Clicker Questions

auditors opinion: free of material misstatement: yes/no
- material misstatement … something
auditors need to be independent
- no shares → all employees may not own any of the audited firms shares
  - hard to enforce, especially with funds
- auditor rotation → different auditors to increase independence (7-10 years)
  - company rotation and individual auditors (people) change
- auditors have strong limitations for non-audit service
  - consulting and auditing should not be done by the same people
auditors define before audit a range of materiality
- a “scope” of what is large enough to be of material significance
  - can be applied individually or as a whole
- Statement of unadjusted Audit Differences
auditors report is public
- management letter is private
  - management letter … advice from auditors on what to improve
statutatory audit
auditor’s firm appointed by shareholders (general assembly)
- management should not be involved in selection process
- but there is a lot of information necessary only management can give
supervisory board appoints management

Quotes

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement

The executive directors are responsible for the preparation of the consolidated financial statements

The executive directors are responsible for assessing the group’s ability to continue as a going concern

will the company still exist during the next year or is it dissolving next year
- if a company goes bankrupt it is not the auditors fault

Principal-Agent Principle
governance report is about the whole structure, everything
- major shareholders
- GCGC declarations of compliance
  - GCGC … German Corporate Governance Code
    - equivalent in Austria
    - corporate-governance-code-012021.pdf
remuneration of management report
- how is management payed
  - important for correct incentives
- basic remuneration → fixed salary
- short-term variable annual cash remuneration → profit of current year
- long-term variable share-based cash remuneration → profit of next 10 years
  - good idea to have more long-term than short-term
  - e.g. through shares which can only be sold after 10 years
  - manager has long left the company, but is still receiving money from company
remuneration report
- money actually payed to management
- the actual manifestation of the plan
- supervisory board is mostly payed fixed, not variable
- supervisory board should be payed 10% of management board