When will your Hungarian company need to hire an auditor?
Most Hungarian small and medium sized companies do not need an auditor. However, when they grow to a certain size, they will be required by law to hire an auditor to make sure all their books are in order.
What does an auditor do?
Auditing refers to your books being reviewed to make sure there are no accounting mistakes. In Hungary, the most important difference between audits is the whether they are done by the Tax Authority or an independent contractor.
- Tax audits are conducted more or less regularly by the Tax Authority. They may refer both open and closed accounting periods, and they may result in a warning or in heavy fines. Read more about tax audits here.
- Audits by an independent contractor are required regularly, but only if your Hungarian company meets certain conditions (listed below). If the auditor finds something is amiss, you should correct the mistakes as soon as possible, but you do not have to worry about a fine.
When do you need an independent auditor?
While tax audits are carried out by the Tax Authority at no extra cost to you, an independent auditor is someone your company must hire at your own cost once the company reaches a certain size of operation.
You need to hire an auditor if:
- Your company uses double-entry bookkeeping, AND
- The average yearly net income of the previous two years goes over HUF 300 million (ca. EUR 750,000) OR
- The average number of your employees in the previous two years gets over 50
In case you have set up your company recently but you already have a significant revenue, that revenue should be considered proportionately. For example, if your company was created in September and generated a net income of HUF 140 million in just 4 short months, it is concluded that the yearly revenue would have been triple that, meaning HUF 420 million. That is already above the limit, which means the company needs to hire an auditor.
Beside the above cases, you will be required to hire an auditor if
- Your Hungarian company is involved in consolidation (meaning that is has several affiliates, and a consolidated annual report must be created for the group), OR
- If your Hungarian company is in fact a branch office of a company registered abroad
Of course, if you work with a professional team like that of Helpers Finance, you can always rest assured that you are notified of your obligations and get the right assistance to comply with them.
Who can be an auditor?
Being an auditor is a specific job, so you will have to hire someone qualified to be an auditor. It cannot be your regular accountant, regardless whether your accountant is an employee or a provider like Helpers Finance. You will need to hire a separate provider to do the auditing for your Hungarian company and make sure that everything is in order with your books.
Hiring an auditor requires company modification
If your Hungarian company is required to hire an auditor, that represents a change to the core data of the company, which requires a company modification. The auditor must be listed with your company date in the Hungarian Company Registry, just like the owners and the managing directors. However, an auditor can be appointed for five years at most, meaning that you will need a company modification at least every 5 years (or even more often, if you change auditors).
Tailored solutions for every occasion
The Helpers Team offers you assistance not only with accounting and bookkeeping, but also with all kinds of administrative procedures relevant to operating a small or medium sized company in Hungary. When your company grows to a size when you will need to hire an auditor, we will be happy to also take care of the company modification required.
Did you like this article? Follow us on Facebook and learn more about topics relevant to accounting and finance in Hungary.
The post When will your Hungarian company need to hire an auditor? appeared first on Helpers Finance.
