Table of Contents:
- Purpose of introducing the audit institution
- Object and scope of the audit
- Who is authorized to conduct the audit?
- Who appoints the auditors?
- How often is the audit of a family foundation conducted?
- Is an audit necessary?
Purpose of introducing the audit institution
The audit institution was introduced by the legislator with the intention of ensuring protection of the assets of the family foundation and the legitimate rights of beneficiaries to receive benefits from the foundation.
Object and scope of the audit
The audit examines the area of the family foundation’s activities strictly related to its assets, including asset management, contracting and fulfilling obligations, as well as public-law obligations by the family foundation. The scope of the audit includes verification of these areas for compliance with legality, accuracy, and conformity with the law, purpose, and foundation documents.
Who is authorized to conduct the audit?
The audit of the family foundation can be conducted by an audit firm or a team of auditors. If a team of auditors conducts the audit, it must include at least three members: a certified auditor, a tax advisor, and a lawyer or legal advisor. The team must also include at least one tax advisor and one lawyer or legal advisor.
Who appoints the auditors?
The authority to select an audit firm or appoint a team of auditors lies with the assembly of beneficiaries (Article 72 of the Act).
How often is the audit of a family foundation conducted?
As a rule, the audit of a family foundation is conducted at least once every four years. However, there is no obstacle to conducting audits more frequently. This matter can be regulated differently in the statute of the family foundation. Therefore, it is possible to introduce provisions into the statute of the family foundation requiring audits annually or every two years. However, the provisions of the statute cannot require audits less frequently than once every four years.
Exception!
The legislator has provided an exception to the four-year audit requirement. A family foundation whose financial statements are subject to examination under the provisions of the Accounting Act must conduct an audit annually, each time before the approval of the financial statements.
Is an audit necessary?
After reviewing the provisions regarding the audit of a family foundation, the question arises: does the obligation to conduct audits of a family foundation protect the beneficiaries or is it an unnecessary formality?
In the case of a family foundation where the board includes the founder/founders along with their adult child who are also beneficiaries, the interest of the family foundation is often identical to the interests of the beneficiaries and the board.
Unfortunately, there is a possibility that despite the blood ties between the members of the board of the family foundation and its beneficiaries, actions detrimental to the foundation and its beneficiaries may occur.
Parents along with adult children who are specialists in their fields do not always possess adequate experience in management. Therefore, they may simply need professional support (not only tax and legal) in managing the family foundation, and an audit provides an ideal opportunity to identify unintentional irregularities. Engaging experts experienced in succession processes will allow the family to benefit from additional advice and proven solutions in the market regarding possible solutions in shaping relationships and succession processes related to family assets.
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