Auditing consists of a review of the company’s annual accounts and providing an assessment. The purpose of the auditor’s assessment is to increase the reliability of the financial data of your company in the eyes of investors, shareholders, and the public.
Audit obligation
If your company is subject to the audit/review obligation, an independent sworn auditor’s report must be added to the annual report. The audit of the annual accounts is compulsory for all public limited companies which have more than two shareholders, state accounting entities, local government units, legal persons governed by public law, and political parties receiving allocations from the state budget. An audit is also compulsory for foundations specified in subsection 91 (4) of the Auditors Activities Act.
More information on who is required to audit or review the annual accounts is available here.
Organising an audit
An independent auditor performs the audit; in Estonia, an independent auditor is an auditing firm that belongs in the list of auditing companies and is represented by a sworn auditor during the provision of the service. The general meeting of the company appoints an auditor or auditors, decides the number of auditors, the principles of their remuneration, and the term of authority. Written consent must be obtained before appointing someone as an auditor. Prior to an audit, a contract must be concluded with the auditing firm.
Responsibilities of the parties
A sworn auditor is required to maintain the confidentiality of information which has become known to them in the course of performing the audit and the auditor is liable for damage caused by a violation of obligations arising from their professional activities. However, a signed auditor’s report does not discharge the executive team of the company from liability for the content of financial statements.
If an audit has been completed in a company and the auditor has prepared a written and signed assessment, it must be added to the annual report. Accounting entities that require an audit cannot finalise the annual report before a sworn auditor has added their report on the audit.