An audit is mandatory when required by the Law on Financial Reporting Companies. This legal obligation depends on:
- Legal type of the company;
- Company size;
- Company’s ongoing activities.
Legal type and why it matters
The Law on Financial Reporting of Companies determines what kind of companies must conduct an audit. They are:
- State enterprise;
- Municipal companies;
- Public interest companies;
- Joint stock companies;
- Closed joint-stock companies (see company size criteria below);
- Closed joint-stock companies, where the shareholder is the state or municipality;
- Closed joint-stock companies, the prices of goods or services are regulated according to the procedure established by law;
- Cooperative companies (cooperatives) (see criteria for company size below);
- Business partnerships, in which all true members are joint-stock companies or closed joint-stock companies (see company size criteria below);
Company size and why it matters
The company size criterion applies only to closed joint-stock companies, cooperative companies, and business partnerships. For legal entities of this legal form, an audit is mandatory when in the case at least two of the three following factors are exceeded on the last day of the financial year (The balance sheet day):
- The value of the balance sheet assets is more than 1.8 million EUR;
- Annual sales revenue exceeds 3.5 million EUR. One should calculate income after subtracting the discounts granted;
- During the financial year, the company had an average of more than 50 employees. To estimate this, one should use the rules for calculating the average annual number of employees explained in the list approved by the Minister of finance of the Republic of Lithuania.
Type of the company activity and why it matters
The Law on Financial Reporting of Companies states that audits must be carried out in companies of public interest. These types of firms are of importance to the public because of the scale and nature of their activities, as well as the number of customers. Here are the criteria of a public interest company mentioned in the Law on the Audit of Financial Statements:
- A company that has its stocks traded on a regulated market;
- Bank or Central Credit Union;
- Financial brokerage firm;
- Collective investment entity;
- Retirement fund;
- Occupational pension fund;
- A company managing a retirement fund, occupational pension fund, or collective investment entity;
- Insurance or reinsurance company;
- State or municipal enterprise meeting the established criteria.
There is also a category of companies whose service prices are regulated by the state, which meet the size criteria (see above), and whose income from regulated activities makes up more than half of the company’s total income.
Regulated activity income related to the following activities:
- Drinking water supply;
- Sewage treatment;
- Surface wastewater management;
- Activities of energy companies.
If you are interested in the time-proven quality audit, you are in the right place: we have been conducting it for over two decades. So contact us!