statements are void.
Since annual financial statements must be filed or published in the electronic Federal Gazette (elektronischer Bundesanzeiger), the authorities automatically receive indications as to which financial statements may be subject to audit, and they follow up on these indications. The audit opinion or audit qualification (Bestätigungsvermerk bzw. Versagungsvermerk) in respect of the completed audit must also be published.
Our Recommendations:
- Keep an eye on the threshold values.
- If appropriate, seek advice before the year end as to the extent to which you can influence the critical threshold values. In particular, the balance sheet total can be shaped to a certain extent entirely lawfully at the balance sheet date.
- If your company becomes subject to a statutory audit, appoint the auditor in good time before the end of the first year subject to audit, since the auditor must as a rule be present at the stock-take (Vorratsinventur).
- Do not regard the statutory audit merely as a burdensome obligation. Particularly when an auditor examines your annual financial statements for the first time, the audit can provide you with valuable data and information for the management of your business.