Statutory Audit

  1. APPLICABLE LEGISLATION
  1. Law no. 162/2017 regarding the statutory audit of the annual financial statements and the consolidated annual financial statements and amendments to certain regulations (the “Statutory Audit Law”);
  2. Accounting law no. 82/1991 (the „Accounting law”);
  3. Accounting regulations of 29.12.2014 on individual annual financial statements and consolidated annual financial statements (the „Accounting regulations”).

According to art. 2 point 1 of the Statutory Audit Law, the notion of statutory audit is defined as an audit of individual annual financial statements or consolidated annual financial statements, performed in accordance with international auditing standards, in two situations:

  • is mandatory under European Union or national law;
  • is performed voluntarily at small entities, and the audited financial statements are published, together with the statutory audit report, in accordance with the law.

The statutory audit should not be confused with the financial audit. Financial audit is a broader notion, which, in addition to the statutory audit, includes the activity performed in order to express an opinion on the financial statements or components thereof, but also the exercise of other assurance missions and professional services according to international auditing standards and other regulations in the field.

The object of the statutory audit is the financial situation, which transposes the economic-financial position, the financial performance and other information regarding the activity carried out by the legal persons, especially by the commercial companies.

The financial year is the period for which the annual financial statements are to be prepared and usually coincides with the calendar year. The duration of the financial year is 12 months.

However, the financial year may be different from the calendar year for branches based in Romania, which belong to a legal entity based abroad, as well as for legal entities based in Romania. Persons opting for a financial year other than the calendar year have the following obligations:

  • to prepare and submit annual accounting reports to the territorial units of the Ministry of Public Finance;
  • to notify in writing the territorial unit of the Ministry of Public Finance about the chosen financial year, at least 30 calendar days before the beginning of the chosen financial year; newly established companies shall submit that notification within 30 calendar days from the date of establishment.
  1. MANDATORY STATUTORY AUDIT

Statutory audit is mandatory at:

  1. Medium and large entities

These are defined in the Accounting Regulations as entities that, at the balance sheet date, exceed the limits of at least two of the following criteria:

  • total assets: 17,500,000 lei (equivalent to 3,946,953 euros);
  • net turnover: 35,000,000 lei (equivalent to 7,893,906 euros);
  • average number of employees during the financial year: 50.
  1. Public entities

According to art. 34 para. (1) of the Accounting Law, public entities are subject to statutory audit, which is performed by statutory auditors, authorized natural or legal persons, in accordance with the law.

The category of public entities includes:

  • companies whose securities are admitted to trading on a regulated market;
  • credit institutions;
  • non-banking financial institutions, defined according to legal regulations, registered in the General Register;
  • payment institutions and electronic money issuing institutions, defined according to the law, which grant loans related to payment services and whose activity is limited to the provision of payment services, namely the issuance of electronic money and the provision of payment services;
  • insurance and reinsurance companies;
  • privately managed pension funds, voluntary pension funds and their administrators;
  • financial investment services companies, investment management companies, collective investment undertakings, central depositories, clearing houses, central counterparties and market / system operators authorized / approved by the Financial Supervisory Authority;
  • national companies;
  • companies with full or majority state capital;
  • public corporations.
  1. Reporting entities

Entities that, at the balance sheet date and during two consecutive financial years, exceed the limits of at least two of the following criteria are subject to statutory audit:

  • total assets: 16,000,000 lei;
  • net turnover: 32,000,000 lei;
  • average number of employees during the financial year: 50.

Two consecutive financial years means the financial year precedingand the current financial year for which the annual financial statements are prepared.

  1. VOLUNTARY STATUTORY AUDIT

Voluntary statutory audit is applicable to small entities, identified in the Accounting Regulations as entities that, at the balance sheet date, do not fall into the category of micro-entities and do not exceed the limits of at least two of the following criteria:

  • total assets: 17,500,000 lei (equivalent to 3,946,953 euros);
  • net turnover: 35,000,000 lei (equivalent to 7,893,906 euros);
  • average number of employees during the financial year: 50.

Failure to comply with the audit obligation constitutes a misdemeanor and is sanctioned, according to art. 44 of Law no. 162/2017, with a fine from 50,000 to 100,000 lei.

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