Company and statutory auditor

Are you a contractor? Then you may be dealing with a statutory auditor.

The statutory auditor or CAC is an external service provider.

This task is considered to be in the public interest. It refers to the need to ensure the transparency and veracity of financial information provided by the company to the authorities and the State.

CAC audits are strictly regulated by law.

Finally, a CAC is appointed for a 6-year term.

In order to clarify the role of the statutory auditor, it is important today to examine the links between the company and the statutory auditor.

What are the duties of a company auditor? 

First of all, it is imperative to examine the obligations relating to the role of the CAC.

These include auditing and certification of annual accounts, as well as a duty to inform, alert and report offences.

These are all mentioned in a mission statement

• With regard to the certification of accounts, the CAC must ensure the conformity of the accounting documents submitted by the company that has appointed him. He or she must also guarantee compliance with the principle of equality between shareholders, i.e. in all matters concerning the distribution of dividends. Certification of the accounts requires verification that they are regular and fair, and that they reflect a true and fair view of the company's financial position and assets and liabilities. It should be noted that for companies required to present "solidified" accounts, the CAC must also ensure that all franchises have been certified. In the event of inaccurate presentation, a company director risks up to 5 years' imprisonment and a €375,000 fine.
• With regard to the obligation to provide information, the CAC is required to inform the company's management of the work program established, the surveys carried out, any changes made to the accounts, any observations deemed useful with regard to valuation methods, any inaccuracies or irregularities identified, and finally the conclusions drawn. The CAC is also required to inform associates at theAnnual General Meeting via :
• A report on the annual financial statements.
• A special report on regulated agreements for SAs and other limited liability companies.
• A report on internal control and risk management.
• With regard to the duty to alert, the CAC must inform the Chairman of the Board of Directors if he discovers facts likely to jeopardize the viability of the company. If no response is received within 15 days, the CAC is obliged to invite the Board of Directors to deliberate. This deliberation will then be forwarded to the Commercial Court.
• With regard to reporting offenses, the CAC must notify the public prosecutor of any criminal act. Failure to do so can result in up to 5 years' imprisonment and a €75,000 fine. Transactions linked to money laundering or terrorist financing must also be reported.

In addition, the CAC is bound by professional secrecy , except in the case of consolidated financial statements requiring the cooperation of several CACs, or in the event of disclosure of an offence.

Which legal structures require a statutory auditor?

Secondly, we need to consider which structures are subject to the intervention of a CAC.

There are two reasons for intervention:

• Companies crossing several thresholds
• Voluntary appointment of a CAC by a company

The appointment of a CAC is mandatory if a company exceeds two of the following three thresholds:

• Sales in excess of €8,000,000
• Balance sheet in excess of €4,000,000
• More than 50 employees

Note: These thresholds have been updated and take into account alignment with European directives following the adoption of the PACTE law in 2019.

When it comes to the involvement of a CAC in an association, there are a number of specific cases to be taken into account

Indeed, associations receiving donations qualifying for tax deductions or public subsidies in excess of €150,000 must appoint a CAC.

Other associations are also required to appoint a CAC in connection with their activity: these are the so-called public benefit associations, those that issue bonds and those that grant loans for the purpose of supporting business creation.

What are the penalties for breaking the rules?

Finally, we look at the sanctions that companies may incur if they fail to appoint a CAC.

Firstly, there are legal risks. These can result in the nullity of decisions taken at General Meetings. This can have a serious impact on a company's future, since it is possible to lose a subsidy or approval.

Sanctions are also possible. Under article L820-4 of the French Commercial Code, failure to appoint a statutory auditor can result in 5 years' imprisonment and a €30,000 fine for the company director.

In conclusion, it is important to pay close attention to the legal form of your company and the conditions under which the CAC is appointed.