In the media

10 April 2019

Evolution of SME audit in Europe from the perspective of the legislation and auditing standards by Hilde Blomme

This article was originally published in Tax, Audit & Accountancy March 2019 by ICCI

Legislation on the audit of SMEs in Europe

Up to the introduction of the 2013 Accounting Directive, there had always been a European Union (EU) requirement to have a statutory audit of ‘small undertakings’. However, Member States had been allowed to exempt all or part of their small companies, as defined locally, from a statutory audit, but within the confines of the EU legislation (see below). At the time of the development of the 2013 Accounting Directive, this was known as the ‘opt-out’ Member State option. Nowadays, following the transposition of the 2013 Accounting Directive, companies defined as ‘small undertakings’ are no longer required to have a statutory audit based on the EU legislation. Nevertheless, Member States can impose an audit on all or part of their small undertakings, also referred to as the ‘opt-in’ regime.

This decision to opt-in is usually driven by the conditions of these small companies and the needs of the users of their accounts. Indeed, the size of a country’s economy as well as the size of its individual entities might be taken into consideration. The need for certainty to banks, suppliers, shareholders and especially tax authorities might equally play a role in this decision. For instance, the rumour goes that in Finland, audit exemption thresholds for small entities are so low (see below) because the average frequency of a corporate tax inspection in Finland is every 100 years. Over the last ten years, Finnish audit exemption thresholds were actually doubled, but as overall corporate tax revenues started to decline, it was decided to go back to the lower thresholds. This was due to the consideration that there is a need for an independent eye also on very small companies at least once a year, in this case a statutory audit by an independent, external auditor.

[…]

Read the entire article here.

Related content

PublicationAudit exemption thresholds in Europe

9 April 2020

EventSimplifying auditing standards for small or non-complex entities

30 May 2018

PublicationSimplifying auditing standards for small or non-complex entities

12 April 2018

EventEarly Warning Europe SME summit

13 July 2021

EventDigitalisation & SMEs

16 June 2021

EventIntellectual Property & SMEs

4 May 2021

EventWorking Together for the planet: Audit & Assurance of sustainability Information

29 April 2021

EventFuture of tax: green, digital, fair

15 April 2021

EventBridging expectations: what NFI from SMEs?

18 March 2021

PodcastGet your seat at the top table

5 March 2021

UpdateAudit Policy

5 March 2021

NewsBecause green recovery counts

4 March 2021

NewsVAT Talks: digitalisation, accountants’ role and the growing importance of tax

2 March 2021

UpdateSME Update

2 March 2021

EventIntellectual Property for SMEs: What role for accountants?

24 February 2021

EventSustainable corporate governance: future role for audit committees

5 February 2021

PublicationGoing concern: recommendations to strengthen the financial reporting ecosystem

3 February 2021

PublicationFraud: recommendations to strengthen the financial reporting ecosystem

3 February 2021

Publication10 most popular publications in 2020

2 February 2021

Consultation responseIAASB’s discussion paper on fraud and going concern

2 February 2021

PublicationSME risk management: insolvency

1 February 2021

UpdateAudit Policy

28 January 2021

Consultation responseEFRAG’s Invitation to comment on EFRAG’s assessment on IFRS 17 Insurance Contracts as amended in...

28 January 2021

Sign up for our newsletter

* indicates required
Would you like to subscribe to our newsletter?
On which topics would you like to receive news?