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    Country by Country Financial Reporting and Auditing Framework

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    Italy – Crowe Horwath AS Srl (prepared July 2015)


    Preparation and Filing of Statutory Financial Statements

    An annual general meeting must be held by a Corporation ("Società per Azioni" "S.p.A.") or Limited Liability Company ("Società a Responsabilità Limitata" "S.r.l.") within 120 days of each year end to approve the financial statements. Under particular circumstances, companies are allowed to hold their general meeting within 180 days of the year end. The financial statements have to be filed with the Register of Companies within one month of approval. Since 2015, there is an obligation to file the statutory financial statements in XBRL format.


    All S.p.A. and S.r.l. are required to prepare full statutory financial statements that include balance sheet, income statement and notes to the financial statements. Statutory financial statements have to be accompanied by a management report. Certain small and medium-sized companies have an option to file abbreviated financial statements. Abbreviated financial statements provide for condensed balance sheet and income statement, less notes disclosures and can avoid the preparation of the management report.


    Under art. 2435-bis of the Civil Code, abbreviated financial statements are allowed if for two consecutive fiscal years (or the first fiscal year in case of newly incorporated company) the company does not exceed two of the following criteria, over two successive fiscal years:

    • Net turnover: Euro 8.800.000
    • Total assets: Euro 4.400.000
    • Average number of employees in the fiscal year: 50.

    The fiscal year cannot last more than twelve months. A company is allowed to have shorter financial years under specific and exceptional circumstances. The year end is established in the by-laws and can be altered by an extraordinary shareholders' meeting. Companies usually close their financial year on December 31st but this is not compulsory.


    As requested by the article 25 of Legislative Decree 127/91, companies that control other companies (of any legal form) are obliged to prepare consolidated financial statements.


    Two Exemptions in the preparation of consolidated financial statements are foreseen by article 27 of Legislative Decree 127/91:

    • If the group does not exceed, over two successive fiscal years, two out of the following three criteria:
      • Net turnover: Euro 35.000.000
      • Total assets: Euro 17.500.000
      • Average number of employees in the fiscal year: 250.
    • If the group is a sub-holding of a EU company that prepare the consolidated accounts.

    Financial Reporting Framework

    The Italian accounting rules are based on a legal framework, the Italian Civil Code, which is based on the 4thEU directives. Civil Code under articles 2423-ter, 2424 and 2425 contains requirements about the content, analysis and classification of items included in the statutory financial statements.


    The Italian accounting standard setter in Italy is the Organismo Italiano di Contabilità (OIC). The OIC issues standards governing financial statements under Italian GAAP and provides responses to the IASB's and other international bodies' consultations. The OIC also issues operational guidance about the application of IFRSs.


    OIC in 2014 issued 20 new accounting principles, some new and some replacing the accounting principles issued in 2005. New accounting principles are more similar to IFRS than the old ones, however certain differences still remain.


    Italy is an EU Member State. Consequently, Italian companies listed in an EU securities market follow IFRS since 2005.


    IFRS are mandatory also for issuers of financial instruments widely distributed among the public, banks, stock broking companies, fund management companies, regulated financial institutions, and insurance companies.


    IFRS are permitted but not required for other companies (S.p.A. or S.r.l.) except small companies preparing financial statements in abbreviated form (article 2435-bis Civil Code).


    Audit Requirements for Companies Registered in Italy

    The audit in Italy is disciplined by the Legislative Decree no. 39 of 27 January 2010 ("Implementation of directive 2006/43/EC on statutory audits of annual accounts and consolidated accounts"). Following the requirements of the Decree certain new laws have been enacted and further laws will be presumably issued in the next future.


    On 13 September 2012, the Register of Statutory Auditors was set up by the Italian Ministry of Economy and Finance. This includes all audit firms previously registered in the Special Register of Audit Firms held by CONSOB (public authority responsible for regulating the Italian financial markets). 


    S.p.A.: under article 37 of the Decree, the statutory audit is exercised by an auditor or an audit company. For companies not obliged to prepare consolidated financial statements the audit can be exercised by the Board of Statutory Auditors (so called "Collegio Sindacale"). S.p.A. are obliged to have a Board of Statutory Auditors that has to supervise the adequacy of the organizational, administrative and accounting systems and can also exercise the audit. The Collegio Sindacale is composed of from three to five regular members and two alternate members.


    S.r.l..: Under art 2477 of Civil Code, S.r.l. are obliged to be audited if they are obliged to prepare consolidated financial statements, or if they control another company that is audited according to law, or if they exceed for two years two of the following conditions:

    • Net turnover: Euro 8.800.000
    • Total balance sheet: Euro 4.400.000
    • Average number of employees in the accounting period: 50.

    The audit of the S.r.l. can be performed by an audit company, by the Board of Statutory Auditors or by a Sole Auditor.


    Audit Appointment, Rotation and Joint Audits

    Auditors are appointed by a shareholders resolution for three years without any limit to the possibility for renewal. For Public Interest Entities (PIE), the duration is nine years with no possibility to be renewed.


    Auditing Standards

    Following articles 11 and 12 of the Legislative Decree no. 39 of 27 January 2010, from 2015 all audit firms in Italy are required to carry out their audits and express an opinion on the statutory financial statements in accordance with ISA Italia. ISA Italia are the translated clarified 2009 International Auditing Standards from number 200 to number 720, integrated with certain local rules. In addition there are two local auditing standards (so called SA) related to periodical verifications and to the verification of the consistency of the information in the Management Report with the financial statements. Audit companies also have to adopt a quality control system in accordance with ISQC Italia 1 (ISQC1 adapted for Italy). ISA Italia replaced the existing Italian Auditing Standards that were mandatory in the past only for the audit of PIE.


    Ethical Framework

    Ethical requirements are included in ISQC Italia 1. For the statutory audits carried out according to Legislative Decree no. 39 of 27 January 2010, the applicable ethic principles are those written upon the provisions of the articles 10, 12 and 17 of the same Decree. These principles, included in a local Code of Ethics prepared by the Italian professional bodies and currently under the approval of the Economy and Finance Ministry, are as stringent as those requested by the IFAC Code of Ethics.


    Audit Regulation

    All Italian audit firms are subject to the following external and internal monitoring processes with regard to their audit practice.


    External monitoring

    Audit firms are subject to the Ministry of Economy and Finance monitoring program. Audit firms auditing PIE are subject to CONSOB, which is the competent authority for ensuring the compliance with regulations by auditors.


    Internal monitoring

    As requested by ISQC Italia 1, audit firms shall establish a monitoring process designed to provide it with reasonable assurance that the policies and procedures relating to the system of quality control are relevant, adequate, and operating effectively.


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