Auditing Company.

The Obligation to Annually Audit in Germany.

An obligation for the performance of annual audits by an auditor did not yet exist in the founding years of our group for companies in Germany (just as little as in Switzerland or the USA).

According to the stock corporation law from 1870, the board of directors was obliged to audit the balance sheets, financial statements, and profit distribution and to report on this to the general assembly.

This, however, led to an overburdening of the board of directors. The respective company structures had already reached a complexity that made providing an effective audit by the board of directors almost impossible.

This was followed by spectacular corporate failures, such as the Frankfurter Allgemeinen Versicherung in 1929, whose balance sheets proved, in retrospect, to be forged.

Nevertheless, it was only in 1931, after the collapse of the “Nordwolle” (Northern Wool) and the resulting shutdown of Danat-Bank that an emergency decree issued by the Reichspräsident led to a statutory audit requirement for German stock corporations being implemented.

More than 50 years later, by the German Accounting Directives Act from 1985, the statutory audit requirement mandatory was extended for all corporations (that are not small according to § 267 par. 2 HGB) and later in the implementation of the corporations and co-Directive law for the limited liability partnerships (OHG und KG) as well.

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