What determines whether you are required to audit
The rule is similar across Europe: the size of the company is measured by three figures — total assets, turnover and average headcount. If you exceed two of the three for two consecutive financial years, the audit becomes mandatory.
The logic is that small companies do not need an external auditor, but those that have reached a certain size do, to protect partners, creditors and the tax authority itself. That is why the thresholds are reviewed and vary by country.
Spain: the classic thresholds
In Spain, a limited liability company is required to audit if, for two consecutive financial years, it exceeds two of these three limits: total assets above €2.85 million, turnover above €5.7 million, or more than 50 employees on average.
These thresholds have been stable for some time, but it is worth checking them every year because company law updates them from time to time. Listed companies and those required by their own sector regulations also always audit.
Portugal: legal certification of accounts
In Portugal the equivalent is called certificação legal de contas and is signed by an official accounts auditor (ROC). It applies to all public limited companies (SA) and to limited liability companies (LDA) that exceed two of these three thresholds: total balance sheet above €1.5 million, turnover above €3 million, or average headcount of more than 50 employees.
If your LDA stays below these, you do not need an auditor. But if it grows and crosses the thresholds two years in a row, the obligation arises on its own and you have to budget for the auditor's cost.
Germany, France and Italy: same pattern, different figures
Germany distinguishes between small, medium and large companies. Small ones (in practice, most young GmbHs) are exempt from audit as long as they do not exceed two of three asset, turnover and headcount thresholds that are updated fairly regularly. Medium and large ones do audit.
France requires an accounts commissioner (commissaire aux comptes) from similar asset, turnover and headcount thresholds, and always for listed or consolidating companies. Italy requires SRLs to appoint a supervisory body or auditor when they exceed the size limits set out in the civil code.
In all three cases the mechanism is the same as in Spain: two of three thresholds exceeded for two financial years, and the audit stops being optional.
What to do if you cross the thresholds
If your company is going to exceed the limits, the first thing is to anticipate it. The auditor is appointed before the end of the financial year and needs access to the accounts of the year it is going to review, so it is better not to leave it until the last quarter.
It is also worth checking whether changing country changes the obligation: the same turnover can be exempt in Portugal and required in Spain, or the other way round. It is one of those differences that are discovered too late if nobody warns you.
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