In 2020, the deadline for submitting the accounts for the previous year, 2019, was postponed to 30 September 2020. A lot of entrepreneurs took advantage of this opportunity, and in many cases, the new deadline was a big assistance not only to entrepreneurs but also accountants to get all the material required ready.
The new deadline also affected the election or re-election of auditors. Many have not yet decided on an auditor for 2020 in the early autumn.
However, it is worth finding the right candidate and making a decision as soon as possible, because there are only a few months left from the business year and an auditor must be elected before the balance sheet date of the business year.
It may be a disadvantage if an auditor is not able to start working in time in 2020, because in 2021the factors identified and to be modified during the audit may not be changed retrospectively. This could be the review of inventories that cannot be made up for retrospectively, or tax benefits that can only be taken advantage of if they started to be applied in the given tax year.
Let’s look at who is required to have an audit and what sanctions it might entail if a company doesn’t retain an auditor.
An audit is mandatory for all entrepreneurs keeping double-entry bookkeeping, unless on the annual average of the two business years preceding the relevant one, the net revenue of the business (on a pro rata basis if the business year is not the entire year) did not exceed HUF 300 million and on the average of the two business years preceding the relevant business year the average number of employees employed by the entrepreneur did not exceed 50 on average. In order to be exempted, these two conditions must be met simultaneously. If only one of the conditions is met, the entrepreneur is required to have an audit.
A few practical examples:
In 2018, the sales revenue of a business was HUF 180 million, the average number of employees was 10 and in 2019 the sales revenue of the business was HUF 450 million, the average number of employees was 25.
The average sales revenue is (180 + 450) / 2 = HUF 315 million. This is more than HUF 300 million.
Average number of employees (10 people + 25 people) / 2 = 17.5 people. This is less than 50 people.
The two conditions for exemption are not met simultaneously, so the company is required to have an audit in 2020.
In 2018, the sales revenue of a business was HUF 230 million, the average number of employees was 5 and in 2019 the sales revenue of the business was HUF 370 million, the average number of employees was 9.
Average sales revenue (230 + 370) / 2 = HUF 300 million.
Average number of employees (5 people + 9 people) / 2 = 7 people. This is less than 50 people.
The two conditions for exemption are met simultaneously, so the company is not required to be audited in 2020.
Thus, if the average sales revenue of the previous two years is exactly HUF 300 million, then the company is not obliged to be audited in the given business year.
A company was founded on 1 March 2020 and that year its sales revenue is HUF 250 million, the average number of employees is 15.
The sales revenue prorated for the whole year: 260/10 * 12 = HUF 312 million. This is more than HUF 300 million.
The company is required to be audited in 2020.
What sanctions can it have if a company does not have an auditor to audit its accounts:
All companies maintaining double-entry bookkeeping are obliged to publish their accounts in the company information system in time (in 2020 by 30 September instead of 31 May) (electronically at https://e-beszamolo.im.gov.hu/ebekuldes). Pursuant to the express provision of the law, the accounts must also include the auditor’s report, the lack of which operates as if the entrepreneur had failed to publish the accounts.
Failure by an entrepreneur to comply with the obligation to publish the accounts with the required content and, if necessary, an auditor’s report, may have several serious consequences. On the one hand, the Tax Authority may cancel the company’s tax number and on the other the court of registration may initiate legal supervision proceedings against the company. These procedures may lead to the involuntary cancellation of the company.
Who can be elected as an auditor?
An auditing firm registered in the Hungarian Chamber of Auditors or a natural person who is a member of the Hungarian Chamber of Auditors may be elected as an auditor.
De Rossi Éva’s membership can be viewed on the following link:
If you would like a confirmation as to whether or not your business is required to be audited, please feel free to contact us and we will answer your question free of charge. If it turns out that you are obliged to be audited, we are also happy to explain what benefits or compensation you can enjoy in return for the service.