The new audit law has been in force since the beginning of 2008
Small businesses, such as advertising and media agencies, can now decide whether they want to have their books audited by an external firm. By Michael Krampf, attorney and editor at the Beobachter Advisory Center.
Until now, every public limited company (AG), no matter how small, had to submit its annual financial statements to an auditor. The law also did not distinguish between economically significant companies and micro companies in the scope of the audit. In contrast, there was no audit requirement for limited liability companies (GmbH).
The new audit law came into force on January 1, 2008. The audit obligation now applies not only to the AG, but also to the GmbH. The scope of the audit, however, depends on the economic importance of a company: For large companies, for example, the regulations were tightened to prevent a collapse of companies as in the case of Swissair. They are now subject to the so-called ordinary audit. Small and medium-sized enterprises (SMEs), which also include advertising and media agencies, only have to have their books audited to a limited extent in comparison. The limited audit will not save any money, however, because the scope of the audit is the same as that which has been applied in practice to SMEs up to now.
Waiver is possible
In other words, those who want to save on expenses will dispense with the auditors. This so-called opting-out is now open to all AGs and GmbHs that do not employ more than ten full-time employees and whose shareholders or partners all agree to it.
Around 250,000 companies are faced with the not-so-simple decision of whether to forego an audit in the future. If they choose the less expensive opting-out option: Will they be scrutinized more closely by the tax office and the compensation office in the future? And how will the banks react to a waiver? Will their rating deteriorate so that they have to pay a higher interest rate for a bank loan?
Opting out not always sensible
Today, it is not yet known how authorities and banks will react to an opting-out. But there are situations in which it does not make sense at all for a company to dispense with the auditors:
- Minority shareholders: They are the main shareholder or - in the case of a limited liability company - the main shareholder and manage the agency themselves. Minority shareholders can quickly become suspicious, especially if the company hardly generates any profits.
- Upcoming sale: As a rule, you must provide interested buyers with audited financial statements for the last three to five years.
- Credit obligation: If the loan agreement states that you must submit an audit report to the bank above a certain credit limit, the bank can terminate the agreement if you decide to opt out without its consent.
- Accounting and financial statements without a specialist: If you do the accounting and prepare the financial statements yourself, you lack an external control. You may miss out on permissible tax optimizations.
The new audit law came into force on January 1, 2008. The audit obligation now applies not only to the AG, but also to the GmbH. The scope of the audit, however, depends on the economic importance of a company: For large companies, for example, the regulations were tightened to prevent a collapse of companies as in the case of Swissair. They are now subject to the so-called ordinary audit. Small and medium-sized enterprises (SMEs), which also include advertising and media agencies, only have to have their books audited to a limited extent in comparison. The limited audit will not save any money, however, because the scope of the audit is the same as that which has been applied in practice to SMEs up to now.
Waiver is possible
In other words, those who want to save on expenses will dispense with the auditors. This so-called opting-out is now open to all AGs and GmbHs that do not employ more than ten full-time employees and whose shareholders or partners all agree to it.
Around 250,000 companies are faced with the not-so-simple decision of whether to forego an audit in the future. If they choose the less expensive opting-out option: Will they be scrutinized more closely by the tax office and the compensation office in the future? And how will the banks react to a waiver? Will their rating deteriorate so that they have to pay a higher interest rate for a bank loan?
Opting out not always sensible
Today, it is not yet known how authorities and banks will react to an opting-out. But there are situations in which it does not make sense at all for a company to dispense with the auditors:
- Minority shareholders: They are the main shareholder or - in the case of a limited liability company - the main shareholder and manage the agency themselves. Minority shareholders can quickly become suspicious, especially if the company hardly generates any profits.
- Upcoming sale: As a rule, you must provide interested buyers with audited financial statements for the last three to five years.
- Credit obligation: If the loan agreement states that you must submit an audit report to the bank above a certain credit limit, the bank can terminate the agreement if you decide to opt out without its consent.
- Accounting and financial statements without a specialist: If you do the accounting and prepare the financial statements yourself, you lack an external control. You may miss out on permissible tax optimizations.
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