Under Article 41 of the Audit Act, auditors are obliged to select and appoint an audit company no later than three months before the end of the reporting period to which the statutory audit relates – i.e. by 30 September 2021 for the audit of annual financial statements for 2021.

Entrepreneurs who are subject to audit independently form the criteria for the selection of the audit company, and these are usually the price, quality of the audit, the reputation of the audit company, and the like.

Entrepreneurs who are not subject to audit are advised to audit their financial statements regardless of the absence of a legal obligation and use the auditor’s knowledge to make all adjustments and harmonize their operations with legal regulations, International Accounting Standards (IAS), and financial reporting standards.

WHO ARE THE OBLIGATORS OF THE AUDIT?

Article. 20 of the Accounting Act prescribes the obligation to audit the financial statements of companies, so the same is subject to annual financial statements and annual consolidated financial statements of public interest entities and large and medium-sized enterprises that are not public interest entities, while the Law on Financial Operations and Accounting of Nonprofit Organizations the obligation to audit non-profit organizations.

Simply put, the obligators of the audit are:

  1. Public interest entities – Insurance companies, credit institutions, leasing companies, pension companies, investment companies (and other capital market operators), companies of strategic interest to the Republic of Croatia, and investment fund management companies
  2. Medium entrepreneurs – if they meet at least two criteria:• If they have between 50 and 250 employees
  • If the amount of their total revenue to HRK 60 to 300 million
  • If their assets amount to HRK 30 to 150 million
  1. Large entrepreneurs – if they meet at least two criteria:
  • If they have more than 250 employees
  • If their total revenues are above HRK 300 million
  • If the amount of their assets rises above HRK 150 million
  1. Limited liability companies, joint-stock companies and limited partnerships * (* a company in which two or more person associate for the permanent performance of activities under a joint venture, at least one of which is jointly and severally liable for the company’s obligations with all its assets), and at least one is liable for the company’s obligations only up to the amount of a certain property contribution to the company (commander)) – if they meet at least two criteria:
  • If they have more than 25 employees
  • If their total operating income exceeds HRK 30 million
  • If their assets amount to more than HRK 15 million
  1. Parent companies of large and medium groups of entrepreneurs
  2. Companies that participated in business mergers, acquisitions, and newly established
  3. Entrepreneurs who have submitted a request for a listing of securities on a regulated market (and do not fall under the auditors under the previously established criteria)
  4. Non-profit organizations – if they meet one of the following criteria:
  • If in the previous year they had a total income of more than 10 million kuna
  • If in the previous year they had an income of at least 3 to a maximum of 10 million kuna

The following reports are subject to audit obligations:

  • Annual financial statements and annual consolidated financial statements,
  • Reports on condition, structure,
  • Reports on changes in the value and volume of assets, revenues, expenditures, own sources,
  • Annual financial report on receipts and expenditures of non-profit organizations.

DEADLINE FOR PUBLICATION OF AUDIT REPORTS

The deadline for publishing audited reports, ie audit reports, is six months from the last day of the business year.

Entrepreneurs liable for public disclosure, which compile annual consolidated reports, are obliged to publish them, together with the audit report, no later than nine months from the last day of the business year.

Trade unions and employers’ associations are obliged to submit to the Ministry of Finance an audit report on the audit of the annual financial statements for the previous year no later than 30 June of the current year.

Non-profit organizations are obliged to publish on their websites the audit report on the performed audit for the previous year, no later than June 30 of the current year.

The above deadlines are clearly defined by the Accounting Act, unless the Ministry of Finance extends the deadlines due to extraordinary circumstances, such as the outbreak of the COVID-19 disease epidemic. Thus, the Ministry adopted the Ordinance on deadlines for submission of financial reports and accounting documentation in special circumstances, which clearly indicates the deadline for submission of accounting documentation for 2020.

Also, observe the following deadlines:

  • Appointment of auditors – The deadline for the appointment of an auditing company is legally determined, and the company’s Management Board should select and appoint an auditor by 30 September of the current year at the latest. If the Management Board does not select and appoint an auditor, following Article 68 of the Audit Act, there is a risk of paying a fine of HRK 20,000 to 100,000.
  • Submission of financial reports (statistics) and income tax returns – The Company’s Management Board is obliged to submit the Financial Statements for statistical purposes and the income tax return for the previous year by 30 April of the following year at the latest. Auditors who do not submit the Annual Financial Report (AFS) and all prescribed documentation for statistical and other purposes risk a fine of 10,000 to 100,000 kuna.
  • Public disclosure of financial statements – The Company’s Management Board is responsible for submitting financial statements for public disclosure for the previous year (or six months after the end of the business year), no later than June 30 of the following year.
  • Public disclosure of consolidated financial statements – The Company’s Management Board is obliged to submit consolidated financial statements for public disclosure for the previous year (or nine months after the end of the business year), no later than 30.9. next year.

DON’T WAIT FOR THE DEADLINES

The Accounting Act and the Audit Act clearly define the rules and deadlines, and it is up to entrepreneurs to abide by them if they want to avoid dizzying penalties. Therefore, study the deadlines carefully, but also be careful which auditor you choose.

When choosing an auditing company, be sure to check whether the auditing company has a valid work permit and whether it meets all the necessary conditions for the legal performance of the audit. After that, choose an audit firm taking into account the expertise and impartiality of the auditor as well as the quality of service.

An audit is not just a legally imposed cost, but an opportunity to align the financial statements with the legal framework and gain a realistic picture of the business, so try not to be guided solely by the lowest bid.

An audit is a complex process that is vital in the reporting chain and during implementation, it is necessary to take into account all aspects of business, identify room for improvement, and/or point out mistakes that should be avoided in the future.

Deadlines are approaching, so don’t wait. Contact our professional team today at office@confida.hr or by calling +385 1 4606 900.