Audit (Auditing)

Under this headline, we provide you with an overview over our activities in the area of auditing. For further information, you may click on the following items:

Audit of annual financial statements

Audit of annual financial statements

Depending on the size of the company, corporations and partnerships are subject to different degrees of auditing. Small corporations are not subject to an audit, i.e. the documentation of their accounting does not have to be audited by an accountant. However, medium-sized and large corporations are bound by law to have the documentation of their accounting verified by an auditor or a certified public accountant (Article 319 Paragraph 1, Sentence 1 of the Law of Trades, Handelsgesetzbuch/HGB). Only the auditor is authorized to review large corporations.

The scope of the annual financial statement depends on the liability of a company. Corporations and partnerships with no natural person who is unlimitedly liable (GmbH & Co. KG), the annual financial statement consists of a balance sheet, profit and loss account and an annex. Besides the annual financial statement, corporations and the aforementioned kind of partnership have to issue a management report (Article 264 Paragraph 1 in connection with Article 264 a HGB). Sole traders and commercial partnerships, which have a natural person with unlimited liability (OHG, KG) are not subject to these conditions. They are only obligated to prepare a simple annual financial statement according to Article 242 Paragraph 1 HGB, as long as the Law of Publicity (Publizitätsgesetz) is not applicable to them as a large concern.

A large concern is given, if at least two of the following criteria apply on at least three subsequent balance sheet key dates:

  • balance sheet total is greater than 65 million EUR
  • sales revenue is greater than 130 million EUR
  • employment of more than 5.000 employees

As a team of tax consultants, accountants, business economists and attorneys, MerzArnoldWüpper presents you with an experienced, competent team. Our services in the area of auditing include in detail:

  • Legally required and voluntary auditing of companies of all legal forms
  • Auditing of individual and consolidated accounts
  • Auditing of consolidated management reports
  • Performance of statutory audits
  • Auditing of non-profit institutions (foundations and societies)
  • Auditing of formation balance sheets, interim balance sheets and closing balance sheets for reasons of legal requirement or other reasons (acquisition of shares (a participation), increase in capital, incorporation of new associates/partners, resignation of associates/partners)
  • Auditing of specific purpose balance sheets and budgeted balance sheets
  • Plausibility check in preparation of a financial statement
  • Analysis of the annual financial statements with comparison to multiple years and analysis of the success
Special audits

Special audits

In the area of special audits, we do statutory and voluntary audits, which naturally have their focus on statutory audits (especially the German Stock Companies Act; Aktiengesetz/AktG). They do not have to be conducted at regular intervals and are thus only of importance in certain cases. The special audits encompass in detail:

  • Formation audits
  • Audit because of a capital increase
  • Management audit according to § 142 AktG
  • Audit because of illegitimate undervaluation
  • Controlled company record
  • Credit status investigation
  • Embezzlement audit
  • Management audit (focusing on the organization)
  • Audit of cost accounting and prices
Specific audits

Specific audits

Under this topic, we usually offer you annual audits at regular intervals for specific legal forms and classes of business. These can include the following services amongst other things:

  • Accounting and audit according to the Publicity Act (Publizitätsgesetz/PublG) (legal forms falling subject to the PublG are for example sole proprietors and commercial partnerships)
  • Audit of communal establishments (according to State legislature)
  • Audit according to § 53 Act on Budget Principles (Haushaltsgrundsätzegesetz)
  • Management audit/Audit of administrative offences (statutory and voluntary audits)
  • Accounting and Audit of associations
  • Audit according to § 34 Trade, Commerce and Industry Regulation Act (Gewerbeordnung)
  • Due diligence (according to legal guidelines for stock exchange prospectus
Audit of public authorities’ companies

Audit of public authorities’ companies

We support public authorities in the reorganization of their obligations and the strategic adjustment of their companies, accompany them in the development of new controlling systems, the implementation of systems and the realization of connected measures. We also offer expert advice concerning challenging projects of infrastructure, cooperation between the public authorities and other complex plans.

Our package of services for public companies and authorities includes the following:

  • Preparation and Audit of the annual financial statements of communal establishments, associations or corporation taking into account communal specifications
  • Audit of calculations of concession levies
  • Organisational consulting concerning the restructuring of communal companies
  • Monitoring of planned privatizations
  • Preparation or Audit of budgets and calculations of remuneration
  • Consulting in the context of budget consolidation
  • Support of the implementation of new communal financial management (introduction of double-entry bookkeeping)
Audit and reporting of charitable corporate enterprises

Audit and reporting of charitable corporate enterprises

Reporting of charitable corporate enterprises (foundations, associations, companies with limited liability) is generally only performed because of an obligations arising out of statutes or the articles of association, by order of a supervisory authority or within the limits of a voluntary assignment.

Only corporate enterprises that also carry on a trade are obligated to conduct an audit if the characteristics of the PublG apply to them or if a Law of Foundation (Stiftungsgesetz,StiftG, e.g. in North Rhine-Westphalia) is applicable to them.

Within the legal limits and the needs of our clients, we audit for charitable corporate enterprises:

  • Administration of foundations, associations, partnerships with limited liability
  • Cash management (revenues and expenses)
  • If a trade law certificate (according to § 322 Section 1 HGB) is required, audit of: accounting, annual financial statements, annex and possibly a management report if needed
  • Truth and fairness of the management
  • Application of funds according to the articles of association and the intention
  • Compliance with taxation regulations – especially the taxation law concerning benefits to the public
  • Analysis of the commercial activities
Appraisal of business

Appraisal of business

The value of a company is determined by the profits it can earn in the future based on its factors for success, which include its innovation, products and position on the market, the internal organisation, its employees and its management.

Provided that only financial targets are pursued, the value of a company is deduced from its ability to generate financial surpluses for its shareholders by the co-action of all factors that influence the profitability.

For our appraisals of business, we regularly use the procedure for profitability (Ertragswertverfahren) or the Discounted-Cashflow-Method (DCF). These procedures are set in the Statements of the Institute of Accountants (Verlautbarungen des Instituts der Wirtschaftsprüfer, IDW), especially in the Standard IDW S1, and are commonly accepted in jurisdiction.

The values of companies we determine can be the basis of:

  • The selling or buying of a company or a part of a company
  • The determination of an issuing price (as well as the bookbuilding margin) when a company is launched at a stock exchange (so-called Initial Public Offering)
  • Foundation of a company with the contribution of assets
  • Admittance of new partners into an existing company
  • Merger of existing companies
  • Demerger and split-up of a partnership into sole proprietorships
  • Retirement of a partner after cancellation
  • Cash compensation of minority shareholders
  • Compensation of minority shareholders by stocks of the controlling company
  • Decisions about the liquidation of a company
Assignments concerning trusts

Assignments concerning trusts

By taking over tasks concerning trusts, we consult and represent clients who have interests in economic matters, e.g.

  • The administration of estate for a third party
  • Retaining of company’s shares
  • Realization of partners’ rights
  • Execution of a will (check also Area of Activity: Legal Consulting, law of succession)
  • Administration of estates (law of succession)
  • Function as custodian and curator of the estate
  • Assumption of a mandate on the supervisory or advisory boards of a company
  • Administration of a foundation
  • Supervision and administration of credits and other securities
  • Liquidations
  • Administration in composition proceedings
Reorganisation

Reorganisation

Financial measures consist of very complex decisions. They can have different causes and always require very substantial preparations and analyses. For example, refinancing is always called for if a company has an inadequate financial structure and overextends itself, e.g. because a too high burden of credit, not enough equity capital or too many suppliers’ debts.

Together, we will find a solution which is acceptable for all parties involved, partners as well as creditors, clients and suppliers, and that enables the company a secure future.

For the financial restructuring, we use the befitting measures, depending on the individual needs:

  • Allocation of new funds, e.g. through increase of capital, the incorporation of new partners, borrowing of moneys, and investments
  • Decrease of the burden of the net debt service, e.g. by deferment of payment, remission of interest and debts, extension of repayment and adjustment of the net debt service to the actual service capability of a company
  • Reorganisation: transformation of short-term credits to long-term loans, transformation of credits to shares, and others
  • Inclusion of public subventions, grants, guarantees, loans
  • Application of alternative financial measures
  • Improvement of the management of liquidity and claims
Recapitalization

Recapitalization

Financial measures consist of very complex decisions. They can have different causes and always require very substantial preparations and analyses. For example, refinancing is always called for if a company has an inadequate financial structure and overextends itself, e.g. because a too high burden of credit, not enough equity capital or too many suppliers’ debts.

Together, we will find a solution which is acceptable for all parties involved, partners as well as creditors, clients and suppliers, and that enables the company a secure future.

For the financial restructuring, we use the befitting measures, depending on the individual needs:

  • Allocation of new funds, e.g. through increase of capital, the incorporation of new partners, borrowing of moneys, and investments
  • Decrease of the burden of the net debt service, e.g. by deferment of payment, remission of interest and debts, extension of repayment and adjustment of the net debt service to the actual service capability of a company
  • Reorganisation: transformation of short-term credits to long-term loans, transformation of credits to shares, and others
  • Inclusion of public subventions, grants, guarantees, loans
  • Application of alternative financial measures
  • Improvement of the management of liquidity and claims
Audits of annual financial statements and consolidated accounts using the standards of IFRS/IAS

Audits of annual financial statements and consolidated accounts using the standards of IFRS/IAS

The International Accounting Standards (IAS) are accounting regulations that were passed by the International Accounting Standards Committee (IASC). The IASC was superseded by the International Standards Board (IASB) in 2001.

It is the duty of the IASB to effect an international harmonization of accounting, in order to increase the comparability of the companies’ reporting at the international capital markets.

The accounting standards adopted by the IASB are called International Financial Reporting Standards (IFRS).

The IFRS have gained importance in Germany especially through the EU-regulation No. 1606/2002. With the Law on the Reform of Accounting Regulations (Bilanzrechtsreformgesetz, BilReG), the legislation has already partially transformed this EU-regulation into national law.

According to this law, all companies oriented on the capital market are obligated to prepare their consolidated accounts in accordance with the IFRS for all financial years starting after December 31, 2004. For certain companies, Article 57 of the Implementation Law of the German Commercial Code (Einführungsgesetz zum Handelsgesetzbuch/EGHGB) allots a transitional period until 2007.

Considering the increased relevance of international accounting standards, our services encompass in detail of the following:

  • Statutory and voluntary audits of individual financial statements and consolidated accounts according to IAS/IFRS
  • Opinions on specific questions to international accounting
  • Formulation of the essential fields of work and the essential differences between the presently used accounting standards and the IAS/IFRS
  • Conception of a project schedule for the conversion to the IAS/IFRS based on the identified differences
  • Supervision and organisation of projects before and during the conversion process
  • Determination of the ideal point of time for the conversion and support of the internal and external communication
  • Analysis of the essential business procedures as well as the internal and external accounting, including the optimization of the procedures for preparing individual financial statements and consolidated accounts
  • Development of a new accounting guideline, of reporting-tools, account systems and new reporting structures

MAW Darmstadt
Tel.: 06151 38940

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MAW Bad Homburg
Tel.: 06172 855670

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MAW Frankfurt
Tel.: 069 97205055

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MAW Berlin
Tel.: 030  86208617

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