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

21 February 2019

EventSimplifying auditing standards for small or non-complex entities

30 May 2018

PublicationSimplifying auditing standards for small or non-complex entities

12 April 2018

PublicationCOVID-19: 5 key steps for accountants to guide SMEs through the crisis

27 March 2020

PublicationCoronavirus crisis: 15 actions for governments to protect European SMEs

27 March 2020

Podcast Reforming the tax system

27 March 2020

UpdateSME

26 March 2020

EventPostponed: Enhancing reliability of non-financial information

23 March 2020

UpdateTax Policy

20 March 2020

UpdateAudit Policy

12 March 2020

EventPostponed: Implementing ESEF

10 March 2020

EventTowards a global non-financial reporting standard setter

9 March 2020

UpdateTax Policy

6 March 2020

Podcast The European Commission’s approach to tax

6 March 2020

UpdateSustainable Finance

2 March 2020

PublicationFrom risks to regulation: rethinking company categorisation

2 March 2020

UpdateSME

25 February 2020

UpdateTax Policy

21 February 2020

PublicationTowards reliable non-financial information across Europe

19 February 2020

EventTax Day 2020: We’re all in this together!

19 February 2020

Podcast Because People Count – Accountancy Europe’s New Podcast Series

14 February 2020

UpdateAudit Policy

14 February 2020

PublicationSME risk management

11 February 2020

Sign up for our newsletter