Institut der Wirtschaftsprüfer
Member | Established: 1932 | Member since October 1977
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.
IDW is a founding member of IFAC and Accountancy Europe.
Statements of Membership Obligation (SMO)
The Statements of Membership Obligations form the basis of the IFAC Member Compliance Program. They serve as a framework for credible and high-quality professional accountancy organizations focused on serving the public interest by adopting, or otherwise incorporating, and supporting implementation of international standards and maintaining adequate enforcement mechanisms to ensure the professional behavior of their individual members.
- SMO 1: Quality Assurance
SMO 2: 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 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 while the WPK administers the exams.
The IDW actively supports the Wirtschaftsprüfer profession and aspiring candidates through its IDW Akademie. The IDW Akademie offers various courses and training seminars to guide students through their practical work experience. The IDW explains that these training courses are taken during the period of work experience in order to build up on the basic knowledge that candidates have acquired during their university education and concentrate on the key areas that Wirtschaftsprüfer deal with day-to-day: auditing, taxation, business administration and law.
The IDW Akademie is also an education provider for continuing professional development (CPD), which according to the institute’s Articles of Incorporation are set at 40 hours of CPD per year for IDW members. The IDW reports that its CPD offerings include advanced training events throughout the country, regional technical seminars, annual workshops, and a variety of online presentations (podcasts, interviews concerning new technical developments etc.)
In addition, the IDW issues a number of professional publications and guidance. In these publications, the institute will incorporate commentary on new pronouncements issued by IAESB to inform members of new developments and solicit members’ input for comment letters to the IAESB.
Finally, both the IDW and WPK are part of the Common Content Project which is designed to harmonize the professional qualifications and education and training outcomes for auditors across Europe.
SMO 3: 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. Although the German parliament transposed the EU audit reform package, comprising the Directive 2014/56/EU on statutory audits of annual 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 stipulates that auditors and audit firms in member states must apply ISA and other related standards issued through the International Auditing and Assurance Standards Board (IAASB) as adopted by the EU Commission. As of the date of the assessment, the EU Commission has not yet adopted ISA.
Therefore, in Germany it is the responsibility of the IDW to issue applicable auditing standards. The IDW Auditing Standards contain the German Generally Accepted Standards on Auditing (GAAS) as promulgated by IDW. In addition to its role in the transposition and translation of ISA and other IAASB-issued pronouncements, the IDW actively participates in the standard-setting processes of the IAASB having jointly nominated an IAASB member with the WPK and having its Director of Auditing Standards and International Affairs serve as the Technical Advisor. The IDW also submits comment letters on pronouncements published by the IAASB. This enables the views and perspective of the German profession to be considered throughout the standard-setting process.
For instance, the IDW issues a number of professional publications and guidance. In these publications, the institute will incorporate commentary on new pronouncements issued by IAASB to inform members of new developments and solicit members’ input for comment letters to the IAASB.
Overall, the institute indicates it provides extensive education and training to members, and develops handbooks, manuals, and software solutions to support the application of IDW Auditing Standards. For example, the IDW has created a structured and searchable catalogue of ISA requirements, as well as the IDW Audit Navigator, which is designed for direct application in audits of smaller and less complex entities, and can be used as an educational tool. The IDW Akademie includes courses on auditing standards to ensure members and students remain up to date with the latest developments and the IDW also offers annual technical conferences on auditing standards. Moreover, the institute states that it has implemented a number of other initiatives at aimed at implementation support such as providing answers to Frequently Asked Questions and practical examples of ISA application tailored to the German legal and economic environment, live and recorded Q&A sessions and interviews with experts in the field, and a series of YouTube podcasts.
In 2018 the IDW decided to change its current practice of transposing ISAs within German IDW Auditing Standards. It is anticipated that within the next few years the German language translations of ISA will be adopted as modified (supplemented by add-ons necessary to reflect requirements under German (and EU law) as “ISA-DE” except for those cases where the use of IDW Auditing Standards (IDW AuS) is necessary because German legal requirements differ from ISA to the extent that translation with add-ons would have been more complex than an IDW AuS (this applies to ISA 570, 260, and 265 and the ISA 700 series other than ISAs 710 and 720)) . The ISA-DE together with the remaining IDW AuS will constitute German GAAS (deutsche Grundsätze ordnungsmäßige Abschlussprüfungen).
- SMO 4: Code of Ethics for Professional Accountants
SMO 5: International Public Sector Accounting Standards
In Germany, 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 and there are no clear plans to adopt IPSAS nationwide.
Although the IDW is not the entity authorized to adopt public sector standards, the institute reports it is active at both the national and regional levels in order to promote and raise awareness about IPSAS. For example, IDW has participated in public consultations issued by Eurostat regarding the European Public Sector Accounting Standards (EPSAS) and the suitability of IPSASs for application in the EU. The IDW has publically stated that it views the adoption of IPSAS in the EU as a long term goal. Furthermore, at the national level the IDW was formally engaged in meetings with the Ministry of Finance until 2013; at this time, informal communications between the IDW and key public sector stakeholders remains ongoing.
The institute has also hosted several seminars on public sector accounting and developments for its members and other interested parties. Following the seminars, the institute notes that it published special editions of its journal that included articles written by the IPSASB Chair and German government representatives.
In addition, until December 2018, the IDW was actively involved in the international standard-setting process through the joint nomination of an IPSASB member and having its Head of International Affairs serve as Technical Advisor. The IDW regularly publishes IPSASB pronouncements, submits comments to exposure drafts when issued by the IPSASB, and circulates relevant information via their website.
- SMO 6: Investigation and Discipline
SMO 7: 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). 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.
With accounting standards set by law and although its membership consists of auditors, the IDW undertakes several activities to promote and support the implementation of IFRS. These include building awareness around new IASB pronouncements, publicizing comment letters submitted by the IDW relating to exposure drafts issued by the IASB, and publishing articles about international developments. Furthermore, the IDW also develops and issues IDW Accounting Principles and Accounting Practice Statements which set forth the views of the German auditing profession regarding specific accounting matters and provide guidance from IDW technical committees on interpreting accounting principles and dealing with specific issues. The institute reports that it’s publishing house’s website maintains these principles and statements within an IFRS Knowledge Base that provides access to EU-endorsed IFRS in English and German, IDW comment letters on exposure drafts, draft interpretations or discussion papers issued by the IASB, literature, articles etc.
Additionally, the IDW also provides technical support and training to members on IFRS, including a telephone “hot-line” for members to make inquiries on technical matters. For example, in its auditor’s handbook, the IDW indicates that it includes a chapter to explain the legal basis for applying IFRS as well as an overview of the conceptual framework. Meanwhile, at the regional level, the IDW states that it further contributes to issues relating to IFRS through its participation in various organizations and groups (e.g. FEE) and through contact with the German government and the Accounting Standards Committee of Germany.
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