Which business subjects in Federation of Bosnia and Herzegovina are required to engage external auditor of financial statements? Who can audit financial statements? What are the deadlines for the appointment of auditors and submission of audited financial statements?
Subjects to the mandatory audit of financial statements
Mandatory audit of the financial statements of business subjects in Federation of Bosnia and Herzegovina are defined under the Law on Accounting and Auditing of the Federation of Bosnia and Herzegovina, published in the Official Gazette of the Federation of Bosnia and Herzegovina No 15 as of 24 February 2021 (the „Law“).
In accordance with the article 57 of Law on Accounting and Auditing of the Federation of Bosnia and Herzegovina, subject of the mandatory audit are financial statements and consolidated financial statements (as well as the reports for periods shorter than one year in case of statutory changes, liquidation or bankruptcy) of following entities:
legal entities classified in the category of large and medium-sized legal entities;
public interest entities, and other entities, if the mandatory audit is prescribed by special regulations;
organizations, public institutions and public establishments that are not subject of the annual audit plan of the Audit Office of the Institutions of the FBiH.
Classification of business entities
Entities are classified into micro, small, medium and large companies depending on the level of the three criteria, which constitute of: total income; average value of business assets and average number of employees, on the date of preparation of financial statements. In accordance with these criteria, companies that, on the date of preparation of financial statements, meet at least two of the three criteria, are classified in the category of medium-sized legal entities, namely:
Average value of business assets is within the range of 4 to 20 million KM;
Annual revenue achieved is within the range of 8 to 40 million KM;
Average number of employees is within the range of 49 to 249 employees;
Medium legal entities also include companies that exceed the limit value of one of the criteria for classification into the category of large legal entities.
Large legal entities are companies that, on the date of preparation of financial statements, meet at least two of the three criteria, namely:
Average value of business assets is equal to or higher than 20 million KM;
Total annual income was generated or exceeded the value of 40 million KM;
Average number of employees is or greater than 249 employees;
Independently of the above criteria, large legal entities includes banks, microcredit companies, insurance and reinsurance companies, leasing companies, factoring companies, investment fund management companies, voluntary pension fund management companies, stock market, broker-dealer companies and other financial organizations.
In accordance with the latest available report of the FIA Agency, in 2021, out of the total number of companies in the Federation of Bosnia and Herzegovina, consisting of 24,821 business entities, 1,064 companies were classified in the category of medium-sized entities, while 235 entities were classified in the category of large entities.
Public interest entities definition
In accordance with the Law, public interest entities are all legal entities whose securities are traded on an organized securities market, banks, microcredit companies, insurance and reinsurance companies, factoring companies, leasing companies, investment fund management companies, voluntary pension fund management companies, broker-dealer companies and other financial organizations, public enterprises, as well as all legal entities of special importance for the Federation of Bosnia and Herzegovina, organizations and public institutions.
Register of Audit Companies
Register of Audit Companies is held within the Ministry of Finance of the Federation of Bosnia and Herzegovina, which keeps a list of licensed companies and employees of certified auditors within each individual audit company. Registry is published on the official website of the Ministry.
The Law on Accounting and Auditing defines the minimum requirements that audit companies must meet. Thus, the Law stipulates that the audit company must have in the employment engaged:
One certified auditor with a valid license to perform audits of less than 20 legal entities with maximum 10 million KM of revenues;
Two certified auditors with a valid license to perform audits of less than 20 legal entities of public interest, entities whose individual annual revenues exceed 10 million KM;
Three certified auditors with a valid license to perform audits of more than 20 legal entities of public interest, or entities whose total individual annual revenues exceed 10 million KM.
Final consideration
The selection of the audit company has to be performed no later than September 30 of the business year for the financial year to which the audit relates.
Audited financial statements have to be submitted to the FIA agency, which performs control of the fulfilment of the prescribed conditions, no later than 30 June, for joint stock companies and public interest entities. Deadline for other entities is set up to 30 September.