The statutory financial audit surprises many owners. The company grows, hires people, revenue increases – and at some point it turns out the annual financial statements can no longer be published without an auditor’s report. If this is discovered in April, only a few weeks remain before the filing deadline. If it is discovered in time, the audit is a planned and calm process.
When is an audit required?
The Bulgarian Accountancy Act defines which companies are subject to a statutory independent financial audit. In broad terms:
- Medium-sized and large companies – always.
- Small companies that exceed two of three criteria – total assets, net revenue and average number of employees.
- Public-interest entities – such as banks, insurers and companies whose securities are traded on a regulated market.
- Companies required to be audited by special legislation – some regulated activities have their own requirements, regardless of size.
We deliberately do not quote specific thresholds: they are set by law and changes are expected. The test should be done every year, with the current values and the company’s actual figures. Subsidiaries of international groups often need an audit for consolidation purposes anyway.
Why the check belongs before year end
The auditor needs to be appointed, the engagement signed and part of the work done before the year closes. For example, the auditor often needs to observe the year-end stock count. If the obligation is discovered after 31 December, that opportunity is gone, and little time remains before the statements must be published.
That is why the threshold check is part of our autumn review with every client – together with the preliminary result and the year-end plan.
How the audit works
- Appointing the auditor – a registered auditor or audit firm, appointed by the shareholders.
- Planning – the auditor learns the business, its risks and internal controls.
- Interim work – before year end, including observation of the stock count.
- Final work – after the financial statements are prepared: balances, confirmations, estimates and disclosures.
- Auditor’s report – published with the financial statements in the Commercial Register.
How to prepare
The better organised the books during the year, the shorter and less costly the audit. Reconciled balances with banks, customers and suppliers, written agreements – especially with related parties – documented estimates and provisions, and a timely stock count all help. An audit should never be the moment when a year’s worth of documents is put in order for the first time.
A good audit starts with good accounting – long before the auditor walks in.
An audit even when it is not required
Some companies choose an audit voluntarily: when they seek financing, sell the business or bring in an investor, when a foreign parent requires it for consolidation, or simply when the owners want independent assurance that the numbers are right.
How we work
At Nubes Soft we check every year whether a client will be subject to audit and prepare the books so that the audit runs smoothly. The audit itself is performed by an independent auditor. Our partner audit firm Ordo Clarus provides statutory financial audit, internal audit and IT audit – in line with auditor independence requirements.
In short: the question “do we need an audit?” belongs in the autumn, not in April. If you are not sure of the answer for your company – request a call.
This article is for information only and does not replace individual advice.