May the auditor participate in the accounting process?

For an auditor to properly perform its function, it must be independent. For example, it would be unthinkable for the auditor to sit on the board of directors of the audit client or make significant decisions regarding the annual financial statements themselves. However, with limited audits, the legislature has opened the door somewhat. The wording of the law states: "Participation in the accounting and the provision of other services for the company being audited is permissible."

The range of services that an auditor can provide is broad. This ranges from a simple correction list at the end of the audit to the preparation of financial statements, ongoing accounting, and valuation reports. A threat to independence always exists where there is a risk of reviewing one's own work. If an auditor reviews their own work, their judgment is no longer objective. The legal regulations regarding the independence of auditors are therefore strict and are closely monitored by the Audit Supervisory Authority. However, to still meet the needs of SMEs for relief, the legislature has created various mitigations of the requirements for limited audits. One of these concerns the involvement of the auditor.

As mentioned at the beginning, assistance with accounting and the provision of other services are explicitly permitted. However, as soon as the risk of self-auditing arises, the auditor must "ensure a reliable audit through appropriate organizational and personnel measures." Thus, the ball is in the auditor's court as to the extent to which they can and want to offer additional services to the audit client.

In detail, two categories must be distinguished:

1. Supporting activities within the scope of the audit and/or provision of services where there is no risk of self-audit
2. Participation in accounting and/or provision of services where there is a risk of self-audit

Possible actions of the auditor under 1. include, for example:

• Creating supplementary posting recommendations
• Preparation of the annual financial statements based on the balance sheet
• Preparing the tax return
• Support with a tax appeal

These services pose no problems from an independence perspective. No organizational or personnel measures are required.

Possible actions for 2. are, for example:

• Ongoing bookkeeping
• Preparation of VAT and/or payroll statements
• Valuation of a balance sheet item of the audit client

Since this poses a risk to self-audit, the auditor must take organizational and personnel measures and disclose the matter in the audit report.

In practice, the same person involved in the audit cannot be the same person who also handles the accounting (duty-based separation of personnel). Furthermore, internal safeguards must be in place to ensure that neither person has authority to give instructions to the other.

If the auditor ensures a reliable audit, their involvement can yield numerous advantages. The auditor is familiar with the processes and circumstances of the audit client. Furthermore, they possess expertise and experience in many areas. This can lead to significant efficiency gains for additional services.