Italian and European Union legislation with regard to financial statements has seen significant transformations over the past few years, aimed at guaranteeing greater attention in the veracity and transparency of the informational documents produced by firms.

The proliferation of beneficial users of the information stated in accounts makes it necessary to express corporate trends according to ever-higher standards.

Statutory audit activity responds to this need by guaranteeing a statement which answers the highest standards enshrined in Italian and European Union legislation.

The New Statutory Audit

After a long process of reform, which had its beginning with the European Community Directive 2006/43/EC, the so-called consolidated audit has come about being approved by [Italian] Legislative Decree number 39 of 27 January 2010.

The statutory audit is carried out so as to give a professional judgement on the year-end accounts.

Being based on a professional judgement expressed by the Statutory Auditor or Audit firm, this results in the conducting of audit procedures identified by Italian Audit Standards and by International Auditing Principles (ISA), as well as those principles issued by the Italian Stock Exchange Commission (CONSOB).

The obligation of the Statutory Audit was envisaged initially only for companies listed on the [Italian] Stock Exchange. Subsequently, that certification requirement has been extended to several other categories of companies.

The statutory auditor or the audit firm carry out their activities through the directions stated in Article 14, paragraph 1 of the [Italian] Legislative Decree 39/2010 so that:

• the statement by means of a specific report give a judgement on the year-end accounts and on the consolidated financial statements, where prepared;

• the check carried out during the account period show the regular performance of the firm accounts and the correct disclosure of facts in the management accounts.

The duration of the assignment of a Statutory Audit is fixed at three years without any limit to the possibility for renewal.

The Board of the firm's internal Auditors is the body which proposes pursuant to Article 13 paragraph 1 of the Legislative Decree number 39 of 27 January 2010, the Statutory Auditor or the Audit firm giving the grounds for their proposal.

Without prejudice to the obligation of the appointment of the Statutory Auditor in cases established by law, the activities carried out by the Audit firm are able to respond increasingly to the needs of ensuring a transparent and appropriate information flow so as to represent to stakeholders the real conditions and outlook of the firm which they have audited.

The activities carried out by the Statutory Auditor or Audit firm guarantees the customer suggestions for improvement by means of a management letter, useful remarks and comments to make procedures more efficient and reliable, from the viewpoint of improving the firm's overall systems.

Furthermore, the predisposition to teamwork among the auditors allows the customer to benefit from specialists in other disciplines (for example, lawyers, tax consultants, IT specialists, etc.), on whom the Auditor, and more specifically, the Audit firm, rely to carry out their work in the most comprehensive manner.

The role of the Auditor in the new audit arrangement for Limited Liability Companies

In the light of recent legislative measures relating to the supervisory system for firms with capital, the range of obligations placed on the shoulders of owners of limited liability companies has been broadened, both as to the method of optional appointments, as well as to those of mandatory appointments of internal supervision.

Specifically for limited liability companies, there is the possibility of choosing between:

• The internal company auditor;

• The Board of internal Auditors;

• The Auditor (more correctly, the Statutory Auditor or the Audit firm).

Article 2477, paragraphs 2 and 3 of the Italian Civil Code lays down the supervisory body or the Auditor must be appointed when the limited liability company:

• has a paid-up capital of not less than the minimum established for companies limited by shares, that is to say when the share capital is equal to or greater than €120,000;

• is needed for the preparation of consolidated financial statements;

• controls a company liable to statutory audit;

• has exceeded, for two consecutive years, at least two of the limits envisaged by Article 2435-bis, paragraphs 1, of the Italian Civil Code, for the preparation of financial statements in abbreviated form (that is to say, of a €4,400,000 limit of balance sheet assets; of €8,800,000 of revenues from sales and services and having an average of 50 persons employed during the financial year).

As regards amendments to the statutes because of the rules in force, without prejudice to cases in which the statute is but a simple reference to the regulation, it is allowed that companies may opt for:

• an 'optional' system in choosing the internal supervisory body. The general meeting of shareholders, in the provision of the mandate, shall nominate the internal supervisory body, in an organisation choice of a single person in charge, or of a body of persons, or of an Auditor (a physical person or a Statutory Audit firm);

• a 'binding' system which shall impose the adoption of a single internal auditor or of an internal Body of Auditors, or of a Statutory Auditor. In the event that the statute requires the appointment of an internal supervisory body, but it may be on the shoulders of the members to outsource the audit function, it shall be envisaged for the statutory provisions that such functions be assigned to the Statutory Auditor or the Audit firm.


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