Disciplinary Oversight
Wirtschaftsprüferkammer (WPK) is responsible for the disciplinary oversight of auditors and audit firms (§§ 57, 61a, 71 Public Accountant Act (WPO)). Breaches of professional duties in the course of statutory audits of public interest entities according to § 316a sentence 2 German Commercial Code (HGB) are within the competence of the Auditor Oversight Body (AOB), which is established at the Federal Office for Economic Affairs and Export Control (BAFA) (§ 66a para. 6 WPO). AOB also exercises the public oversight of WPK and is the authority of ultimate decision making.
Disciplinary oversight encompasses different areas, which pursue preventive as well as disciplinary approaches.
- Revocation proceedings
Disciplinary oversight serves the preventive safeguard in case specific legal requirements for practicing the profession are not adhered to. - Financial Statements Review
WPK reviews published financial statements audited by its members as well as the corresponding auditor's opinions issued on those statements and resolves any questions that may arise. - Disciplinary proceedings
WPK investigates cases of suspected professional misconduct of its members. This requires sufficient indications that professional duties may have been breached, which have been obtained by WPK through information or notice or other proceedings.
In the course of revocation proceedings the prerequisites for appointing a member as an auditor or recognition as an audit firm (§§ 20, 34 WPO) are evaluated. The WPK must revoke appointment or recognition, if legal prerequisites for practicing the profession are not met. An example is the lack of maintaining proper professional indemnity insurance.
The essential professional requirements comprise orderly financial conditions and refraining from incompatible activities. Noncompliance with these requirements shall lead to revocation of the appointment as an auditor or of the recognition as a professional audit firm. Court review of the revocation decisions of the WPK may occur as part of administrative jurisdiction.
Regarding financial statements reviews, which do not require a specific initial suspicion of a breach of professional duties, WPK reviews published company financial statements audited by its members (exception: financial statements of public interest entities (PIEs) according to § 316a sentence 2 HGB) and the corresponding auditor’s report. Ambiguities arising as to the financial accounting or the auditor’s report are discussed with the auditors. Any suspected breach of professional duties may also lead to a formal disciplinary proceeding.
If the investigation of WPK in a disciplinary proceeding confirms a breach of professional duties, WPK is responsible for sanctioning this breach (§ 68 para. 1 sentence 2 WPO). Possible sanctioning measures are reprimands, fines up to EUR 500,000 for individuals and EUR 1,000,000 for audit firms, temporary prohibition of professional activities, or exclusion from the profession. WPK may impose multiple measures simultaneously. In case of a repeated occurrence of breaches, WPK may also declare a prohibition order.
Subsequent to an unsuccessful objection a member may appeal for a professional court proceeding (§ 71a WPO). The so-called 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 assisted by members of the profession who bring in their professional expertise. On its website WPK discloses irrevocable sanctioning measures, thereby stating type and natures of the breach (§ 69 WPO).
The WPK publishes an annual report on disciplinary oversight (in German). Court decisions on professional matters as well as further issues of interest relating to disciplinary oversight are made available for general information in the WPK Magazine.