German Accounting Profession

As with German accounting law, the German auditing profession has a rather short tradition compared to those of some other European countries. The first auditing firms were formed at the turn of the twentieth century. Their main purpose was to audit and to provide consultancy services for large businesses on a voluntary basis. The first official professional organization was established in 1931, when the consequences of the worldwide economic crisis demonstrated the need for audited financial statements.

Further milestones in its development are represented by the statutory audit requirements established for stock corporations in 1937, for large non-stock corporations in 1969, for (at least medium-sized) limited liability companies in 1985 and for (at least medium-sized) CorpCo’s in 1999.

The growing demands of stockholders, banks, and other creditors for audited financial statements, as well as a dramatic expansion of the range of services provided by audit firms, has led to considerable growth of the profession during the past 30–40 years. Today the German auditing profession is headed by the Chamber of Auditors (Wirtschaftsprüferkammer), an independent professional organization supervised by the Federal Minister of Economics. The tasks of the Chamber of Auditors range from the supervision of its members to the external representation of the profession.

Members of the Chamber of Auditors are both certified auditors (Wirtschaftsprüfer, or WP) as well as certified accountants (vereidigte Buchprüfer, or vBP). The difference between the two types of professionals is that certified accountants benefit from simplified admission and examination procedures, while on the other hand, they are allowed to perform only voluntary audits, as well as statutory audits of medium-sized limited liability companies (GmbHs) and medium-sized CorpCo’s. All other statutory audits must be performed by certified auditors.

Before being appointed a certified auditor, candidates have to pass an examination that covers in depth the subjects of accounting, auditing, business administration, law, taxation and general economics. Furthermore, candidates must usually have 3 years of practical experience in auditing or audit-related activities. Because of stringent admission, examination, and supervisory regulations, the German Professional Law (Wirtschaftsprüferordnung) is widely regarded as one of the strictest worldwide.

Besides the Chamber of Auditors, the Institute of Certified Auditors (Institut der Wirtschaftsprüfer, IdW) is the other important organization of the profession. Its main task is to publish statements on basic accounting and auditing questions that then usually serve as generally accepted standards and principles within the profession. Unlike the Chamber of Auditors, membership in the Institute of Certified Auditors is voluntary.

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