Many companies become subject to mandatory audits without realizing it. Whether and when a company is required to undergo an audit depends on statutory size thresholds under the German Commercial Code (HGB) – but in practice, this is often assessed too late. Only when the financial statements are nearly complete does it become clear: an audit is required. That’s when the real stress begins – and the problems often lie not in the audit itself, but in the preparation.
The real problems of an audit start beforehand
When companies think about audits, they often picture the moment when the auditor arrives. Questions, sampling, reconciliations. But in practice, it becomes clear time and again: the biggest challenges do not arise during the audit – but months before.
The key question is not:
“How does the audit work?”
but rather:
“How well is our company prepared for it?”
Especially the first time, companies often lack the experience to answer this question realistically.
A typical mistake: recognizing the audit requirement too late
Many companies grow gradually. Revenue, total assets, and employee numbers increase – often over several years. What is easily overlooked: this growth can also trigger a statutory audit requirement.
The problem: this development happens gradually.
- Figures increase, but no one actively checks the thresholds
- Responsibilities are not clearly assigned
- The topic is “carried along” but not prioritized
Only when the financial statements are being prepared – or even afterward – do companies ask:
“Are we actually required to undergo an audit?”
At that point, it is often already late, and the pressure to act is high.
What happens when your company becomes subject to an audit?
Once it becomes clear that a statutory audit is required, the situation changes abruptly. What was previously an internal process suddenly becomes subject to external review, especially in the case of a first-time audit. This is where typical problems arise:
1. Documents are not audit-ready
Accounting records exist – but are not structured for an external audit. Supporting documents must be searched for, prepared, and explained afterward.
2. Time pressure builds
The audit runs parallel to the finalization of the financial statements. Reconciliations must be completed at short notice, and deadlines approach quickly.
3. Coordination issues within the company
Accounting, controlling, and tax advisors are not always fully aligned. Information is scattered or not clearly documented.
4. Surprises in valuations
Provisions, accrals, or valuations are suddenly questioned. What seemed “clear” internally must now be justified in a transparent and verifiable way.
The result: what should be a routine process turns into a time-consuming project.
Audit requirement overlooked? Common misconceptions in practice
Why does this happen so often? Not because companies work poorly – but because certain assumptions are widespread:
“This doesn’t apply to us (yet)”
Growth is often not directly associated with audit requirements.
“Our tax advisor will take care of it”
Responsibility is often seen as external – without clear coordination.
“We’ll deal with it when the time comes”
Preparation is postponed, even though it should start early. This mindset is understandable – but risky.
Recognizing audit requirements early instead of reacting late
Companies whose first audit runs smoothly usually have one thing in common: they addressed the topic early on.
This does not mean everything must be perfectly prepared. But it does mean:
- Clarity about whether and when your company will become subject to an audit
- Structured financial reporting processes
- Awareness of audit-relevant topics
The difference is noticeable: instead of last-minute reactions, a manageable and plannable process emerges.
Why the first audit is particularly crucial
The first audit is more than just an additional step in the financial reporting process. It is a turning point:
- Processes are reviewed externally for the first time
- Documentation becomes more important
- Coordination becomes more structured
What is established during this phase often has long-term effects. A well-prepared first audit creates:
- Greater certainty within the company
- More efficient processes in subsequent years
- Less coordination effort
Conversely, an unstructured start can lead to ongoing additional effort.
Conclusion: assess audit requirements early
Many companies only address the question of statutory audit requirements once they have already come into effect. But the key question should be asked earlier:
Could our company already be subject to an audit – or become so in the near future?
Those who clarify this in time not only avoid surprises but also ensure that the first audit is structured, manageable, and free of unnecessary time pressure.
Well prepared for your audit?
In practice, we repeatedly see that first-time audits do not fail due to technical issues, but due to a lack of preparation within the company.
My recommendation: clarify early on whether your company may be subject to an audit – ideally before the financial statements are finalized.
Your ACCONSIS contact
Kerstin Weidenbach-Koschnike
Diplom-Kauffrau
German CPA, Tax Consultant
Managing Director of ACCONSIS
Service phone
+49 89 54 71 43
or via email
k.weidenbach-koschnike@acconsis.de
Frequently asked questions about audit requirements
When does a company become subject to an audit?
Under the HGB, a company becomes subject to an audit if it is classified as a medium-sized or large corporation and exceeds at least two of the following thresholds on two consecutive balance sheet dates:
Medium-sized corporations:
- Total assets exceeding EUR 7.5 million
- Revenue exceeding EUR 15 million
- More than 50 employees on average
Large corporations:
More than 250 employees on average
Total assets exceeding EUR 25 million
Revenue exceeding EUR 50 million
Does the audit requirement apply automatically?
Yes. The statutory audit requirement arises directly from the German Commercial Code (HGB) and applies automatically once the relevant conditions are met.
How can I identify early on whether my company will become subject to an audit?
A first indication is continuous growth in revenue, total assets, or number of employees. At the latest, if two of these criteria increase over several years, you should assess whether a statutory audit requirement may arise.
What happens if the audit requirement is recognized too late?
If identified too late, this often leads to time pressure during the preparation of financial statements, additional coordination efforts, and an increased risk of delays in the audit process.
Who is responsible for audit requirements within the company?
In practice, responsibility usually lies with management. However, accounting, controlling, and external advisors are often involved in the assessment.
When should preparation for the first audit begin?
Ideally during the preparation of the financial statements – or earlier, as soon as it becomes apparent that thresholds may be exceeded.
