In which language are commercial books and financial statements to be drawn up?
While according to § 239 para. 1 sentence 1 HGB the use of a “living language” is sufficient for the keeping of commercial books and other required records, annual financial statements, consolidated financial statements and IFRS financial statements, including (group) management report, if applicable, must be prepared and disclosed in German (§ 244, 298 para. 1, 325 para. 1 sentence 1 HGB).
- Section 244 is consistent with provisions of tax law: Section 87 (1) AO designates German as the official language. In addition, the taxpayer must submit a German translation of the commercial books upon request of the tax authority pursuant to section 146 (3) AO if these were kept in a foreign language.
What are the requirements for the audit report?
Pursuant to § 321, section 1, sentence 1, HGB, the audit report must be in writing and with the required clarity, i.e. an oral report is not sufficient. In addition, it must – apart from exceptions with due regard to the information content – generally be prepared in German, unless otherwise agreed and there is no obligation to submit the audit report to official German authorities (Beck’scher Bilanz-Kommentar, p. 2350, § 321 para. 14).
According to Hoffmann/Lüdenbach, the use of the German language is a de facto constraint which may be overcome in reasonable constellations (NWB Kommentar Bilanzierung, 12th edition, p. 2197, § 321 para.3).
In contrast to the auditor’s report, the audit report does not serve to inform the general public, but rather a limited group of addressees, usually the audit committee, supervisory board, shareholders’ meeting (§ 321 Ab. 5 S. 1 and 2 HGB). The tasks of the audit report essentially consist of informing the legal representatives (executive board, managing directors), the supervisory body (supervisory board) and the shareholders of limited liability companies/corporations & Co. about the type and scope as well as the result of the audit and its derivation and in providing information about the accounting as well as in monitoring compliance with the accounting regulations by the legal representatives.
What language is recommended for the audit report?
In view of the fact that legal representatives must submit a copy of the audit report to the tax authorities when submitting the tax return (§ 150, paragraph 4 AO, § 60, paragraph 3, sentence 1 EStDV), it seems sensible to write the audit report in German. Not least because according to § 87 AO German is the official language.
Likewise, a German-speaking group of addressees speaks in favour of drafting the audit report in German.