Germany

Member Organizations

Member Organization Associate Other PAOs

  Institut der Wirtschaftsprüfer
  Wirtschaftsprüferkammer

Legal and Regulatory Environment

  • Overview of Statuatory Framework for Accounting and Auditing

    The legal framework for corporate financial reporting in Germany is established in the applicable EU Directives and Regulations, which are transposed into national laws and other legal instruments.

    Accounting Framework

    Companies whose debt or equity securities trade in a regulated market in Germany are required to use IFRS in their consolidated accounts as required by the European Commission (EC) Regulation No. 1606/2002. IFRS are also permitted in the preparation of annual and consolidated financial statements of all other types of companies for informational purposes only. For all other purposes, these companies must prepare their financial statements in line with the national accounting standards (German Accounting Standards (GAS)) outlined within the German Commercial Code (Handelsgesetzbuch - HGB). The Deutsches Rechnungslegungs Standards Committee (DRSC) [Accounting Standards Committee of Germany], established in 1998, is recognized as the German standard-setter with the following responsibilities: develop recommendations for the application of principles for consolidated financial reporting; provide advice on planned legislation on accounting regulations at national and EU level; develop Interpretations of the international accounting standards within the meaning of section 315a(1) of the HGB; enhance the quality of accounting and financial reporting; and promote research and education in the above-mentioned areas.

    In 2009, the German Accounting Law Modernization Act came into force in order to reduce the regulatory burden on companies and achieve closer alignment of national standards with the IFRS although it is policy to keep the German GAAP for companies without public accountability.

    In 2015, the German Accounting Directive Implementation Act was aimed at harmonizing the German accounting law with the EU Accounting Directive (2013/34/EU). The possibilities to reduce the burden on small, medium-sized and large companies was taken advantage of to the greatest extent possible.

    According to the German Ministry of Justice and Consumer Protection, the majority of German enterprises required to keep accounts do not take part in the capital market. The 2015 Act exempts 'sole merchants' (proprietorships) with less than €600,000 turnover and €60,000 profit from any obligation to keep accounts and records. Small companies (less than 50 employees, assets of €6 million, and annual turnover of €12 million) need not have an audit and may publish only a balance sheet. Medium-sized companies (less than 250 employees, assets of €20 million, and annual turnover of €40 million) have reduced disclosure requirements and may combine balance sheet items. In addition, among the new accounting provisions of the Act, financial institutions will measure financial instruments designated as 'held for trading' at fair value, with value changes recognized in a 'special reserve'.

    Auditing Framework

    European Union member states had until June 17, 2016 to transpose the European audit reform package, comprising the Directive 2014/56/EU on statutory audits of annual accounts and consolidated accounts into their national legislation. At the same time, the Regulation (EU) No 537/2014 on specific requirements regarding statutory audit of public interest entities (PIEs) came into force. The Regulation is directly applicable law in all EU member states and replaces any national law on the same subject matter. The Directive requires auditors and audit firms in member states to apply international auditing standards adopted by the EU Commission which—as stated in the Directive—means ISA, ISQC 1, and other related standards issued through the International Auditing and Assurance Standards Board (IAASB). While the German parliament adopted the EU audit reforms on March 10, 2016, the EU Commission has not yet adopted ISA.

    Germany has not expanded the definition of PIEs beyond the Directive’s definition which includes listed companies on an EU regulated market, credit institutions, insurance undertakings, and other entities a member state may choose to designate as a PIE.

    It therefore remains the responsibility of the professional accountancy organization Institut der Wirtschaftsprüfer (IDW) to issue applicable auditing standards in the jurisdiction. The IDW Auditing Standards contain the German Generally Accepted Standards on Auditing (GAAS) as promulgated by IDW. Since 2018 the IDW is in the process of adopting the translation of the ISAs with specific German requirements (add-ons). Specially denoted paragraphs (“D paragraphs” for “Deutschland”) are added to deal with the requirements of German law, etc. These standards are named International Standards on Auditing [DE] (ISA-DE).

  • Regulation of Accountancy Profession

    In Germany, members of the profession are known as Wirtschaftsprüfer and vereidigte Buchprüfer (public accountants / (sworn) auditors, for sake of simplification just referred to as “Wirtschaftsprüfer” in the following). The profession is first and foremost regulated by the Wirtschaftsprüferordnung (Public Accountant Act (WPO)) 1961 and its amendments which outlines the professional duties of Wirtschaftsprüfer, the establishment of the Wirtschaftsprüferkammer (Chamber of Public Accountants (WPK)), and the prerequisites in order to practice as a Wirtschaftsprüfer.

    Wirtschaftsprüfer, once licensed, are authorized to carry out examinations of businesses, and in particular to perform audits of annual financial statements of business enterprises, and to issue auditor's reports on the conduct and the results of such audit engagements. Wirtschaftsprüfer may also advise and represent clients in tax matters, act as experts in the field of business management, advise on business matters, and act as trustees.

    Before receiving the designation of Wirtschaftsprüfer, individuals must complete a university degree and course of study that encompass all disciplines according to § 4 of the Wirtschaftsprüfer's Examination Regulation. Candidates must then complete three years’ of practical experience, with at least two years being in audit practice. Subsequently, candidates may sit for examinations. After passing the examinations applicants are appointed as Wirtschaftsprüfer whereupon they receive a certificate issued by the WPK.

    The WPK operates under the legal oversight of the Federal Ministry of Economic Affairs and Energy and is responsible, in particular, for the following: (i) licensing of Wirtschaftsprüfer and audit firms; (ii) revocation of licenses; (iii) registration of public accountants and audit firms; (iv) conducting examinations for the Wirtschaftsprüfer designation; (v) setting ethical requirements; (vi) establishing continuing professional development requirements; and (vii) carrying out quality assurance (QA) reviews and (viii) disciplinary procedures for auditors of non-public interest entities (PIEs).

    The WPK’s activities and members are subject to the independent oversight of the Abschlussprüferaufsichtsstelle (APAS—Auditor Oversight Body (AOB)) which was established as a result of the EU Audit Reform and transposed into national law by the Abschlussprüferaufsichtsreformgesetz (APAReG; Auditor Oversight Reform Act) and amending the WPO. The AOB’s responsibilities as outlined in the amended WPO include: (i) inspections of public interest entity (PIE) audit firms and PIE audits; (ii) enforcement (investigations and sanctions) in relation to PIE audits; (iii) mandatory statement on any amendments to professional rules (ethics, quality control) issued by the WPK for approval by the Federal Ministry of Economics; (iv) market monitoring in accordance with Article 27 of the Regulation (EU) No. 537/2014; and (v) supervision of and ultimate responsibility and decision-making power especially in relation to the abovementioned activities of the WPK.

    Lastly, auditing standards that are applicable in the jurisdiction are issued by the Institut der Wirtschaftsprüfer in Deutschland e.V. (Institute of Public Auditors in Germany, Incorporated Association (IDW))—a professional accountancy organization with voluntary membership for auditors alongside other professionals, such as licensed tax advisors and lawyers in public practice. The IDW’s mission to (i) provide for the education and continuing professional development (CPD) of Wirtschaftsprüfer, and to conduct appropriate measures therefor; (ii) to advocate uniform principles for exercise of the profession in an independent, individually responsible and conscientious manner, and ensure members’ compliance with these principles; and (iii) to foster the further development of the role of the Wirtschaftsprüfer profession. Individuals who join the IDW are required to be registered on the institute’s registry and are subject to its CPD requirements and investigative and disciplinary procedures.

  • Audit Oversight Arrangements

    In Germany, Wirtschaftsprüfer (public accountants / auditors) are subject (either directly (PIEs) or indirectly (Non-PIEs) via WPK) to the independent oversight of the Abschlussprüferaufsichtsstelle (APAS—Auditor Oversight Body (AOB)) which was established as a result of the EU Audit Reform and transposed into national law by the Abschlussprüferaufsichtsreformgesetz (APAReG; Auditor Oversight Reform Act) and amending the Public Accountant Act (WPO) 1961. The AOB’s responsibilities as outlined in the amended WPO include: (i) inspections of public interest entity (PIE) audit firms and PIE audits; (ii) enforcement (investigations and sanctions) in relation to PIE audits; (iii) mandatory statement on any amendments to professional rules (ethics, quality control) issued by the WPK for approval by the Federal Ministry of Economics; (iv) market monitoring in accordance with Article 27 of the Regulation (EU) No. 537/2014; and (v) supervision of and ultimate responsibility and decision-making power especially in relation to the activities of the Wirtschaftsprüferkammer (Chamber of Public Accountants (WPK))—the mandatory membership chamber for all auditors in the country.

    The AOB is member of the International Forum of Independent Audit Regulators (IFIAR) and of the Committee of European Auditing Oversight Bodies (CEAOB).

  • Professional Accountancy Organizations

    The Institut der Wirtschaftsprüfer in Deutschland e.V. (Institute of Public Auditors in Germany, Incorporated Association (IDW))

    The IDW was incorporated as an association in 1946 to serve the interests of its members, which comprise individual Wirtschaftsprüfer (public accountants / auditors) and Wirtschaftsprüfungsgesellschaften (German audit firms) along with other professionals such as licensed tax advisors and lawyers in public practice. Membership in the IDW is voluntary. The IDW’s mission to (i) provide for the education and continuing professional development (CPD) of Wirtschaftsprüfer, and to conduct appropriate measures therefor; (ii) to advocate uniform principles for exercise of the profession in an independent, individually responsible and conscientious manner, and ensure members’ compliance with these principles; and (iii) to foster the further development of the role of the Wirtschaftsprüfer profession. Individuals who join the IDW are required to be registered on the institute’s registry and are subject to its CPD requirements and investigative and disciplinary procedures.

    Wirtschaftsprüferkammer (Chamber of Public Accountants (WPK))

    The WPK was established by the Wirtschaftsprüferordnung (Public Accountant Act (WPO)) 1961 and its amendments. Membership of the institute is mandatory for all Wirtschaftsprüfer. The WPK operates under the Federal Ministry of Economic Affairs and Energy in addition to the oversight of the Auditor Oversight Body (AOB). The chamber is responsible, in particular, for the following: (i) licensing of Wirtschaftsprüfer and audit firms; (ii) revocation of licenses; (iii) registration of public accountants and audit firms; (iv) conducting examinations for the Wirtschaftsprüfer designation; (v) setting ethical requirements; (vi) establishing CPD requirements; and (vii) carrying out quality assurance (QA) reviews and (viii) disciplinary procedures for auditors of non-public interest entities (PIEs).

    Both PAOs are founding members of IFAC, with IDW also being a founding member of Accountancy Europe.

  • Projects or Other Information

    The Institut der Wirtschaftsprüfer in Deutschland e.V. announced that it will adopt the German translation of the ISA and add specially denoted paragraphs (“D paragraphs” for “Deutschland”) and square brackets to deal with the requirements of German law etc. The translation of the ISA together with these D paragraphs will then be designated “ISA-DE” – that is “ISA-Deutschland”. The adopted ISA-DE and the remaining German standards—that continue to be transposed due to German and EU legal requirements—relevant to financial statement audits will form a package representing the German Generally Accepted Standards for Financial Statement Audits (Grundsätze ordnungsmäßiger Abschlussprüfung – GoA). As a rule, an auditor performing audits of financial statements in accordance with GoA will be able to refer in the auditor’s report to their audits having performed in accordance with the ISA in addition to in accordance with GoA.

Adoption of International Standards

  • Quality Assurance

    Under the Wirtschaftsprüferordnung (Public Accountant Act (WPO)) 1961 and its amendments the Wirtschaftsprüferkammer (Chamber of Public Accountants – WPK) is responsible for the quality assurance (QA) reviews of audits of non-public interest entities (PIEs) subject to the oversight of the Abschlussprüferaufsichtsstelle (APAS—Auditor Oversight Body (AOB)) and the Federal Ministry of Economic Affairs and Energy. Meanwhile, quality control standards for the jurisdiction are issued by the Institut der Wirtschaftsprüfer in Deutschland e.V. (Institute of Public Auditors in Germany, Incorporated Association – IDW). The institute has adopted ISQC 1 for application.

    Effective June 2016, QA reviews of the audits of PIEs are undertaken by the AOB which was established as a result of the EU Audit Reform and transposed into national law by the Abschlussprüferaufsichtsreformgesetz (APAReG; Auditor Oversight Reform Act) and amending the WPO.

    The WPK states that its QA procedures are in line with the requirements of SMO 1 (revised 2012) and based on information from the AOB’s IFIAR profile, it appears its system also meets SMO 1 requirements.

    Current Status: Adopted

  • International Education Standards

    The Wirtschaftsprüferordnung (Public Accountant Act (WPO)) 1961 sets forth different routes for admission to the Wirtschaftsprüfer profession.

    Before receiving the designation of Wirtschaftsprüfer, individuals must complete a university degree. Candidates must then complete a minimum of three years’ practical experience, with at least two years being in audit practice. Subsequently, candidates may sit for examinations (content: see § 4 of the Wirtschaftsprüfer's Examination Regulation and the Referenzrahmen [reference framework]). After passing the examinations applicants are appointed as Wirtschaftsprüfer whereupon they receive a certificate issued by the Wirtschaftsprüferkammer (Chamber of Public Accountants – WPK). The WPO and the Wirtschaftsprüfer Examination Regulation (WiPrPrüfV) regulate the specifics of the practical experience and the content of the examinations.

    Citizens of a European Union Member State, a Treaty Nation in the European Economic Area, or of Switzerland may sit an aptitude test—which covers German tax and commercial law and German auditing and accountancy regulations—if they have already been approved in other Member States to carry out statutory audits of annual accounts and consolidated accounts.

    The WPK sets continuing professional development requirements (CPD) for its members, which are a minimum of 40 CPD hours per year. Similarly, the Institut der Wirtschaftsprüfer in Deutschland e.V. (Institute of Public Auditors in Germany, Incorporated Association – IDW)’s articles of incorporation stipulate that individuals who voluntarily join the institute must also fulfill CPD requirements of 40 hours per year.

    Overall, it appears that the accountancy educational requirements in Germany almost completely meet the 2015 IES requirements.

    Current Status: Adopted

  • International Standards on Auditing

    The German Commercial Code (Handelsgesetzbuch, HGB) regulates, inter alia, purpose and scope of an audit, and audit opinion and report. Only small companies that meet certain criteria are exempted from undergoing an audit.

    European Union member states had until June 17, 2016 to transpose the European audit reform package, comprising the Directive 2014/56/EU on statutory audits of annual accounts and consolidated accounts), into their national legislation. At the same time, the Regulation (EU) No 537/2014 on specific requirements regarding statutory audit of public interest entities (PIEs) came into force. The Regulation is directly applicable law in all EU member states and overrides any national law on the same subject matter. The Directive requires auditors and audit firms in member states to apply international auditing standards adopted by the EU Commission which—as stated in the Directive—means ISA, ISQC 1, and other related standards issued through the International Auditing and Assurance Standards Board (IAASB). While the German parliament adopted the EU audit reforms on March 10, 2016, the EU Commission has not yet adopted ISA.

    It therefore remains the responsibility of the professional accountancy organization Institut der Wirtschaftsprüfer (IDW) to issue the IDW Auditing Standards which contain the German Generally Accepted Standards on Auditing (GAAS) as promulgated by IDW.

    In 2018 the IDW commenced a project to adopt the German translation of the ISAs with specific German requirements (add-ons). Specially denoted paragraphs (“D paragraphs” for “Deutschland”) and square brackets are added to deal with the requirements of German law, etc.

    Current Status: Partially Adopted

  • Code of Ethics for Professional Accountants

    The Wirtschaftsprüferordnung (Public Accountant Act (WPO)) 1961 and the German Commercial Code (Handelsgesetzbuch) establish ethical requirements for the Wirtschaftsprüfer profession.

    Both laws form the legal basis on which the Wirtschaftsprüferkammer (Chamber of Public Accountants – WPK) is legally authorized to develop ethical requirements in more detail in the form of by-laws for the profession (WPK’s Professional Charter). The WPK states it has a process to eliminate differences between its ethical requirements and the IESBA Code of Ethics, which is overseen by the Abschlussprüferaufsichtsstelle (APAS—Auditor Oversight Body (AOB)) and the Federal Ministry of Economic Affairs and Energy.

    In 2014, the WPK states that it conducted a comparison of its ethical requirements, which included changes due to the implementation of the EU Audit Reform, against the 2014 IESBA Code of Ethics and concluded that German ethical standards reach convergence with the IESBA Code of Ethics. The WPK is currently in the process of reviewing the 2018 version of the IESBA Code to identify any differences that may result from amendments to the Code in the meantime and that need to be addressed.

    Current Status: Partially Adopted

  • International Public Sector Accounting Standards

    The Institut der Wirtschaftsprüfer (IDW) reports that there have been developments at the federal, state, and municipal level to increase the adoption of accrual or modified accrual accounting. However, this primarily follows private company accounting requirements as set forth in the German Commercial Code rather than IFRS or IPSAS. Meanwhile, the German Central government continues to use cash-based, single-entry accounting.

    It is unclear if there are plans to formally adopt IPSAS for application in the jurisdiction in light of the ongoing initiative to develop EU’s European Public Sector Accounting Standards (EPSAS) which are based on IPSAS but tailored for application in the EU.

    Current Status: Not Adopted

  • Investigation and Discipline

    Under the Wirtschaftsprüferordnung (Public Accountant Act (WPO)) 1961 and its amendments the Wirtschaftsprüferkammer (Chamber of Public Accountants – WPK) is responsible for the investigation and discipline (I&D) of the Wirtschaftsprüfer profession subject to the oversight of the Abschlussprüferaufsichtsstelle (APAS—Auditor Oversight Body (AOB)) and the Federal Ministry of Economic Affairs and Energy.

    The WPK is responsible for investigating and disciplining all violations, i.e. criminal activity, intentional or severe breaches of professional duties and acts likely to bring the audit profession into considerable disrepute; however, breaches of professional duties in the course of statutory audits of public interest entities are within the scope of the AOB’s responsibilities. Members may appeal for a professional court proceeding. The professional courts (special divisions of criminal courts/Senate at the District Court of Berlin in the First Instance, Superior Court of Justice of Berlin in the Second Instance and the Federal Court of Justice in the Third Instance) are responsible in these cases. The professional courts are also composed of members of the profession as associate judges who contribute their professional expertise.

    WPK states it has reviewed the revised SMO 6 and concluded that its system addresses the requirements of the revised SMO.

    Current Status: Adopted

  • International Financial Reporting Standards

    Companies whose debt or equity securities trade in a regulated market in Germany are required to use IFRS in their consolidated accounts as required by the European Commission (EC) Regulation No. 1606/2002. IFRS are also permitted in the preparation of annual and consolidated financial statements of all other types of companies for informational purposes only. For all other purposes, these companies must prepare their financial statements in line with the national accounting standards (German Accounting Standards (GAS)) outlined within the German Commercial Code (Handelsgesetzbuch – HGB). The Deutsches Rechnungslegungs Standards Committee (DRSC) [Accounting Standards Committee of Germany], established in 1998, is recognized as the German standard-setter with the following responsibilities: develop recommendations for the application of principles for consolidated financial reporting; provide advice on planned legislation on accounting regulations at national and EU level; develop Interpretations of the international accounting standards within the meaning of section 315a(1) of the HGB; enhance the quality of accounting and financial reporting; and promote research and education in the above-mentioned areas.

    In 2009, the German Accounting Law Modernization Act came into force in order to reduce the regulatory burden on companies and achieve closer alignment of national standards with the IFRS although it is policy to keep the German GAAP for companies without public accountability. In 2015, the German Accounting Directive Implementation Act was aimed at harmonizing the German accounting law with the EU Accounting Directive (2013/34/EU). This led to a further alignment with IFRS.

    Current Status: Partially Adopted

Disclaimer

IFAC bears no responsibility for the information provided in the SMO Action Plans prepared by IFAC member organizations. Please see our full Disclaimer for additional information.

Methodology

Methodology
Last updated: 04/2019
We welcome feedback. Please email compliance@ifac.org

Thank you for your interest in our publications. These valuable works are the product of substantial time, effort and resources, which you acknowledge by accepting the following terms of use. You may not reproduce, store, transmit in any form or by any means, with the exception of non-commercial use (e.g., professional and personal reference and research work), translate, modify or create derivative works or adaptations based on such publications, or any part thereof, without the prior written permission of IFAC.

Our reproduction and translation policies, as well as our online permission request and inquiry system, are accessible on the Permissions Information web page.

For additional information, please read our website Terms of Use. ALL RIGHTS RESERVED.