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    Country by Country Financial Reporting and Auditing Framework

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    Germany - Crowe Horwath Deutschland (prepared July 2013)


    Preparation of and Filing of Statutory Financial Statements

    Corporations and Limited Liability Partnerships (LLPs) are required to prepare annual financial statements and file these with the German Federal Gazette (www.bundesanzeiger.de).


    Listed companies are required to file their financial statements with the German Federal Gazette within 4 months after the balance sheet date. Private corporations and LLPs are required to file their financial statements with the Federal Gazette immediately after adoption by the shareholders but not later than 12 months after the balance sheet date.


    All corporations and LLPs are required to prepare full financial statements comprising a balance sheet, an income statement and explanatory notes to the financial statements. Medium and large sized corporations and LLPs are also required to prepare and file a management report. Certain small and medium sized companies/LLPs have an option to file abbreviated financial statements with the Federal Gazette. Abbreviated financial statements provide for some reduced disclosure, e.g. a condensed balance sheet and less notes disclosures.


    Just recently, the German government adopted a new legislation enabling so called micro entities to further reduce their filing burden. Micro entities are only obliged to file an abbreviated balance sheet and selected explanatory notes.


    Large and medium sized groups are required to prepare and file consolidated financial statements that also comprise a group management report.


    Financial Reporting Framework

    Listed companies in Germany are required to prepare their group financial statements in accordance with International Financial Reporting Standards (IFRS).  IFRS is that adopted by the EU. A full set of financial statements for listed companies having their registered offices in Germany, also includes a group management report.


    All other corporations/LLPs in Germany, subject to any other requirements which may be otherwise specified, have the obligation to prepare their financial statements in accordance with accounting principles promulgated by the German Commercial Code (Handelsgesetzbuch; "German GAAP"). For filing purposes, a corporation/LLP may also prepare additional IFRS financial statements. The voluntary IFRS financial statements can only be used for filing purposes and do not replace the statutory financial statements prepared under German GAAP that are still the sole legal basis for e.g. determining distributions to shareholders.


    Also, the German GAAP statutory financial statements are the starting point for determining the taxable income of an entity for corporation and trade tax purposes in Germany.


    Audit Requirements for Corporations and LLPs Registered in Germany

    In general, all medium and large sized corporations and LLPs must have an audit on their statutory financial statements. Regardless of their size, all listed companies are subject to a statutory audit.


    In addition to the audit of separate statutory financial statements of certain parent companies, their group financial statements are also subject to an audit, if a preparation is required by law.

    Audit Exemption

    Subject to the above, small private corporations/LLPs may not need an audit of their annual accounts - unless the company's articles of association say it must or enough shareholders ask for one.  Alternatively, there may be a requirement specified by other third parties for an audit (i.e. in a bank loan/overdraft agreement).


    For a small corporation/LLP they may qualify for an audit exemption if the company meets two out of the following three criteria on two consecutive reporting dates.

    • has an annual turnover of no more than 9.68 million euros
    • has assets worth no more than 4.84 million euros
    • has no more than 50 employees.

    Audit Appointment, Rotation and Joint Audits

    Auditors are elected by the shareholders and appointed by management or - if present - the supervisory board of an entity for only one year.  Germany does not have any rules relating to mandatory rotation of audit firms but there are guidelines within the ethical standards regarding partner rotation.  Whilst not prohibited, joint audits are very rare in Germany.


    Auditing Standards

    All Crowe Horwath International member firms in Germany are required to carry out their audits and express an opinion on the (group) financial statements in accordance with auditing standards promulgated by the German institute of certified auditors (Institut der Wirtschaftsprüfer in Deutschland, "IDW"). Those standards require us to comply with the Ethical Standards for Auditors in Germany. The auditing standards issued by the IDW are largely consistent with the Clarity ISAs issued by the IAASB subject to some minor additional requirements relevant within Germany.


    Ethical Framework

    All Crowe Horwath International member firms in Germany are bound by the Code of Ethics promulgated by the Institute of certified auditors in Germany (IDW). This is based on the IFAC Code of Ethics (IESBA) with additional commentary for Germany.


    Audit Regulation

    All German Crowe Horwath International member firms are subject to the following external and internal monitoring processes with regard to their audit practice.


    External Monitoring

    The audit practices of all German member firms are subject to periodic external peer reviews. The peer reviews have to be completed every six years. Member firms that also perform audits for public interest entities are required to have their peer reviews successfully completed every three years.


    In addition to the external monitoring through obligatory peer reviews, those German Crowe Horwath International member firms carrying out statutory audits of public interest entities are additionally subject to regular inspections performed by the German auditor oversight commission (APAK). The APAK is the competent authority for the organisation and performance of inspections that are carried out at least every three years. These APAK inspections particularly focus on audit quality matters that are unique to public listed entities.

    Internal Monitoring

    All German member firms have established an annual firm wide monitoring process known as internal inspections (Interne Nachschau). The internal inspections are led by the Quality Assurance Partner within the respective firm. The internal inspections are conducted following procedures defined by the IDW and cover all certified auditors of a firm who perform statutory audit engagements. The results of the annual internal inspections are used to develop and further enhance the quality of the audit processes within the German member firms.


    Transparency Report

    The two German member firms Crowe Horwath Deutschland GmbH, Stuttgart, and Kleeberg Audit GmbH, Munich, prepare an annual transparency report that is available on their websites and cover information about the respective audit firm's governance and ownership structure, its quality control and monitoring system, its independence policies and measures, its continuing professional education processes and its remuneration principles for senior personnel.


    Crowe Horwath Deutschland GmbH Wirtschaftsprüfungsgesellschaft is a member of Crowe Horwath International, a Swiss verein (Crowe Horwath). Each member firm of Crowe Horwath is a separate and independent legal entity. CROWE HORWATH Deutschland GmbH Wirtschaftsprüfungsgesellschaft and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath or any other member of Crowe Horwath and specifically disclaim any and all responsibility or liability for acts or omissions of Crowe Horwath or any other Crowe Horwath member. © 2014 Crowe Horwath Deutschland GmbH Wirtschaftsprüfungsgesellschaft


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