Auditing

Objectives behind financial statement audits:

• to check whether the annual financial statements comply with the pertinent legal requirements and accounting standards (e.g. German Commercial Code, IFRS)
• to ascertain whether accounting has been conducted correctly
• to assess the company’s economic situation
• to provide increased transparency and credibility towards shareholders, investors, and creditors

The auditor issues either an unqualified or qualified audit opinion, depending on whether the annual financial statements give a fair and true view of the company’s economic situation. In the event of material misstatements in the financial statements, the auditor may instead issue an adverse opinion. This indicates that the financial statements do not give a fair and true view of the company’s economic situation.

The Corporate Sustainability Reporting Directive (CSRD) is one of the three pillars of the EU’s sustainable finance framework alongside the Sustainable Finance Disclosure Regulation (SFRD) and the EU Taxonomy Regulation. Each of these regulations work to support directing cash flows on the European capital markets towards sustainable investments, namely investments in companies that engage in green economic activities.

The Corporate Sustainability Reporting Directive places stricter demands on companies. Sustainability is becoming an increasingly crucial key to success. The introduction of mandatory reporting has also elevated transparency on the topic of sustainability. In addition, the German Supply Chain Due Diligence Act (LkSG) places further requirements in the realm of corporate strategy, processes, and reporting.

Are you a medium-sized company grappling with implementation and reporting requirements under the new regulations? If so, we’ve got you covered. We can help you to set your sustainability targets and strategies and to prepare your sustainability report. Our services involve auditing your report and providing advice.

Special audits are sporadic, isolated audits conducted when circumstances require. The objective of a special audit is to check whether a client is fulfilling their obligations.

In legislation and case law, special audits are divided into three groups:

• required by law
• provided for by law
• voluntary special audits

Certain conditions need to be met for a statutory special audit, as the name entails, to permit it to automatically be conducted according to the pertinent law. If a statutory special audit is not conducted even though the conditions have been met, the organisation appointed to conduct the audit is liable to prosecution and must also undergo an audit. Statutory special audits are predominantly carried out subject to commercial law. These encompass the formation audit in accordance with Section 33 of the German Stock Corporation Act (AktG) and the post-formation audit in accordance with Section 52 of the German Stock Corporation Act.

A statutory audit may optionally be conducted for special audits provided for by law. In other words, if a relevant condition is met, a special audit may, but does not have to be carried out. The organisation responsible for conducting the audit is granted certain discretion when it comes to making the decision as to whether to conduct a statutory special audit. In most cases, special audits are conducted because the organisation responsible for conducting the audit does not want to be accused of failing to carry out an audit, as it is also audited by the next higher authority.

Voluntary special audits refer to all special audits that are not prescribed or provided for by law. The audit is carried out at the suggestion and in the interest of the authority that expects a positive audit result from the voluntary special audit.

Examples of voluntary special audits include the embezzlement audit and the creditworthiness audit, which are carried out in the private sector by the designated auditing bodies. These special audits can be commissioned both internally and externally.

Financial due diligence involves a partial audit, otherwise known as the due diligence audit. This audit provides a precise analysis of a company and gives potential buyers or investors an overall picture of the company for corporate transactions.

For example, if a company wishes to invest in another company, experts selected in advance analyse the financial situation of the company in question as part of the financial due diligence process. An external auditor usually carries out this partial audit and analyses the main influencing factors and the opportunities and risks presented by the financial situation of the targeted company. In short, the company’s assets and its financial and earnings position are scrutinised in order to minimise the risk of a bad investment and facilitate a successful takeover or investment.

A company valuation is usually carried out in relation to the purchase and sale of companies, company shares, or investments. Potential lenders may also require a company valuation.

A company valuation determines the value of the company, the value of a company share, or the value of individual departments within a company. In order to be considered legally valid, a valuation must be carried out by external service providers such as banks or auditing companies.

Several valuation methods may be employed and the method used depends on the objective pursued by the client and user of the valuation with regard to the company to be valued.

There are many reasons why companies opt to switch to international accounting standards: The integration of an acquired group into a listed, multinational corporation, going public on the regulated market, and presenting international investors with comprehensible financial statements.

Terms:
IFRS stands for International Financial Reporting Standards = recognised uniform guidelines for corporate accounting. IFRSs are issued by the International Accounting Standards Board (IASB).

US GAAP
US GAAP stands for United States Generally Accepted Accounting Principles = US GAAP defines the US accounting standards for the annual financial statements of companies based in the USA

The aim of both terms is to provide information about the company’s financial situation and its ability to generate cash flows in the future.

As international accounting (IFRS/US GAAP) is extremely complex and subject to constant change, and is usually only published in English, employees who work in this field require specialist qualifications and continuous further training. Needless to say, this involves substantial investments in terms of both time and money, which you can save by consulting us.

Business consulting encompasses a variety of tasks and topic areas, making it a highly diverse field.

We are happy to advise every company, regardless of whether it is still in the start-up phase or has been active on the market for several years. After all, there is always a need for improvement and every enterprise can benefit from advice, whether with regard to logistics, controlling, or investments. As a highly diversified field, business consulting can be split into five main groups:

1. Start-up consulting
   Opportunity/risk analysis, advice on choosing the right legal form, help with drawing up a business plan
2. Tax structuring consulting
   Tax contract drafting, restructuring, gift and inheritance tax advice
3. General management consultancy
   Cost accounting, profitability/investment planning, rating consulting
4. Succession consulting
   Advice and support in the selection of a suitable successor, including a review of the tax implications of different handover approaches along with other aspects. Business management consulting usually covers a longer period of time, meaning that we, the consultants, are always at the company’s side, can observe the company’s development and intervene in certain situations with our experience in order to react to unexpected changes or special circumstances.

The term corporate planning is used to summarise numerous processes in which future structures or procedures are defined on the basis of predetermined KPIs. The defined measures are then used to help a company achieve its defined targets by set deadlines. Corporate planning is therefore the core task of management and controlling.

In corporate planning, a distinction is made between operational planning (= short term), which addresses target attainment within one year, tactical planning (= medium term), which addresses target attainment in two to five years, and strategic planning, which addresses the fundamental overarching goals of an organisation over a longer period of time.

Corporate planning can also be organised according to subtopics:

Budget planning
Statement of costs and revenues or income and expenses expected in the planning period

Balance sheet planning
Statement of expected asset positions at the end of the planning period

Investment planning
Statement of expected investments and divestments in fixed assets

Financial planning
Statement of cash flows expected over the course of the implementation of the resolved measures or earmarked to finance the measures

Corporate planning forms the basis of the management cycle.
To start off, the company’s targets are defined in the planning phase and targeted practical procedures are established. The developed measures are then rolled out. An actual/target comparison is then carried out to review whether the predefined targets have been achieved or not. If deviations are identified, the measures are optimised for the subsequent period and any errors are corrected. The cycle then begins anew in order to continually adapt and optimise the processes.

Our firm was appointed as a registered quality control auditor by the German Chamber of Public Accountants and conducts quality control audits of auditors and auditing companies. The aim behind quality control is to review the appropriateness and effectiveness of the quality assurance system in place at an audit firm, in particular compliance with the relevant professional practice regulations (WPO, WP/vBP professional code of conduct and professional rules), independence requirements, the quality and quantity of the resources used and the remuneration charged.