The FISG as a panacea against accounting scandals?

It goes without saying that it is diffi­cult to criti­cally examine what one has previously helped to create. The famous Sarba­nes-Oxley Act expres­sed nothing else as early as 2002, when the U.S. Senate and House of Repre­sen­ta­ti­ves, in response to accoun­ting scan­dals invol­ving compa­nies such as Enron or World­Com, also legally regu­la­ted the incom­pa­ti­bi­lity of audi­ting and consul­ting. In Germany, a simi­lar prin­ci­ple alre­ady exis­ted prior to the FISG in Section 319 (1). 3 HGB. The FISG now merely speci­fies this by means of an expli­cit black­list of services that are prohi­bi­ted for audi­tors of public inte­rest enti­ties (PIEs). Howe­ver, globally active audi­ting firms in parti­cu­lar have alre­ady taken this to heart and imple­men­ted it in the past.

It is true that the prin­ci­ple of “a new broom sweeps clean” also applies in the area of annual audits. Howe­ver, this is parti­cu­larly double-edged in the case of the group of public inte­rest enti­ties to be audi­ted in the context of the FISG. So you can only audit compa­nies respon­si­bly if you under­stand them through and through. This often requi­res a degree of specia­liza­tion and exper­tise that is not easy to find in the market. The prin­ci­ple that “ever­yone is replaceable” does not apply here. If the FISG now requi­res a maxi­mum limit of ten years for exter­nal rota­tion with regard to audits of PIEs and a maxi­mum of five years for inter­nal rota­tion at the audit firm, this will have a signi­fi­cant impact on the audit market in Germany. In many cases, the same audi­tor has been working for compa­nies listed on the German capi­tal market for well over ten years.

First of all, the ques­tion arises as to what purpose the FISG actually pursues and how this chan­ges the legal situa­tion in Germany. In Section 323 of the German Commer­cial Code (HGB), the legis­la­tor has formu­la­ted a clear message to the effect that the audit opinion of an audi­ting company is there exclu­si­vely for the company to be audi­ted and does not grant any third-party protec­tion. The FISG has not chan­ged this situa­tion. Third parties, namely the capi­tal market, do not receive any direct claims against the audi­tor. If — as in many accoun­ting scan­dals — the audi­tor was just as much the victim of crimi­nal machi­na­ti­ons as the capi­tal market, the FISG does not provide for any direct claims by the share purcha­sers against the auditor.

Real chan­ges have only taken place in the legal rela­ti­onship between the company being audi­ted and the audi­tor. Here, the liabi­lity amounts were increased or caps were abolished altog­e­ther. Howe­ver, many voices, inclu­ding those from the Bundes­rat, fear that the legal chan­ges will lead to a further concen­tra­tion of the market in favor of the alre­ady powerful parti­ci­pants, who are in a posi­tion to bear such liabi­lity risks and to main­tain appro­priate liabi­lity insu­rance cover.

It would also have been possi­ble to set upper liabi­lity limits in a certain ratio to the balance sheet total of the company to be audi­ted; a maxi­mum liabi­lity limit depen­ding on the finan­cial ratios of the audit firm itself would also have been possi­ble. From the perspec­tive of liabi­lity insu­r­ers, quan­ti­fy­ing the increase in risk due to the FISG in any case repres­ents a parti­cu­lar calcu­la­tory chall­enge; an increase in premium adjus­ted to the increased risk will be the inevi­ta­ble conse­quence. Whether the tigh­tening of liabi­lity through the FISG will help to avoid scan­dal cases, on the other hand, can only be judged in the course of decades.