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Article 34 of the Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings, amending Directive 2006/43/EC of the European Parliament and of the Council and repealing Council Directives 78/660/EEC and 83/349/EEC (hereinafter the Accounting Directive) requires an audit for the following categories of companies:
• public-interest entities (broadly, those traded on a regulated market, credit and insurance institutions, and those specifically designated as such by Member States)
• medium-sized and large undertakings
Consequently, those companies defined as “small undertakings” are not explicitly required to have an audit and recital 43 of the Accounting Directive clarifies that this is the intention. Notwithstanding, Member States can impose an audit on small undertakings, albeit the audit should be appropriate for the conditions and needs of these companies and the users of their accounts.
Article 3(2) of the Accounting Directive defines “small undertakings” as those which, on their balance sheet date for two consecutive years, do not exceed the limits of at least two of the three following criteria:
a) balance sheet total (€): 4,000,000
b) net turnover (€): 8,000,000
c) average number of employees during the financial year: 50
These limits are lower than those proposed in October 2011 and, indeed, are slightly lower than those of the 2006 amendment1. It should, however, be noted that Member States are permitted to increase the thresholds for a) and b) to a level not exceeding:
a) balance sheet total (€): 6,000,000
b) net turnover (€): 12,000,000
Member states are additionally allowed to increase or decrease the Euro thresholds by up to 5% to allow conversion into a national currency at a round sum amount.
Member States had until 20 July 2015 to adopt this directive into their national legislation with a view that the provisions first apply to financial statements for financial years beginning on 1 January 2016.