When audit is mandatory?

An audit is mandatory if it is required by the Law on Financial Reporting of Companies. The statutory obligation to conduct an audit depends on:

• legal forms of the company;
• company size;
• field of activity.

The influence of the legal form of the company on the mandatory audit

The Law on Financial Reporting of Companies determines which legal form audits are mandatory for companies. The audit of financial statements must be carried out in the following companies:

• in state enterprises;
• in municipal companies;
• in public interest companies;
• in joint stock companies;
• in closed joint-stock companies (see company size criteria below);
• in closed joint-stock companies, where the shareholder is the state or municipality;
• in closed joint-stock companies, the prices of goods (services) of which are regulated according to the procedure established by law;in cooperative companies (cooperatives) (see criteria for company size below);
• in business partnerships, in which all true members are joint-stock companies or closed joint-stock companies (see company size criteria below);

Company size criteria determining mandatory audit

The company size criterion applies only to closed joint-stock companies, cooperatives (cooperative companies) and business partnerships. For legal entities of this legal form, an audit is mandatory when at least two indicators exceed the following amounts on the last day of the financial year:

• the value of assets indicated in the balance sheet – EUR 2,500,000;
• net sales revenue during the reporting financial year – EUR 4,500,000;
• average annual number of employees according to the list during the reporting financial year - 50 employees.

Mandatory audit, depending on the type of company's activity

The Law on Financial Reporting of Companies stipulates that audits must be carried out in public interest companies. A public interest company is one that is important to the public due to the scale or nature of its activities and the number of customers. What is a public interest entity, is specified in the Law on Auditing of Financial Statements and Other Assurance Services:

• a company whose securities are traded on a regulated market;
• bank and Central Credit Union;
• financial brokerage firm;
• collective investment entity;
• pension fund;
• occupational pension fund;
• a management company that manages a pension fund, occupational pension fund or collective investment entity;
• insurance company and reinsurance company;
• a state enterprise and a municipal enterprise meeting the established criteria;

The audit is also mandatory for companies whose service prices are regulated by the state, which meet the company size criteria (see Company size criteria determining mandatory audit) and whose income from regulated activities makes up more than half of the company's total income. Regulated activity income is income from the following activities:

• drinking water supply;
• sewage treatment;
• surface wastewater management;
• activities of energy companies.

If your company is required to audit financial statements, UAB "Tezaurus auditas" can offer audit services. We also provide audit services for regulated activities.