A public limited company (société anonyme - SA) must be supervised by one or more internal auditors (commissaire), who can be partners or not. Big size companies are subject to the statutory audit of accounts by one or more approved statutory auditor.
The approved auditors (internal or external) must verify that the annual accounts present a true and fair view of the company's financial situation. They must furthermore monitor the company's operations.
Public limited companies who do not exceed 2 of the 3 following limits on the balance sheet date can have their accounts audited by an internal auditor (commissaire):
Companies that exceed 2 of these limits must have their accounts audited by an approved statutory auditor.
The crossing of these limits must:
Internal auditors are an organ of the company and is appointed by the general meeting. They can be reappointed, unless the articles of association provide for otherwise. The duration of the mandate cannot exceed 6 years and can be renewed.
There is no minimum duration of the mandate. In practice, a minimum mandate is equivalent to the duration of a financial year.
An SA can appoint one or more internal auditors, whether they are partners or not. In practice, the mandate as an internal auditor cannot be held concurrently with that of business director, or member of the management board or the supervisory board of the same company.
There are no specific requirements in terms of competence or qualification to carry out the mandate as an internal auditor.
If the number of internal auditors is reduced by more than a half, the board of directors or the management board, depending on the case, must immediately call a general meeting to replace the missing auditors.
An auditor can be dismissed ad nutum by the general meeting, without justification of grounds and without preconditions.
In principle, internal auditors have 2 main assignments:
Supervision of the operations of the company extends through the financial year and the auditor has unlimited rights of supervision: he/she can, at any time, access:
The internal auditor can carry out regular checks without prior authorisation.
Every semester, the internal auditor receives a report summarising the company's assets and liabilities from the management board or the board of directors.
Each year, one month before the annual general meeting is held, the annual accounts are submitted to the internal auditor for the purposes of drafting up a report with recommendations and the control procedure used. The report must also be made available to all shareholders at the registered office 8 days before the general meeting. The auditor may request the assistance of an expert approved by the company in order to proceed with the audit of the company's books and accounts.
The internal auditor also has the right to call a general meeting if he deems it necessary.
The internal auditor is liable towards the company for the implementation of the mandate he was given and for the management errors he committed. We speak of contractual responsibilities. The auditor has an obligation of means (input based obligation) but not an obligation of result (output based obligation). He may turn to the courts of justice (juge des référés) should the company not allow him to perform his duties properly.
Besides, the internal auditor is liable towards the company and third parties for damages resulting from any legal infractions or infractions to the company’s articles of association.
An internal auditor remains liable for errors committed during his/her mandate, even after his/her resignation.
An internal auditor is committing an error if he/she does not report, during the general meeting, if the following elements are missing:
An internal auditor can be discharged by the shareholders' general meeting.
In opposition to the internal auditor, the approved statutory auditor is not an organ of the company. The general meeting appoints one or more approved statutory auditors for the statutory audit of accounts, when it exceeds 2 out of 3 of the following criteria for 2 consecutive financial years:
The statutory auditor is bound to the company by a fixed-term service agreement. It can only be cancelled for serious grounds.
The approved statutory auditor must be independent of the company he is auditing. Statutory auditors can be a legal or a natural person, registered with the Luxembourg institute of registered auditors (Institut des Réviseurs d'Entreprises - IRE).
In particular, the approved statutory auditor is responsible for advising whether the management report is in line with the financial statements for the year and has been prepared in accordance with legal requirements.
The statutory auditor's mission only begins after the annual financial statements and the management report have been established by the board of directors.
An approved statutory auditor is not entrusted with the monitoring of the operations of the company as is the case for the internal auditor.
A statutory auditor has an obligation of means and not an obligation of result.
The service agreement between the company and the approved statutory auditor protects the latter from the consequences of unintentional errors. Nevertheless, statutory auditors cannot be completely relieved from their responsibilities.
Civil or professional litigation against a statutory auditor can only be undertaken within 5 years of the date of the auditor's report.
The statutory auditor is bound by professional secrecy towards third-parties and his peers.