Before 1998, Germany didn't have financial accounting standard-setting function, because it is understood in English-speaking countries. The actual German Institute provided discussion in various processes of lawmaking which affected accounting and monetary reporting, but legal requirements had been absolutely supreme. Similar discussion was given by the Frankfurt Stock Exchange, German born trade unions, and accounting teachers. The 1998 law upon control and transparency (shortened KonTraG) introduced the requirements for the Secretary of state for Justice to recognize a private nationwide standard-setting body to serve the following goals:• Develop recommendations for the application of accounting standards for consolidated financial statements.
- Advise the Ministry of Justice on new accounting legislation.
- Represent Germany in international accounting organizations such as the IASB.
The German Accounting Requirements Committee (GASC), or in German, the actual Deutsches Rechnungslegungs Standards Committee (DRSC), was started shortly thereafter, and appropriately recognized by the Ministry of Rights as the German standard-setting authority.Seventeen The GASC oversees the German born Accounting Standards Board (GASB), that does the technical function and issues the sales standards. The GASB is made up of 7 independent experts with a history in auditing, financial analysis, academia, as well as industry. Working groups are in place to examine and make recommendations on the problems before the board. As a rule, these types of working groups have reps from trade and business and the auditing profession, a university teacher, and a financial analyst. GASB deliberations consume a due process and conferences are open. Once released, the standards must be authorized and published by the Secretary of state for Justice.
The new German sales standard-setting system is broadly similar to the methods in the United Kingdom (as discussed in this section) and the United States , and to the actual IASB . It is important to emphasize, however, which GASB standards are authoritative suggestions that only apply to combined financial statements. They do not limit or alter HGB requirements. The actual GASB was created to develop a set of German born standards compatible with international sales standards.Since its founding, the GASB has issued German Accounting Standards (GAS) on such issues as the cash flow statement, segment reporting, deferred taxes, and foreign currency translation. However, in 2003, the GASB adopted a new strategy that aligned its work program with the IASB’s efforts to achieve a convergence of global accounting standards. These changes recognized the EU requirement for IFRS for listed companies.
The Financial Accounting Control Act (abbreviated BilKoG) was enacted in 2004 to improve compliance with German financial reporting req irements and IFRS by listed companies. The law established a two-tiered enforcement system. A privatesector body, the Financial Reporting Enforcement Panel (FREP), reviews suspected irregular financial statements that come to its attention. It also conducts random reviews of financial statements. The FREP relies on companies to voluntarily correct any problems it finds. The FREP refers matters that are not resolved to the Federal Financial Supervisory Authority (German abbreviation BaFin), the public-sector regulatory body that oversees securities trading (stock exchanges) and the banking and insurance industries. BaFin will then take authoritative action to resolve the issue. BaFin refers questionable auditing to the Wirtschaftsprüferkammer, discussed next.
Certified public accountants in Germany are called Wirtschaftsprüfer (WPs), or enterprise examiners. All WPs are legally required to join the official Chamber of Accountants (Institut der Wirtschaftsprüferkammer). The Auditor Overs ght Commission, which reports to the Ministry of Economics and Labor, is responsible for overseeing the Chamber of Accountants. By international standards, the German auditing (accounting) profession is small. The 1985 Accounting Act extended the audit requirement to many more companies. As a result, a second-tier body of auditors was created in the late 1980s. These individuals, known as sworn book examiners (Vereidigte Buchprüfer), are only allowed to audit small and medium-sized companies, as defined in the act. Thus, two classes of auditors are legally sanctioned to conduct independent audit examinations of companies. German audit reports emphasize compliance with requirements over the “true and fair view.”
