Why is a statutory auditor indispensable?

The statutory auditor plays a crucial role in the business world, namely serving the public interest and providing financial reliability. Through their independence, ethics, and the quality of their work, they foster trust, transparency, and greater certainty, which can in turn lead to economic growth and prosperity.

The statutory auditor (commissaris) is bound by an obligation of means rather than an obligation of result. The objective of their audit engagements is to obtain reasonable assurance as to whether the annual accounts, or financial statements in international terminology, as a whole are free from material misstatement, whether caused by fraud or error.
A “reasonable assurance” is a high level of assurance.

Types of interventions or certifications:

• Statutory audit of the annual accounts;

• Certification engagement for the works council;

• Statutory occasional engagements (e.g., contribution in kind, …);

• Contractual engagements (e.g., due diligence in the context of an acquisition, …).

What is an audit of the annual accounts?

The statutory auditor’s assignment results in the expression of an opinion on the annual accounts, also referred to as an attestation engagement. This is a statutory permanent assignment.

A company or a non-profit association/foundation must appoint a “commissaris” when it is deemed “large” and exceeds at least two of the following three criteria:

• Average annual number of employees: 50;

• Annual turnover (excluding VAT): EUR 11,250,000;

• Balance sheet total: EUR 6,000,000.

The qualification “large” is assumed or adjusted when at least two of the above criteria are or are no longer exceeded, and this only has consequences if it occurs for two consecutive financial years.
The consequences apply from the financial year following the year in which more than one criterion was exceeded or no longer exceeded for the second time.

For newly established companies, non-profits, international non-profits, and foundations, the above criteria are estimated in good faith based on figures at the start of the financial year.

According to the Companies and Associations Code (CAC), small listed companies, small companies that are public interest entities, and companies that are part of a group required to consolidate (Art. 3:72, 2° CAC) are always required to appoint a commissaris.

Entities that are not legally obliged to appoint a commissaris may do so on a voluntary basis, which allows them to increase their credibility and financial transparency.

Mandate of the statutory auditor : appointment and term

The law provides that the statutory auditor is appointed on the proposal of the administrative body and, where applicable, on the recommendation of the works council.
The general meeting of the company or association appoints the statutory auditor from among the statutory auditors registered in the public register of the Institute of Statutory Auditors or from among the registered audit firms, for the statutory audit of the annual accounts and, where applicable, the consolidated annual accounts.
The general meeting also determines the remuneration of the statutory auditor.

If the company is required by law to establish an audit committee, the proposal of the administrative body is made on the recommendation of the audit committee.
This proposal of the audit committee is communicated, for information purposes, to the works council.

The statutory auditor is always appointed for a renewable term of three years.

For mandates in public interest organisations (including listed companies, …), renewability is limited to three mandates of three years, except in the following cases:

• Renewal up to six mandates (18 years) is possible if the selection was based on a public tender;

• Renewal up to eight mandates (24 years) is possible if independent statutory auditors perform a joint audit.

Works council and the statutory auditor

In companies where a works council has been established, the assignment of the statutory auditor consists in certifying the accuracy and completeness of the economic and financial information (EFI) provided by the administrative body. The statutory auditor must play an educational role and promote dialogue.
In most cases, this assignment is performed by the commissaris.

By law, one or more statutory auditors must be appointed in every company where a works council has been established. The law provides exceptions for subsidised educational institutions.

The statutory auditor’s assignment with respect to the works council consists of:

• Reporting on the annual accounts and the annual report;

• Certifying the accuracy and completeness of the economic and financial information provided by the administrative body to the works council;

• Explaining and analysing the significance of the economic and financial information in relation to the financial structure and the evolution of the company’s financial position;

• If they are unable to provide the certification referred to in point 2°, or if they identify gaps in the economic and financial information provided to the works council, informing the administrative body of this, and, if the administrative body fails to act within one month following their intervention, informing the works council on their own initiative.