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Service Profile

We have broken down our service profile into four segments. We inform you of the main aspects of our service profile and things worth knowing about each segment in tabular form.

Things worth knowing about auditing annual accounts & special audits

Current developments in auditing

The legal framework conditions for auditing have been subject to considerable changes in recent years in the wake of a series of new laws. The legislation aims to strengthen the independence of auditors which, as a consequence of numerous accounting scandals in the recent past, has had to be put in question, as well as tightening the professional supervision of auditors.

Amendments to the auditor directive (WPO)

The system of quality controls was introduced in the auditing profession as early as 1st January 2001. § 57a WPO states that auditors and auditing companies must undergo an external quality control under the current status of legislation every 3 years, if these perform legally stipulated audits. The examination is made by an auditor (auditor for quality controls) registered with the Chamber of Auditors (WPK). The quality control commission set up by the WPK is responsible for all matters of professional supervision, including monitoring quality controls.
The Final Auditor Supervision Act (APAK) of 27/12/2004 reacted to the criticism on monitoring the profession solely by other members of the profession. This deploys a final auditor supervisory commission independent of the auditing profession as the public watchdog with the authority of ultimate decision. This now supervises the profession and, among other things, examines whether the WPK performs the professional supervision with which it is charged.
The draft of the Professional Supervisions Reform Act of 3rd March 2006 foresees an extension to the examination options and responsibilities of the WPK in questions of professional supervision. If required, the WPK is to be given the authority to search the business premises of members of the profession and confiscate documents. Auditor will no longer be able to invoke their duty of silence regarding their clients in the professional supervision process operated by the WPK.

Amendments to the German Commercial Code (HGB)

§ 319 and § 319a HGB passed within the framework of the Accounting Law Reform Act of 4th December 2004 contain a significant extension and tightening of the grounds for excluding an auditor from an audit. In particular, the catalogue of irresolvable activities connected with auditing companies listed on stock markets was extended. For example, auditors are excluded from the audit if they have provided legal or fiscal consulting services in the financial year to be audited which go beyond simply pointing out alternative arrangements, and which directly and not insignificantly influence the depiction of the situation of assets, finances and earnings.

The Accounting Law Reform Act likewise introduced the obligation of stating the final auditor's fee for companies listed on stock markets. The details should differentiate between fees for the audit, other confirmation or valuation services, tax consultancy services and other services.

The Financial Statements Control Act of 15th December 2004, via § 342b HGB, empowered the Federal Ministry of Justice to recognise a body organised under private law to investigate infringements against financial reporting regulations (inspectorate) by contract. The registered association "Financial Reporting Enforcement Panel” (Deutsche Prüfstelle für Rechnungslegung (DPR)) was recognised as the inspectorate in the sense of § 342b HGB on 30th March 2005. It started work on 1st  July 2005. The DPR examines whether the annual financial statements and management reports lastly established, or the consolidated financial statements and group management reports lastly approved, correspond to legal regulations. It becomes active in the following cases:

  1. If there is a good reason to suspect an infringement of financial reporting regulations (trigger audit)
  2. At the request of the Federal Office for Financial Services Supervision
  3. Without a particular reason (spot check audit).

The only companies examined are those whose shares are admitted on a stock exchange for trading on an official or regulated market.
Legislators have thus created a control body which works in addition to the legal final auditor and which is intended to increase public trust in the financial reporting of capital market oriented companies (enforcement of financial reporting standards). Following this development the BilMoG introduced new regulations e.g. regarding the withdrawl from an audit engagement, reasons for exclusion from the audit engagement - especially regarding networks - and reporting requirements of the former auditor to the new auditor.

Changes to the auditing standards

The auditing standards of the German Institute of Certified Public Accountants (Institut der Wirtschaftsprüfer (IDW)) were revised and formally adapted to the International Standards on Auditing (ISA) within the framework of the changes made to professional appraisals and opinions of the IDW in the wake of the new arrangements for audits made by the Corporate Control and Transparency Act (KonTraG) which entered force on 1st May 1998. This then described the auditing standards in agreement with the international standards on auditing from the professional view of auditors on pertinent auditing questions and have applied since then as the principles of the proper performance of audits in Germany laid down by IDW. Direct application of the ISA by members of the profession is foreseen in the Directive 2006/43/EC of the European Parliament and of the Council passed on 17th May 2006. The adoption of the ISAs, the application of which is to become mandatory in the EU, is nevertheless reserved for the EU Commission. Upon their adoption by the EU Commission and the national implementation, the ISAs will have the character of law in future and insofar be binding on the auditor. After a long delay und sanktions announced by the European Union the ISAs were finally implemented into national legislation by adoption of the BilMoG.

This development firstly promotes the successive implementation of uniform, international auditing standards. It secondly represents a reaction from the standard-setters in this respect  to international experience, which is not least influenced by accounting scandals which have occurred lately. As a result, this development codifies the scope of work and the level of quality of the auditing work to be performed. In practice, this has already resulted in a general expansion in the scope of the auditing work to be performed. This development is not seldom emphasised by advances in technical options (see, for example: IDW Auditing Standard: audits deploying information technology (IDW PS 330)) or by changing expectations on audits (see, for example: IDW Auditing Standard: To uncover irregularities during an audit  (IDW PS 210). As a result, the audit thereby requires that the company being audited operates a properly functioning and effective financial reporting system, including appropriate internal control systems, and becomes a process-oriented audit both, with regard to the auditing work to be performed and to the commissioning organisation.