A company has economic responsibilities to project credibility and confidence to its stakeholders and interested parties; its workers, partners or directors, investors, clients, suppliers and credit institutions.
In our capacity as independent auditors, we ensure the reliability of the information provided by the company and the transparency of its operations. We analyze the essential aspects of the business and the administrative procedures involved. We identify possible weaknesses and propose improvements in internal control structures. All of which contribute greatly to our client’s stability and positive exposure.
The auditing of accounts is a regulated activity which involves the inspection and verification of annual accounts and financial statements or accounting documents in order to issue a report attesting their reliability. This must be carried out by a statutory auditor or by an audit firm.
Statutory auditors can carry out other tasks under legal provisions but it is generally accepted that they also undertake functions which are not under the legal provisions but are in the International Auditing Standards (Engagements to review financial statements and Engagements to perform agreed-upon procedures regarding financial information).
The Audit of Accounts
All companies which have one or more of the following characteristics must carry out the audit of its annual accounts:
a) To issue securities admitted to trading on official secondary stock markets or multilateral trading facilities.
b) That they issue obligations in a public offer.
- That they are habitually engaged in financial intermediation
- That they have as their corporate purpose any activity subject to the revised text of the Law on the Regulation and Supervision of Private Insurance, within the limits established by regulations, as well as the Pension Funds and their managing entities.
That they receive subsidies, aid or carry out works, services, or supply goods to the State and other public bodies within the limits set by the Government by means of a royal decree.
Entities, which must draw up annual accounts, which during a financial year have signed with the public sector the contracts provided for in article 2 of Law 30/2007, of 30 October, on public sector contracts, for a accumulated total amount in excess of 600,000 euros, and this represents more than 50% of the net amount of its annual turnover, are required to audit the annual accounts for that financial year and those of the following year.
Entities, which must prepare annual accounts in accordance with the financial reporting regulatory framework applicable to them.
Exceptions to this obligation are entities that meet, for two consecutive years, at the closing date of each of them, at least two of the following circumstances:
- That the total of the items of the asset does not exceed 2,850,000 euros (capital companies) or 4,000,000 euros (other entities).
- That the net amount of its annual turnover does not exceed 5,700,000 euros (capital companies) or 8,000,000 euros (other entities).
- That the average number of workers employed during the year does not exceed 50.
Entities lose this power if they fail to meet, for two consecutive years, two of the circumstances referred to in the previous paragraph.
In the first financial year since its incorporation, transformation or merger, entities are exempted from the obligation to audit themselves if they meet, at the end of that financial year, at least two of the three circumstances set out in section previous.
In companies that are not required to submit the annual accounts to verification by an auditor, partners representing at least five percent of the share capital may apply to the commercial registrar of the registered office, which, at the expense of the company, appoint an auditor to review the annual accounts for a given financial year, provided that three months have not elapsed from the closing date of that financial year.
If the cooperative is not required to audit its annual accounts, five percent of the members may request from the Register of Cooperative Companies that, at the expense of the company, appoint an auditor to carry out the audit of the annual accounts of a certain financial year, provided that three months have not elapsed from the closing date of that financial year.
Exceptionally, the person in charge of the Register of Foundations of State Competence may appoint, at the request of the Protectorate or any of the members of the Board of Trustees, an auditor to verify the annual accounts for a given year, in cases where the Board of Trustees being required to appoint an auditor, has not done so before the end of the year to be audited.
In the case of companies which must carry out the audit of annual accounts, the persons or bodies responsible for appointing the auditor before the financial year end are:
- Venture capital enterprises: The General Board.
- Cooperatives. The General Assembly.
- Foundations. The Board of Trustees.
Appointment of auditors when the competent body has not appointed the auditor before the end of the year to be audited, and must do so, or the appointee does not accept the position or is unable to perform his / her duties. :
- Capital companies. The administrators and any partner may request from the commercial registrar of the registered office the designation of the person or persons who are to carry out the audit. In public limited companies, the request can also be made by the commissioner of the bond trade union.
- Cooperatives. The governing council and other persons authorized to request the audit may apply for the appointment of an auditor in the Central Register of Cooperatives.
- Foundations. The person in charge of the Register of Foundations of State Competence may appoint, at the request of the Protectorate or any of the members of the Board of Trustees, an auditor.
- Auditors and audit firms must be engaged for a period of time initially determined, which may not be less than three years nor more than nine years from the date on which the first financial year to be audited begins, and may be contracted for successive maximum periods of up to three years once the initial period has ended. However, when audits of accounts are not mandatory, these limitations do not apply.
- In the case of public interest entities, the total contracting period, including extensions, may not exceed a maximum duration of ten years. However, once the maximum total ten-year hiring period for an auditor or audit firm has ended, that period may be further extended to a maximum of four years, provided that it has been hired simultaneously. to the same auditor or audit firm together with another or other auditors or audit firms to act jointly in this additional period.
Group companies which must draw up consolidated financial statements must also audit them.
The Group’s parent company must draw up these consolidated financial statements, except in the following cases:
1) When at the end of the financial year, the companies of the Group or sub-group do not exceed the following conditions during two consecutive financial years:
- The total of the asset headings is not greater than 11.400.000 Euros.
- The net annual turnover is not greater tan 22.800.000 Euros.
- The average number of workers during the financial year is not greater than 250 people.
In order to calculate these limits, we must combine the parent company’s and group companies’ figures, bearing in mind any possible adjustments and eliminations inherent in the consolidation process.
Alternatively, we could exclusively consider the balance sheet total nominal values and the profit and loss accounts of all the group companies. In this case, the limits are the expected figures taken from the balance sheet total asset headings and from the net annual turnover, with a 20 percent increase. The number of workers remains the same.
This waiver of the consolidation obligation cannot be applied if one of the Group companies has issued securities admitted to trading on a regulated market in one of the European Union member states.
2) When the parent company responsible for the consolidation as subject to Spanish legislation is also dependent on another company under the same legislation or on a company from another European Union member state, providing the following conditions apply:
- The latter company must possess at least 50 percent of its share capital.
- The shareholders or partners with at least 90 percent of the share capital explicitly approve the waiver.
- The company granted the waiver has not issued securities admitted to trading on a regulated market in one of the European Union member states.
3) When the parent company responsible for the consolidation participates exclusively in dependent companies which do not have a significant interest, individually or as a group, in the true and fair view of its net worth, of its financial statements and of the Group companies’ results.
4) The waiver of the obligation to consolidate shall not be applied for Group and sub-group companies if they belong to a sector under special regulations which do not allow for such waivers.
Appointments: The General Board which must draw up the consolidated financial statements must also appoint the statutory auditors who will monitor the annual accounts and the Group’s Management report.
There is a mandatory rotation of the auditor who signs the consolidated annual accounts audit report after a seven-year period from the first year or first financial year in which these accounts were audited, when the Group companies in question are a public interest entity or the Group net turnover is greater than 50.000.000 Euros.
The same mandatory rotation applies in the case of the parent company if its auditor is the same person who signs the above-mentioned Group consolidated annual accounts audit report which they themselves presented.
Other functions in accordance with legal provisions
The determination of the share price: If the Parties do not reach an agreement of if there are no statutory regulations, the share acquisition price will be determined by a statutory auditor.
The auditor determines the share transfer price.
The auditor determines the increase in in usufructed contribution or share value.
The Auditor certifies the veracity of the information given by the directors in relation to the compensated credits.
The Auditor verifies the balance sheet.
The auditor draws up a report on the reasonable value of the company shares, on the theoretical value of preferential rights –a proposal having been made to eliminate or limit them – and on the reasonableness of the information in the director’s report.
The auditor verifies the balance sheet on which the operations are based.
The value of the unquoted shares and contributions pertaining to the separation and exclusion of partners is determined by the auditor.
The auditor carries out a report on the directors’ report regarding the conversion bases and methods. In the case of the suppression of preferential subscription rights, a technical judgment is carried out regarding the reasonableness of the information in the directors’ report, on the suitability of the conversion ratio, and wherever applicable, on the adjustment formulas used to compensate an eventual dilution of the shareholders’ economic interest.
The auditor verifies the balance sheet presented in relation to the company social type change.
The auditor verifies the merger balance sheet and the corresponding changes in the evaluations.
The statutory auditors carry out a review of the accounts evidencing subsidies.
The expert draws up a report which reviews the fulfillment of the necessary requirements to obtain the Authorized Economic Operator (AEO) Certificate.
Other functions contemplated in the International Auditing Standards
Report on the Agreed Procedures regarding the amount of each type of electric and electronic equipment in the market from producers belonging to ‘Integrated Management Systems’ set up in accordance with ‘Real Decreto 208/2005’.
| Type: | Engagements to perform agreed-upon procedures |
| Applied to a: | Producers belonging to ‘Integrated Management Systems’ (IMS) |
| Regulations: | Private agreement between each producer and the IMS |
| Appointment: | The company’s statutory auditor, if the company is required to present audited accounts. |
Reports on agreed procedures for packaging material statements for ‘Ecoembes’ in accordance with the ‘Ley de Envases’ 11/1997, developed in line with the ‘Real Decreto 782/1998’ regulations.
| Type: | Engagements to perform agreed-upon procedures |
| Applied to a: | Distributors of packaged goods |
| Regulations: | Private agreement between each packaging company or distributor and Ecoembes |
| Appointment: | The company’s statutory auditor, if the company is required to present audited accounts. |